Carbohydrates are synthetically challenging molecules with vital biological roles in all living systems. Selective synthesis and functionalization of carbohydrates provide tremendous opportunities to improve our understanding on the biological functions of this fundamentally important class of molecules. However, selective functionalization of seemingly identical hydroxyl groups in carbohydrates remains a long-standing challenge in chemical synthesis. We herein describe a practical and predictable method for the site-selective and stereoselective alkylation of carbohydrate hydroxyl groups via Rh(II)-catalyzed insertion of metal carbenoid intermediates. This represents one of the mildest alkylation methods for the systematic modification of carbohydrates. Density functional theory (DFT) calculations suggest that the site selectivity is determined in the Rh(II)-carbenoid insertion step, which prefers insertion into hydroxyl groups with an adjacent axial substituent. The subsequent intramolecular enolate protonation determines the unexpected high stereoselectivity. The most prevalent trans-1,2-diols in various pyranoses can be systematically and predictably differentiated based on the model derived from DFT calculations. We also demonstrated that the selective O-alkylation method could significantly improve the efficiency and stereoselectivity of glycosylation reactions. The alkyl groups introduced to carbohydrates by OH insertion reaction can serve as functional groups, protecting groups, and directing groups.