This work describes single-(DFT, CCSD(T)) and multireference (CASSCF, CASPT2) theoretical calculations on the reaction of yttrium atoms with formaldehyde studied recently in crossed molecular beam experiments. The reaction is shown to proceed through the exothermic formation of a side-bound pi-complex followed by C-H insertions which branch out to competing pathways to products. Dihydridoyttrium(II) is formed through the decomposition of the double insertion product, whereas carbonylyttrium(0) and high-energy formylyttrium-(I) result from the single insertion intermediate. The product and transition state energetics are consistent with experimental results and allow one to rule out the direct reductive elimination pathway for the formation of carbonylyttrium(0).