PCP ligand (1,3-bis-[(diisopropyl-phosphanyl)-methyl]-benzene), and PCN ligand ({3-[(di-tertbutyl-phosphanyl)-methyl]-benzyl}-diethyl-amine) based rhodium dinitrogen complexes (11 and 2, respectively) react with phenyl diazomethane at room temperature to give PCP and PCN-Rh carbene complexes (3 and 5, respectively). At low temperature (-70 degreesC), PCP and PCN phenyl diazomethane complexes (4 and 6, respectively) are formed upon addition of phenyl diazomethane to 1 and 2. In these complexes, the diazo moiety is ill coordinated through the terminal nitrogen atom. Decomposition of complexes 4 and 6 at low temperatures leads only to a relatively small amount of the corresponding carbene complexes, the major products of decomposition being the dinitrogen complexes I and 2 and stilbene. This and competition experiments (decomposition of 6 in the presence of 1) suggests that phenyl diazomethane can dissociate under the reaction conditions and attack the metal center through the diazo carbon producing a eta(1)-C bound diazo complex. Computational studies based on a two-layer ONIOM model, using the mPW1K exchange-correlation functional and a variety of basis sets for PCP based systems, provide mechanistic insight. In the case of less bulky PCP ligand bearing H-substituents on the phosphines, a variety of mechanisms are possible, including both dissociative and nondissociative pathways. On the other hand, in the case of i-Pr substituents, the eta(1)-C bound diazo complex appears to be a critical intermediate for carbene complex formation, in good agreement with the experimental results. Our results and the analysis of reported data suggest that the outcome of the reaction between a diazoalkane and a late transition metal complex can be anticipated considering steric requirements relevant to eta(1)-C diazo complex formation.