Evidence is presented for a proposed mechanism of C-H activation of 3-methyl -3,4-dihydroquinazoline (1) by (PCy3)(2)RhCl. One intermediate (3), a coordination complex of 1 with (Pcy(3))(2)RhCl, was identified along the path to the Rh-N-heterocyclic carbene product of this reaction (2). Isotopic labeling and reaction-rate studies were used to demonstrate that C-H activation takes place intramolecularly on the reaction coordinate between 3 and 2. Computational studies corroborate the proposed mechanism and suggest that the rate-limiting step is oxidative addition of the C-H bond to the metal center. The consequences of this mechanism for coupling reactions of N-heterocycles that occur via Rh-catalyzed C-H bond activation are discussed.