A density functional theory based computational approach to describing the mechanistic course of the allene azide cycloaddition cascade sequence has been developed. The results of these calculations permit characterization of key reactive intermediates (diradicals and/or indolidenes) and explain the different behaviors observed in the experimental studies between conjugated and nonconjugated species. Furthermore, computational analysis of certain intermediates offer insight into issues of regioselectivity and stereoselectivity in cases where different reaction channels are in competition, suggesting suitable substitutions to achieve a single regioisomer in the indole synthesis via azide-allene cyclization.