This paper presents an experimental and theoretical investigation of the Pd-catalyzed Negishi coupling reaction and reveals a novel second transmetalation reaction between an Ar-1-Pd-Ar-2 species and the organozinc reagent Ar-2-ZnX. Understanding of this second step reveals how homocoupling and dehalogenation products are formed. Thus, the second transmetalation generates (ArPdAr2)-Pd-2 and (ArZnCl)-Zn-1, which upon reductive elimination and hydrolysis, respectively, give the homocoupling product Ar-2-Ar-2 and the dehalogenation product (ArH)-H-1. The ratio of the cross-coupling product Ar-1-Ar-2 and the homocoupling product Ar-2-Ar-2 is determined by competition between the second transmetalation and reductive elimination steps. This mechanism is further supported by density functional theoretical calculations. Calculations on a series of reactions suggest a strategy in controlling the selectivity of cross-coupling and homocoupling pathways, which we have experimentally verified.