The mechanism of palladium-catalyzed Sonogashira cross-coupling reaction has been studied theoretically by DFT (density functional theory) calculations. The model system studied consists of Pd(PH3)2 as the starting catalyst complex, phenyl bromide as the substrate and acetylene as the terminal alkyne, without regarding to the co-catalyst and base. Mechanistically and energetically plausible catalytic cycles for the cross-coupling have been identified. The DFT analysis shows that the catalytic cycle occurs in three stages: oxidative addition of phenyl bromide to the palladium center, alkynylation of palladium(Ⅱ) intermediate, and reductive elimination to phenylacetylene. In the oxidative addition, the neutral and anionic pathways have been investigated, which could both give rise to cis-configured palladium(Ⅱ) diphosphine intermediate. Starting from the palladium(Ⅱ) diphosphine intermediate, the only identifiable pathway in alkynylation involves the dissociation of Br group and the formation of square-planar palladium(Ⅱ) intermediate, in which the phenyl and alkynyl groups are oriented cis to each other. Due to the close proximity of phenyl and alkynyl groups, the reductive elimination of phenylacetylene proceeds smoothly.