It has recently been reported by Sen et al. that dioxygen can functionalize methane directly at low temperatures with RhCL3 as the catalyst and I- as the promoter. The main products are acetic acid and methanol, with formic acid as a side product. The active form of the catalyst is considered to be [Rh(CO)(2)I-2](-). We propose here a mechanism for the Sen process and investigated it theoretically with DFT. The proposed mechanism is as follows. In the first step, a methane C-H bond is activated by [Rh(CO)(2)I-2](-) either through an oxidative-addition process or by a Q-bond metathesis mechanism, leading in both cases to a Rh-CH3 complex (a). In the next step a facile insertion of CO into the Rh-CH3 bond leads to a RhCOCH3 complex (b). Finally, the hydrolysis of a and b produces methanol and acetic acid, respectively, and forms [Rh(CO)(2)IH](-) (c). The oxidation of c by 02 leads to the peroxo complex [(HOO)Rh(CO)(2)I](-), which can react with another c to yield two hydroxo complexes of the form [(HO)Rh(CO)(2)I](-). Substitution of OH- by I- finally regenerates the [Rh(CO)(2)I-2](-) catalyst.