Theoretical calculations, based on density functional theory, have been carried out on the insertion of formaldehyde into the Co-H bond of HCo(CO)3. The first step of the process was considered to involve the initial formation of a π-complex between HCo(CO)3 and H2CO. The second step was modeled by a migration of the hydride to either carbon or oxygen on formaldehyde under the formation of a methoxy or hydroxymethyl intermediate. Several structures of the precursor π-complex as well as the methoxy and hydroxymethyl intermediate were fully optimized. The π-complexes were found to have a trigonal bipyramidal structure with H2CO in either the axial or equatorial position. The equatorial site was favored by 50 kJ/mol. The methoxy and hydroxymethyl groups were found to favor axial coordination with a β-hydrogen in the equatorial position interacting in an agostic manner with cobalt. The corresponding equatorial coordination was calculated to be less stable by 27 (methoxy) and 44 kJ/mol (hydroxymethyl), respectively. The methoxy intermediates were found to be more stable than the corresponding hydroxymethyl intermediates by as much as 40 kJ/mol, primarily as a result of oxygen forming stronger bonds with cobalt than carbon. The reaction profile for the hydride migration was modeled by a linear transit procedure. The formation of methoxy was calculated to have a reaction enthalpy of 6 kJ/mol and an activation barrier of less than 5 kJ/mol. The formation of hydroxymethyl has a reaction enthalpy of 40 kJ/mol and an activation barrier of 15 kJ/mol. It is concluded that the catalytic conversion of aldehydes to alcohols, polyols and esters, by HCo(CO)3, most likely proceeds via the formation of a methoxy intermediate. © 1990, American Chemical Society. All rights reserved.