The reaction mechanism of the rhodium-phosphine catalysed borylation of methyl-substituted arenes using pinacolborane (HBpin) has been investigated theoretically using DFT calculations at the B3PW91 level. Factors affecting selectivity for benzylic vs. aromatic C-H bond activation have been examined. It was found that [Rh(PR3)2(H)] is the active species which oxidatively adds the C-H bond leading to an eta3-benzyl complex which is the key to determining the unusual benzylic regioselectivity observed experimentally for this catalyst system. Subsequent reaction with HBpin leads to a [Rh(PR3)2(eta3-benzyl)(H)(Bpin)] complex from which B-C reductive elimination provides product and regenerates the catalyst. The electrophilic nature of the boryl ligand assists in the reductive elimination process. In contrast to Ir(L)2(boryl)3-based catalysts, for which Ir(III)-Ir(V) cycles have been proposed, the Rh(I)-Rh(III) cycle is operating with the system addressed herein.