The molecular mechanism of the three-component reaction of triphenylphosphine, dialkyl acetylene dicarboxylate, and 2-acetylbutyrolactone to synthesize the stabilized phosphorus ylide and 1,3-butadiene derivative via the intramolecular Wittig reaction has been investigated using the density functional theory method at the B3LYP/6-31G level of theory. Two possible reaction pathways have been characterized in detail to form the cyclobutene intermediate and in the next step; the cyclobutene intermediate undergoes the conrotatory ring-opening reaction to produce the 1,3-butadiene derivative along two possible pathways. The calculated results indicate that two pathways (pathways II and II-a) are the most energy favorable among all of the pathways, so they occur more than do the others. Moreover, the phosphorus ylide is more stable than the corresponding 1,3-butadiene, demonstrating that the intramolecular Wittig reaction could not easily occur at room temperature, which is in agreement with the experimental results.