The mechanism of the copper(I)-catalyzed olefin cyclopropanation reaction with dimethyl diazomalonate (DMDM) has been extensively investigated using the DFT method at B3LYP/6-31G* and BP86/SDD/6-31G* levels in this study. First, ethene was chosen as a model substrate to concentrate solely on the mechanisms by eliminating steric effects and then the suggested mechanisms were applied to a real system: namely, 2,2-dimethyl-4,7-dihydro-1,3-dioxepine. All the possible pathways leading first to a metal carbene and then to the cyclopropane product have been studied for this system and their energetics are demonstrated. Carbene formation of the κN,O copper diazo complex via alkene-nonassisted nitrogen gas extrusion is found to be a facile route, as supported by the experimental findings on analogous systems in the literature. At the cyclopropanation step, the four- and three-centered pathways have been found to be energetically facile and both mechanisms intersect at the common metallacyclobutane intermediate.