The mechanism of the reaction of diphenyldiazomethane with thiobenzophenone and related hetaryl thioketones leading to the corresponding tetrasubstituted thiiranes was studied by means of DFT computational methods at the M06-2X/6-311+G(d) level of theory. The study showed that the initial step of this conversion is a classic one-step (3+2) cycloaddition to give 1,3,4-thiadiazolines in a regioselective manner. These initially formed products undergo a spontaneous extrusion of N2 resulting in the formation of tetraaryl-substituted thiocarbonyl ylides as reactive intermediates. The calculated parameters of the activation for the subsequent 1,3-dipolar electrocyclizations are low (ΔG = 10.8–11.9 kcal/mol) and the only products formed in these reactions are the corresponding thiiranes. The alternative pathways leading to thiocarbonyl ylides via stepwise mechanisms involving zwitterionic or biradical nitrogen-containing intermediates were ruled out.