C-H bond activation/functionalization promoted by low-valent iron complexes has recently emerged as a promising approach for the utilization of earth-abundant first row transition metals to carry out this difficult transformation. Herein we use extensive density functional theory and high-level ab initio coupled cluster calculations to shed light on the mechanism of these intriguing reactions. Our key mechanistic discovery for C-H atylation reactions reveals a two-state reactivity (TSR) scenario in which the low-spin Fe(II) singlet state, which is initially an excited state, crosses over the high-spin ground state and promotes C-H bond cleavage. Subsequently, aryl transmetalation occurs, followed by oxidation of Fe(II) to Fe(III) in a single-electron transfer (SET) step in which dichloroalkane serves as an oxidant, thus promoting the final C-C coupling and finalizing the C-H functionalization. Regeneration of the Fe(II) catalyst for the next round of C-H activation involves SET oxidation of the Fe(I) species generated after the C-C bond coupling. The ligand sphere of iron is found to play a crucial role in the TSR mechanism by stabilization of the reactive low-spin state that mediates the C-H activation. This is the first time that the successful TSR concept conceived for high-valent iron chemistry is shown to successfully rationalize the reactivity for a reaction promoted by low-valent iron complexes. A comparative study involving other divalent middle and late first-row transition metals implicates iron as the optimum metal in this TSR mechanism for C-H activation. It is predicted that stabilization of low-spin Mn(II) using an appropriate ligand sphere should produce another promising candidate for efficient C-H bond activation. This new TSR scenario therefore emerges as a new strategy for using low-valent first-row transition metals for C-H activation reactions.