Catalytic olefin hydrogenation is ubiquitous in organic synthesis. In most proposed homogeneous catalytic cycles, reactive M-H bonds are generated either by oxidative addition of H2 to a metal centre or by deprotonation of a non-classical metal dihydrogen (M-H2) intermediate. Here we provide evidence for an alternative H2-activation mechanism that instead involves direct ligand-to-ligand hydrogen transfer (LLHT) from a metal-bound H2 molecule to a metal-coordinated olefin. An unusual pincer ligand that features two phosphine ligands and a central olefin supports the formation of a non-classical Ni-H2 complex and the Ni(alkyl)(hydrido) product of LLHT, in rapid equilibrium with dissolved H2. The usefulness of this cooperative H2-activation mechanism for catalysis is demonstrated in the semihydrogenation of diphenylacetylene. Experimental and computational mechanistic investigations support the central role of LLHT for H2 activation and catalytic semihydrogenation. The product distribution obtained is largely determined by the competition between (E)-(Z) isomerization and catalyst degradation by self-hydrogenation.