Despite numerous research efforts, the mechanism of methanol homologation and especially the role of iodine promoters remain unclear. In an approach to improve the understanding of this reaction, the basic properties of cobalt-iodine-phosphine catalyst systems have been studied. In addition, well-defined cobalt complexes and clusters were used as catalysts, and experiments with labelled reagents have been carried out. Based on these data a reaction mechanism via oxidative addition of methyl iodide to a cobalt(I) center is proposed.