Ligand exchange processes at metal complexes underpin their reactivity and catalytic applications. While mechanisms of ligand exchange at single site complexes are well established, occurring through textbook associative, dissociative and interchange mechanisms, those involving heterometallic complexes are less well developed. Here we report the reactions of a well-defined Fe−Al dihydride complex with exogenous ligands (CO and CNR, R=Me, tBu, Xyl=2,6-Me2C6H3). Based on DFT calculations we suggest that these reactions occur through a dyotropic rearrangement, this involves initial coordination of the exogenous ligand at Al followed by migration to Fe, with simultaneous migration of a hydride ligand from Fe to Al. Such processes are rare for heterometallic complexes. We study the bonding and mechanism of the dyotropic rearrangement through in-depth computational analysis (NBO, IBOs, CLMO analysis, QTAIM, NCIplot, IGMH), shedding new light on how the electronic structure of the heterometallic core responds to the migration of ligands between metal sites. The dyotropic rearrangement fundamentally changes the nature of the hydride ligands, exposing new nucleophilic reactivity as evidenced by insertion reactions with CO2, isocyanates, as well as isocyanides.