Recent studies have shown that cumulus updrafts often consist of a succession of discrete rising thermals with spherical vortex-like circulations. In this paper, a theory is developed for why this “thermal chain” structure occurs. Theoretical expressions are obtained for a passive tracer, buoyancy, and vertical velocity in axisymmetric moist updrafts. Analysis of these expressions suggests that the thermal chain structure arises from enhanced lateral mixing associated with intrusions of dry environmental air below an updraft’s vertical velocity maximum. This dry-air entrainment reduces buoyancy locally. Consequently, the updraft flow above levels of locally reduced buoyancy separates from below, leading to a breakdown of the updraft into successive discrete thermals. The range of conditions in which thermal chains exist is also analyzed from the theoretical expressions. A transition in updraft structure from isolated rising thermal, to thermal chain, to starting plume occurs with increases in updraft width, environmental relative humidity, and/or convective available potential energy. Corresponding expressions for the bulk fractional entrainment rate ε are also obtained. These expressions indicate rather complicated entrainment behavior of ascending updrafts, with local enhancement of ε up to a factor of ~2 associated with the aforementioned environmental-air intrusions, consistent with recent large-eddy simulation (LES) studies. These locally large entrainment rates contribute significantly to overall updraft dilution in thermal chain-like updrafts, while other regions within the updraft can remain relatively undilute. Part II of this study compares results from the theoretical expressions to idealized numerical simulations and LES.