Indanones and 2-cyclopentenones have been successfully prepared in good to excellent yields by the palladium-catalyzed carbonylative cyclization of unsaturated aryl iodides and dienyl triflates, iodides, and bromides, respectively. The best results are obtained by employing 10 mol % of Pd(OAc)(2), 2 equiv of pyridine, 1 equiv of n-Bu4NCl, 1 atm of CO, a reaction temperature of 100 degreesC, and DMF as the solvent. This carbonylative cyclization is particularly effective on substrates that contain a terminal olefin. The proposed mechanism for this annulation includes (1) Pd(OAc)2 reduction to the active palladium(O) catalyst, (2) oxidative addition of the organic halide or triflate to Pd(0), (3) coordination and insertion of carbon monoxide to produce an acylpalladium intermediate, (4) acylpalladation of the neighboring carbon-carbon double bond, (5) reversible palladium beta-hydride elimination and re-addition to form a palladium enolate, and (6) protonation by H2O to produce the indanone or 2-cyclopentenone.