The reaction mechanism of the Pd-catalyzed benzyl/allyl coupling of benzyl chloride with allyltributylstannan, resulting in the dearomatization of the benzyl group, was studied using density functional theory calculations at the B3LYP level. The calculations indicate that the intermediate (eta(3)-benzyl)(eta(1)-allyl)-Pd(PH3) is responsible for the formation of the kinetically favored dearomatic product. Reductive elimination of the dearomatic product from the intermediate occurs by coupling the C-3 terminus of the eta(1)-allyl ligand and the para-carbon of the eta(3)-benzyl ligand in (eta(3)-benzyl)(eta(1)-allyl) Pd(PH3). For comparison, various C-C coupling reaction pathways have also been examined.