A highly efficient, selective, and catalytic intermolecular formal carbenoid insertion reaction into olefinic C-H bonds of allylic phosphoranes is described. This novel insertion reaction proved to proceed via a catalytic cyclopropanation of allylic phosphoranes with diazoacetate, followed by ring opening of the resulting cyclopropane ylide. On the basis of this observation, a facile synthetic method yielding 1,1,4-trisubstituted 1,3-butadienes with high stereoselectivity by a one-pot reaction of tributylphosphine-derived salt 11 with MDA and aldehydes under mild conditions has been developed.