Palladation of methylenecyclopropane and [3 + 2] cycloaddition with alkenes have been studied theoretically. In palladium complexes of methylenecyclopropane or trimethylenemethane, the eta(2) forms have been shown to be more stable than the palladacyclobutane forms. However, the barrier heights to yield palladacyclobutanes are not very high and the methylene-bridged carbon can be converted to the metal-attached carbon on palladium via a ring-opened transition state, allowing the scrambling of hydrogens in methylenecyclopropane. With respect to the palladium-catalyzed [3 + 2] cycloaddition reaction of methylenecyclopropane with alkenes, the path via palladacyclobutanes has been demonstrated to be more favorable than the path via an eta(2) complex. These results are discussed by using the paired interaction orbital scheme.