Exploration of intermediates that enable chemoselective cycloaddition reactions and expeditious construction of fused-or bridged-ring systems is a continuous challenge for organic synthesis. As an intermediate of interest, the oxyallyl cation has been harnessed to synthesize architectures containing seven-membered rings via (4+3) cycloaddition. However, its potential to access five-membered skeletons is underdeveloped, largely due to the thermally forbidden (3+2) pathway. Here, the combination of a tailored precursor and a Pd(0) catalyst generates a Pd-oxyallyl intermediate that cyclizes with conjugated dienes to produce a diverse array of tetrahydrofuran skeletons. The cycloaddition overrides conventional (4+3) selectivity by proceeding through a stepwise pathway involving a Pd-allyl transfer and ring closure sequence. Subsequent treatment of the (3+2) adducts with a palladium catalyst converts the heterocycles to the carbocyclic cyclopentanones.