Mechanistic studies for the palladium-catalyzed decarboxylative cyclization reactions of gamma-meth-ylidene-delta-valerolactones 1 with isocyanates 2 are described. The reactions can be effectively catalyzed by palladium triarylphosphine complexes to give piperidones 3 and/or azaspiro[2.4]heptanones 4. Through kinetic studies using NMR spectroscopy, it has been determined that the oxidative addition of lactones 1 to palladium(0) is the turnover-limiting step of the catalytic cycle. By changes in the electronic properties of the triarylphosphine ligands, the product distribution between 3 and 4 can be easily controlled, and an explanation for the origin of this selectivity is provided. The selectivity between 3 and 4 is also influenced by the nature of the nitrogen substituent on isocyanates 2, and more electron-rich substituents tend to give higher selectivity toward azaspiro[2.4]heptanones 4. These studies represent the first systematic investigation into the selectivity between terminal attack and central attack at (pi-allyl)palladium species by nitrogen-based nucleophiles.