Excited-state catalysis, a process that involves one or more excited catalytic species, has emerged as a powerful tool in organic synthesis because it allows access to the excited-state reaction landscape for the discovery of novel chemical reactivity. Herein, we report the first excited-state palladium-catalyzed 1,2-spin-center shift reaction that enables site-selective functionalization of carbohydrates. The strategy features mild reaction conditions with high levels of regio- and stereoselectivity that tolerate a wide range of functional groups and complex molecular architectures. Mechanistic studies suggest a radical mechanism involving the formation of hybrid palladium species that undergoes a 1,2-spin-center shift followed by the reduction, deuteration, and iodination to afford functionalized 2-deoxy sugars. The new reactivity will provide a general approach for the rapid generation of natural and unnatural carbohydrates.