[reaction: see text] Several bicyclic compounds bearing a strained 1,2-cyclobutanediol have been prepared from a gamma-bromopropargylic diol under palladium(0) catalysis. The reaction proceeds through a rare unfavored 4-exo-dig cyclocarbopalladation. In some cases, the first reaction is followed by a 6pi-electrocyclization leading to unusual strained tricyclic systems.