A novel two-step synthesis of 2-hydroxymethylbenzofurans 3 and 2-alkoxymethylbenzofurans 4-6, based on palladium-catalyzed cycloisomerization of 2-(1-hydroxyprop-2-ynyl)phenols 1 under basic conditions to give 2-methylene-2,3-dihydrobenzofuran-3-ols 2, followed by acid-catalyzed isomerization or allylic nucleophilic substitution with alcohols as nucleophiles, is reported. Cycloisomerization reactions leading to 2 (80-98% yields) were carried out at 40 degrees C in MeOH as the solvent, in the presence of a base and catalytic amounts of PdX2 + 2KX (X = Cl, I). Isomerization reactions of 2 readily occurred at 25-60 degrees C in DME as the solvent, with H2SO4 as the proton source, to give 2-hydroxymethylbenzofurans 3 in 65-90% yields. In a similar manner, allylic nucleophilic substitution reactions of 2 with ROH as nucleophiles [carried out at 25-40 degrees C in ROH (R = Me) or ROH-DME mixtures (R = Bu, Bn) in the presence of H2SO4] afforded 2-alkoxymethylbenzofurans 4, 5, and 6 (R = Me, Bu, and Bn, respectively), in 65-98% yields.