A highly regio- and stereoselctive palladium-catalyzed domino reaction of functionalized aryl allyl ethers has been developed. Various aryl allyl ethers derived from the phosphine-catalyzed addition of electron-deficient allenes with phenol are found to be efficient substrates for the synthesis of 2-substituted 2,3-dihydrobenzofurans and indolines. It is the first example of aryl allyl ether used as an ideal and practical precursor of hard to get functionalized 1,3-butadiene for the heterocyclic compound synthesis.