A convenient strategy for the synthesis of phthalides and γ-butyrolactones is reported. The method utilizes readily prepared allylic alcohols in formal Au(I)- and Pd(II)-catalyzed SN2' reactions. Using these catalysts, exclusive formation of the desired five-membered lactones is observed, completely avoiding the competing direct lactonization pathway that forms the undesired seven-membered ring with protic acids and alternative metal salts. This mild and operationally simple method notably tolerates exomethylene groups and should find use in both phthalide and terpene syntheses.