A palladium-dihydroxyterphenylphosphine (DHTP) catalyst was successfully applied to the direct C3-arylation of N-unsubstituted indoles with aryl chlorides, triflates, and nonaflates. This catalyst showed C3-selectivity, whereas catalysts with other structurally related ligands exhibited N1-selectivity. Complex formation between the lithium salts of the ligand and the indole is assumed to accelerate the arylation at the C3 position. Reactions using 3-alkylindoles afforded 3,3-disubstituted indolenines, which can be further converted to the corresponding indoline derivatives.