Methylene-selective C-H functionalization is a significant hurdle that remains to be addressed in the field of Pd(II) catalysis. We report a Pd(II)-catalyzed synthesis of benzocyclobutenes by methylene-selective C(sp3)-H arylation of ketones. The reaction utilizes glycine as a transient directing group and a 2-pyridone ligand, which may govern the methylene selectivity by making intimate molecular associations with the substrate during concerted metalation-deprotonation. This reaction is shown to be highly selective for intramolecular methylene C(sp3)-H arylation, thus enabling sequential C(sp3)-H functionalization.