The (3+2) cycloadditions between electron-deficient Pd-oxyallyls and conjugated dienes have been investigated with density functional theory calculations. A stepwise mechanism with C-C bond formation occurring first is supported by computations. The key electron-withdrawing ester substituent on the Pd-oxyallyl species decreases the migratory insertion barrier by both lowering the LUMO energy and enabling a less-strained six-membered coordination mode. The lack of (3+2) reactivity with monoenes is attributed to higher migratory insertion barriers due to a lower-energy HOMO, as well as high C-O reductive elimination barriers, which become rate-determining. Conjugated dienes enable the formation of a highly electrophilic eta(3) Pd-allyl species and greatly facilitates C-O formation.