Palladium-catalyzed alkane arylation reactions with aryl halides are described for the preparation of 2,2-dialkyl-dihydrobenzofuran substrates. These reactions occur in excellent yield and very high selectivity for the formation of one sole product arising from a reaction at nearby methyl groups. Mechanistic and computational studies point to the involvement of a concerted, inner-sphere palladation-deprotonation pathway that is enabled by the presence of three-center agostic interactions at the transition state. This mechanism accurately predicts the experimentally observed kinetic isotope effect as well as the site selectivity and should be useful in the design of new reactions and catalysts.