A novel intramolecular oxycyanation of methylenecyclopropanes is reported that proceeds through oxidative cleavage of the N−CN bond and subsequent palladium transfer from N to O of the amide group. A range of substituted benzo[ d][1,3]oxazines with a cyano group are readily furnished by this newly developed oxycyanation reaction. Tris(4-trifluoromethylphenyl)phosphine as a ligand has been found to be crucial to effectively promote the transformation with high chemo- and regioselectivity. Moreover, the reaction outcome can be significantly affected by the electronic effect of the acyl group attached to the nitrogen atom of methylenecyclopropanes. When R3 is a chloromethyl group, the pyrrolo[2,3- b]quinoline derivative is obtained by thermal-induced [3+2] cycloaddition of methylenecyclopropane to the methanediimine intermediate. [ABSTRACT FROM AUTHOR]