[reaction: see text] A highly effective metal-catalyzed benzylation and allylic alkylation of 2,4-pentanediones has been developed. This new bismuth-catalyzed direct carbon-carbon bond forming reaction provides the corresponding monoalkylated dicarbonyl compounds in high yields after short reaction times using the lowest amounts of catalyst (1 mol %) and the free alcohol. In addition, a new route to substituted indenes is presented.