A new, highly regio- and stereospecific SN2' substitution reaction between a zirconium oxo complex and allylic chloride has been achieved. The resulting allylic alcohol or TBS-protected allylic ether products were isolated in good to excellent yields with a wide range of E-allylic chlorides. A mechanism for the SN2' allylic substitution consistent with kinetic, stereochemical and secondary isotope effect studies was proposed.