The combination of Mo(CO)6 and 10 mol % of palladium acetate catalyzes the transformation of 2-nitroarenes to 3H-indoles through a tandem cyclization-[1,2] shift reaction of in situ generated nitrosoarenes. Mo(CO)6 appears to have dual roles in this transformation: generate CO and promote C-N bond formation to increase the yield of the N-heterocycle product.