An efficient strategy to synthesize the western part of phainanoids is reported. The benzofuranone-based 4,5-spirocyclic motif is constructed diastereoselectively via a palladium-catalyzed intramolecular alkenylation. The computational study suggests that the remarkably high diastereoselectivity is attributed to the stabilizing interaction between the 2' carbonyl moiety and the palladium catalyst in the favored transition state.