The first synthesis of highly strained spirocyclobutane-pyrrolines via a palladium-catalyzed tandem Narasaka-Heck/C(sp3 or sp2)-H activation reaction is reported here. The key step in this transformation is the activation of a δ-C-H bond via an in situ generated σ-alkyl-Pd(II) species to form a five-membered spiro-palladacycle intermediate. The concerted metalation-deprotonation (CMD) process, rate-determining step, and energy barrier of the entire reaction were explored by density functional theory (DFT) calculations. Moreover, a series of control experiments was conducted to probe the rate-determining step and reversibility of the C(sp3)-H activation step.