A palladium-catalyzed aminopalladation reaction followed by nucleophilic addition with aldehydes and dehydration is described. This direct and operationally simple procedure provides a rapid and reliable approach to a wide range of functionalized tetrahydroisoquinolines with high selectivity. Mechanistic studies disclosed that the nucleophilic addition, performed via a highly ordered transition-state, is the turnover-limiting step in which the inherent β-hydride elimination of the key Csp³−Pd species was controlled by the confined conformation and the nucleophilicity of the Csp³−Pd bond was enhanced by the strong electron-donating effect of the nitrogen atom.