The Pd-catalyzed decarboxylative allylation of α-(diphenylmethylene)imino esters (1) or allyl diphenylglycinate imines (2) is an efficient method to construct new C(sp3)C(sp3) bonds. The detailed mechanism of this reaction was studied by theoretical calculations [ONIOM(B3LYP/LANL2DZ+p:PM6)] combined with experimental observations. The overall catalytic cycle was found to consist of three steps: oxidative addition, decarboxylation, and reductive allylation. The oxidative addition of 1 to [(dba)Pd(PPh3)2] (dba=dibenzylideneacetone) produces an allylpalladium cation and a carboxylate anion with a low activation barrier of +9.1 kcal mol−1. The following rate-determining decarboxylation proceeds via a solvent-exposed α-imino carboxylate anion rather than an O-ligated allylpalladium carboxylate with an activation barrier of +22.7 kcal mol−1. The 2-azaallyl anion generated by this decarboxylation attacks the face of the allyl ligand opposite to the Pd center in an outer-sphere process to produce major product 3, with a lower activation barrier than that of the minor product 4. A positive linear Hammett correlation [ρ=1.10 for the PPh3 ligand] with the observed regioselectivity (3 versus 4) supports an outer-sphere pathway for the allylation step. When Pd combined with the bis(diphenylphosphino)butane (dppb) ligand is employed as a catalyst, the decarboxylation still proceeds via the free carboxylate anion without direct assistance of the cationic Pd center. Consistent with experimental observations, electron-withdrawing substituents on 2 were calculated to have lower activation barriers for decarboxylation and, thus, accelerate the overall reaction rates.