An unprecedented oxidative dimerization by palladium catalysis has been developed using PhI(OPiv)2 as a by-standing oxidant. This provides a facile method for the synthesis of quaternary 2,3′-bibenzofuran-2′(3′)-ones from readily accessible substrates. A plausible mechanism involving a Pd(II)–Pd(IV) catalytic cycle is proposed; a trace amount of water is required for subsequent oxidation.