Oxidative carbonylation of 1,5-cyclooctadiene in methylene chloride-methanol mixture, catalyzed by Pd(II)-salts, gave rise to a bicyclic, bifunctional product under mild experimental conditions. The mechanism, involving multiple carbon monoxide and double bond insertions into the Pd(II)-carbon σ-bond, has been proposed, as being consistent with the outcome of this novel ring closure reaction.