The palladium-catalyzed reaction of 4-iodo-2-quinolones with diarylacetylenes in the presence of Ag2CO3 as a base in N,N-dimethylformamide (DMF) at 100 °C afforded unprecedented polyfused 2-quinolones via sequential [2+2+1] spirocyclization/arene C–H activation. A plausible mechanism is suggested based on control experiments and density functional theory (DFT) calculations.