The reaction of propargylic alcohols with diaryl disulfides and carbon monoxide in the presence of tetrakis(triphenylphosphine)palladium leads to a novel thiolative lactonization to afford beta-(arylthio)-alpha,beta-unsaturated lactones in moderate to good yields. Similar conditions can be employed with homopropargylic alcohols, giving the corresponding delta-lactones with a beta-arylthio group successfully