An unprecedented indium-mediated palladium-catalyzed allylic alkylation of isatins with alkynes is disclosed. This reaction provides a new, practical, and straightforward route to access 3allyl-3-hydroxy-2-oxindoles in good yields with broad substrate scope and scalability, exhibiting high atom and step economy. A primary mechanistic study reveals that indium played two roles in the reaction, first as a reductant and second as a Lewis acid. Compared with previous methods, our strategy eliminated the steps for the separation and purification of the reaction intermediates, as well as pre-installing leaving groups to allylic substrates. Moreover, our reaction did not employ moisturesensitive allylic metal species and stoichiometric oxidants.