A catalyst system based on palladium 2‐methylnaphthyl complexes bearing ylide‐functionalized phosphines (YPhos) was found to enable the selective γ‐arylation of 1,3‐dioxinone derivatives with diversely functionalized aryl, heteroaryl, and vinyl chlorides. The products were further converted into 1,3‐diketones and heterocycles, highlighting their function as synthetic hubs. Experimental and computational studies revealed that bulky, electron‐rich YPhos ligands are uniquely effective because they enable the oxidative addition of aryl chlorides at room temperature while at the same time efficiently promoting the rate‐limiting reductive elimination step of the thermally sensitive enolates.