Herein, a divergent and selective synthesis of (E)-3alkylidene oxindole, which is a highly valuable framework due to its presence in biologically important molecules, via palladiumcatalyzed multicomponent reaction of 3-diazo oxindole, isocyanide, and aniline has been developed. Further, the feasibility of the reaction was demonstrated by employing differently substituted 3diazo oxindoles, isocyanides, and anilines as starting material and obtaining the corresponding products in 31−83% isolated yields. Besides, a plausible mechanism has been presented and further investigated using DFT calculations which suggest the formation of the Pd-carbene complex and ketenimine intermediate as the key step during the catalytic cycle.