We demonstrate a unique strategy for a benzylation/benzylic CH amidation cascade reaction by the (η3‐benzyl)palladium system derived from a palladium catalyst and benzyl alcohol. This tandem process is devised as a new synthetic route for 3‐phenyl‐3,4‐dihydro‐(2H)‐1,2,4‐benzothiadiazine‐1,1‐dioxide. Water plays an important role for the smooth generation of the (η3‐benzyl)palladium species, and a bis‐benzylated Pd(II) intermediate would be formed in our catalytic system. Atom economical processes such as benzylic CH activation, cascade reactions and chemoselective reactions in aqueous media have been developed.