Palladium-catalyzed allylic substitution of aryl allyl chlorides with aromatic and heteroaromatic aldehydes was performed in the presence of hexamethylditin. This procedure involves palladium-catalyzed formation of transient allylstannanes followed by generation of a bis(allyl)palladium intermediate, which subsequently reacts with the aldehyde electrophile. The catalytic substitution reaction proceeds with high regio- and stereoselectivity. The stereoselectivity is affected by the steric and electronic properties of the allylic substituents. Various functionalities including NO(2), COCH(3), Br, and F groups are tolerated under the applied catalytic conditions. Density functional calculations at the B3PW91/DZ+P level of theory were applied to study the steric and electronic effects controlling the regio- and stereoselectivity of the electrophilic addition. The development of the selectivity was studied by modeling the various bis(allyl)palladium species occurring in the palladium-catalyzed substitution of cinnamyl chloride with benzaldehyde. It was found that the electrophilic attack proceeds via a six-membered cyclic transition state, which has a pronounced chair conformation. The regioselectivity of the reaction is controlled by the location of the phenyl group on the eta(1)-allyl moiety of the complex. The stereoselectivity of the addition process is determined by the relative configuration of the phenyl substituents across the developing carbon-carbon bond. The lowest energy path corresponds to the formation of the branched allylic isomer with the phenyl groups in anti configuration, which is in excellent agreement with the experimental findings.