A Pd(II)-catalyzed [5 + 2] annulation between N-triflyl aryl indoles and α,γ-substituted allenoates for the synthesis of indole-fused benzodiazepines is reported. This protocol is highly efficient when N-acetylated valine amino acid and DMSO have been used as ligand and cosolvent, respectively. The substrate scope can be further extended to disubstituted allenoates. A reaction mechanism has been proposed based on the mechanistic studies. Mechanistically, the N-acetylated valine amino acid ligand accelerates C-H activation of the C(sp2)-H bond. Consequent cyclopalladation leads to the formation of a six-membered palladacycle. Subsequent coordination and migratory insertion of an allenoate forms the possible eight-membered intermediate. Reductive elimination followed by a [1,3]-H shift results in the indole-fused benzodiazepines.