A novel [Rh2]/Xantphos-catalyzed one-pot sequence for the synthesis of diverse 3-acyl-3-allyl oxindole derivatives from easily available N-aryl-α-diazo-β-keto amides and allylic compounds has been developed. The notable features of this work include ease of operation, mild reaction conditions, good functional group compatibility and facile diversification of the products. Preliminary mechanistic studies indicate a tandem carbene-induced C-H functionalization and Rh(II)/Xantphos catalyzed allylic alkylation process. Moreover, the choice of Xantphos as the ligand is critical to enable the allylic alkylation process in this catalysis.