Further study of our aerobic intermolecular cyclization of acrylic acid with 1-octene to afford α-methylene-γ-butyrolactones, catalyzed by the Pd(OCOCF(3))(2)/Cu(OAc)(2)⋅H(2)O system, has clarified that the accumulation of water generated from oxygen during the reaction causes deactivation of the Cu cocatalyst. This prevents regeneration of the active Pd catalyst and, thus, has a harmful influence on the progress of the cyclization. As a result, both the substrate conversion and product yield are efficiently improved by continuous removal of water from the reaction mixture. Detailed analysis of the kinetic and spectroscopic measurements performed under the condition of continuous water removal demonstrates that the cyclization proceeds in four steps: 1) equilibrium coordination of 1-octene to the Pd acrylate species, 2) Markovnikov-type acryloxy palladation of 1-octene (1,2-addition), 3) intramolecular carbopalladation, and 4) β-hydride elimination. Byproduct 2-acryloxy-1-octene is formed by β-hydride elimination after step 2). These cyclization steps fit the Michaelis-Menten equation well and β-hydride elimination is considered to be a rate-limiting step in the formation of the products. Spectroscopic data agree sufficiently with the existence of the intermediates bearing acrylate (Pd-O bond), η(3)-C(8)H(15) (Pd-C bond), or C(11)H(19)O(2) (Pd-C bond) moieties on the Pd center as the resting-state compounds. Furthermore, not only Cu(II), but also Cu(I), species are observed during the reaction time of 2-8 h when the reaction proceeds efficiently. This result suggests that the Cu(II) species is partially reduced to the Cu(I) species when the active Pd catalytic species are regenerated.