The C‐C ring closure of α‐chloromethyl alkyl or aryl N‐aryl imines catalyzed with 1 to 10 % Pd(OAc) 2 /P(p‐tolyl) 3 afford efficiently 2‐aryl‐ and 2‐alkyl‐1 H‐ indoles. The heterocyclization reaction involves the initial formation of [2‐(arylimino)ethyl]palladium(II) chloride complexes with subsequent C‐H activation of the aromatic amine ring. Readily or commercially available α‐chloromethyl‐aryl or ‐alkyl ketones are used as the precursors. Functionalized indoles at the benzene ring are obtained when the imines are derived from substituted anilines.