This Letter describes a Pd-catalyzed Tsuji-Trost-type/Heck reaction with allyloxy-tethered aryl iodides and aziridines. The strategy provides efficient access to benzannulated medium-sized rings via intermolecular cyclization. The substrate aryl iodide has two oxidative addition sites, that is, the aromatic C-I bond and the allyl-oxygen bond. The chemoselective oxidative addition of allyl-oxygen bonds is favored, followed by the activation of aromatic C-I bonds. Aziridine plays a key role. Mechanistic studies shed light on the reaction pathway.