We report a palladium-catalyzed intermolecular [4 + 1] annulation pathway for N-phenoxyacetamides with aldehydes to form 1,2-benzisoxazoles. By activating the C–H bonds ortho to phenol-derived O–N bonds, the method enables the simultaneous construction of C–C and CN bonds in 1,2-benzisoxazoles with the O–N bonds intact. The method has been successfully applied to the synthesis of active pharmaceutical intermediates, such as risperidone.