A highly efficient and mild palladium-catalyzed, one-pot, four-step cascade annulation has been developed to afford functionalized beta- and gamma-lactones in moderate to good yields with high regio- and diastereoselectivities in ionic liquids. The employment of ionic liquids under mild reaction conditions makes this transformation green and practical. Especially, this reaction provided a novel and convenient methodology for the construction of naturally occurring biologically active beta- and gamma-lactones.