Abstract: The formation of quinazoline-2,4(1H,3H)-diones via palladium-catalyzed three-component coupling of o-iodoanilines, isocyanides, and carbon dioxide has been studied. The use of the coordinatively unsaturated phosphine complex [PdCl(μ-Cl)(PPh3)]2 in DMF at 80°C under atmospheric CO2 pressure provided quantitative yield of the target product in 3 h. Optimization of the reaction conditions, including solvent nature, temperature, and reactant ratio has been performed. The molecular mechanism of catalysis involving dynamic equilibrium between the monomeric and dimeric forms of palladium complexes has been proposed on the basis of ESI/HRMS analysis of key intermediates. A broad substrate scope of the reaction, including sterically hindered isocyanides, has been demonstrated. Biological screening of the synthesized quinazolinedione derivatives has shown that some of them exhibit moderate antibacterial activity against methicillin-resistant S. aureus.