Palladium-catalyzed allylic alkylation with a variety of active methylene compounds has been carried out in the ionic liquid 1-butyl-3-methylimidazolium tetrafluoroborate ([bmim]-[BF4]). Phosphine ligands are found to exert a profound effect on the active palladium species, with the more electron-donating ones such as PCy3 affording faster rates and the strong electron accepters such as P(OPh)(3) affording extremely low conversions. In the most commonly used molecular solvent, THF, the reaction is slower and the choice of ligands is more limited. These observations may be accounted for by the allylpalladium intermediate existing in different forms in the two solvents.