We have developed a phosphine-catalyzed (4+1) annulative rearrangement for the preparation of 3-pyrrolines from allenylic carbamates via phosphonium diene intermediates. We employed this methodology to synthesize an array of 1,3-disubstituted- and 1,2,3-trisubstituted-3-pyrrolines, including the often difficult to prepare 2-alkyl variants. A mechanistic investigation employing allenylic acetates and mononucleophiles unexpectedly unveiled that a phosphine-catalyzed (4+1) reaction for the construction of cyclopentene products, previously reported by Tong, might not occur through a phosphonium diene, as had been proposed, but rather through multiple mechanisms working in concert. Consequently, our phosphine-catalyzed rearrangement is most likely the first transformation to involve the unequivocal formation of a phosphonium diene intermediate along the reaction pathway. To demonstrate the synthetic utility of this newly developed reaction, we have completed concise formal syntheses of the pyrrolizidine alkaloids (+/-)-trachelanthamidine and (+/-)-supinidine.