The reaction of 4-chloro-2-iodo-7-azaindole with terminal alkynes was investigated using 10% Pd/C–PPh3–CuI as a catalyst system in water. This study afforded a new, mild and selective process for the preparation of 2-alkynyl-4-chloro-7-azaindole in good yields via C– C bond forming reaction. The resulting chloro derivative can be functionalized further via another Pd-mediated C–C bond forming reaction with arylboronic acid.