A novel gold-catalyzed oxidative cyclization/aldol addition of homopropargyl alcohols with isatins has been developed that provides an effective access to the 3-hydroxyoxindoles in high yields under mild reaction conditions with high diastereoselectivities. In comparison with disclosed transformations of alkyne oxidations via an α-oxo gold carbene route, this is the first example of an aldol-type interception of an ylide (or its enolate form) intermediate with alkyne as a safe and readily available nondiazo carbene precursor.