A highly diastereo- and enantioselective aldol reaction of isatins with silyl ketene imines was realized by using a chiral N, N'-dioxide/GdIII complex (1 mol %), and with the addition of water, all the reactions completed within 10 min and various β-hydroxy nitriles with adjacent tetrasubstituted stereocenters were obtained in excellent outcomes. The essential role of water was probed, and a possible transition state model was proposed based on an eight-coordinated N, N'-dioxide/GdIII complex.