In this work, 1,4-dioxane-mediated hydroxylhydrative aza-cyclization of 2-alkynylbenzamide is developed for the synthesis of 3-hydroxylisoindolin-1-ones. The transformation proceeds smoothly in water with good yields and a broad reaction scope. Mechanistic studies show that regioselective brimonative 5-exo-dig aza-cyclization, bromohydration of the resulting alkene groups, and hydrolysis of dibromo compounds are involved. Compared to the traditional methodologies, the synthetic procedure reported herein represents a cleaner route toward 3-hydroxylisoindolin-1-ones.