A domino propargylation/furanylation (intramolecular exo-dig-cyclization)/benzannulation reaction of 2,4-diyn-1-ols with 1,3-dicarbonyl compounds has been developed for the first time. This provides a novel and effective method for the preparation of aryl/heteroaryl-fused benzofurans from easily accessible starting materials in a single step. The methodology was extended to pyrrolyl-benzannulation to obtain aryl/heteroaryl-fused indoles. Further, application of this approach in the synthesis of eustifoline D and dictyodendrin structural frameworks has been demonstrated.