A Rh(III)-catalyzed C-H bond activation for the synthesis of fused 2H-isoindole scaffolds from oxadiazolones with diazo compounds was developed. The reaction proceeded through C-H activation of oxadiazolones/[4 + 1] annulation, intramolecular cyclization, and an unusual acyl migration cascade to afford target scaffolds with good yields. These 2H-isoindole derivatives could be further transformed into intriguing drug privileged scaffolds.