Herein, we introduce an iodonium ylide strategy to achieve novel α-alkylation of cyclic 1,3-dicarbonyls through harnessing C(sp3)-Rh species generated from 5-exo-trig cyclization to provide rapid access to molecular hybridization of medically important isoindolin-1-ones and cyclic 1,3-dicarbonyls from readily available substrates. This approach features mild conditions, good yield, excellent functional group tolerance, and the simultaneous formation of two new chemical bonds and one stereogenic center. Moreover, the hydroxyl group of resulting product provides a good handle for downstream transformations. Importantly, we also demonstrate this strategy can be achieved in a one-pot manner. A C(sp3)-Rh complex was prepared and proved to be the key intermediate.