To date, the general and catalytic α-arylation of cyclic 1,3-dicarbonyls remains elusive. We now report the first Rh-catalyzed α-arylation of cyclic 1,3-dicarbonyls with benzocyclobutenols through a cyclic iodonium ylide strategy. Our strategy represents a good solution for the previously challenging α-arylation of cyclic 1,3-dicarbonyls with sterically demanding aryl partners, which is especially appropriate for structurally unique heteroaromatic 1,3-dicarbonyls. Our approach features mild conditions, readily available starting materials, high yields, excellent functional group-tolerance, and simple operation, providing expedient access toward medically important 2-aryl (hetero)cyclic 1,3-dicarbonyls. The practicality of this approach is demonstrated by the gram-scale synthesis, one-pot synthesis, and numerous downstream transformations.