Exploring multistep cascade reactions triggered by C−H activation are recognized as appealing, yet challenging. Herein, we disclose a Rh(III)-catalyzed domino C−H coupling of N-carbamoyl indoles and 4-hydroxy-2-alkynoates for the streamlined assembly of highly functionalized furan-2(5H)-ones in which the carbamoyl-directing group (DG) is given a dual role of an auxiliary group and a migrating acylating reagent via the cleavage of stable C−N bonds at room temperature. More importantly, the obtained furan-2(5H)-one skeleton could be further functionalized under air in situ via C5−H hydroxylation by simply switching the solvent or additive, providing fully substituted furan-2(5H)-ones with the installation of an alcohol-based C 5 quaternary carbon center. Detailed experimental studies and density functional theory calculations reveal that a Rh(III)-mediated tandem C−H activation/alkyne insertion/DG migration/lactonization accounts for the developed transformation to achieve high functionalities with the observed exclusive selectivity. The potential biological application of the obtained furan-2(5H)-ones as a class of potent PPARγ ligands further highlights the synthetic utility of the developed methodology. This protocol is endowed with several salient features including efficient multistep cascade triggered by C−H activation, excellent chemo-, regio-, and stereoselectivity, high bondforming efficiency (e.g., two C−C and two C−O bonds), solvent-or additive-controlled product selectivity, good functional-group compatibility, and mild redox-neutral conditions.