Rhodium-catalyzed cyclization of phosphinic acids and phosphonic monoesters with alkynes has been developed. The oxidative annulation proceeds with complete conversion of phosphinic acid derivatives and allowed the atom-economic preparation of useful phosphaisocoumarins with high yield and selectivity. The reaction is tolerant of extensive substitution on the phosphinic acid, phosphonic monoester and alkyne, including halides, ketone, and hydroxyl groups as substituents. Furthermore, we found that alkenylphosphonic monoesters proceed to give a wide range of phosphorus 2-pyrones through oxidative annulation with alkynes. Mechanistic studies revealed that C-H bond metalation was the rate-limiting step.