A regioselective synthesis of furanone-fused isoquinoline heterocycles is developed in a single step using a Rh(III) catalyst. In this reaction, a cascade C−H activation, regioselective annulation, and lactonization occur in one pot. A wide range of alkynoates was examined, which showed good regioselectivity. The regioselectivity was guided by steric bulk at the C4 position of the 4-hydroxy-2-alkynoates. The synthetic utility was exemplified, and the model reaction was scaled up to a 1 g scale.