The synthesis of indanone derivatives by the Rh(III)-catalyzed reaction of α-carbonyl sulfoxonium ylides with activated alkenes is reported. The reaction shows a high tolerance for functional groups and furnishes a variety of substituted indanone derivatives via a formal [4 + 1] cycloaddition. Highly stable sulfoxonium ylides were used as substrates in this C–H functionalization, and their bifunctional character could be effectively exploited using Rh(III) catalysis via sequential double C–C bond formation. Based on mechanistic studies including deuterium-labeling experiments, the reaction is proposed to proceed as follows: Rh(III)-catalyzed C–H oxidative alkenylation via β-hydride elimination, readdition of H–Rh species, a 1,2-carbon shift with the elimination of DMSO, and protonation.