The rhodium­(III)-catalyzed C–H activation followed by intramolecular annulation reactions between arylhydrazines and iodonium ylides under suitable conditions has been described. Tetrahydrocarbazol-4-ones are readily achieved with moderate to excellent yields. The synthetic protocol features a wide range of substrates with high functional group tolerance. The gram-scale reaction and derivatization of the product demonstrate the synthetic practicality and utilization of this method.