The synthesis of oxygen-and nitrogen-substituted indanes was successfully performed by iodine(III)-mediated ring contraction of 1,2-dihydronaphthalenes. Acetoxy and benzoyloxy alkenes afforded indanes in 60-71% yield, irrespective of their position on aromatic ring. Similarly, the nitrogen containing substrates protected with 9-fluorenylmethyloxycarbonyl (Fmoc) and benzoyl (Bz) groups smoothly undergoes ring contraction giving indanes in 64-77% yield. The tosyl-protected substrate resulted only in addition products.