Oxidative cleavage of the Csp3−O bond in 1‐arylisochromans with stoichiometric oxidants, such as CrO3/H2SO4, has been practiced for decades in synthetic chemistry. Herein, we report that a structurally well‐defined FeII–pyridyl(bis‐imidazolidine) catalyst promotes the aerobic oxygenation of 1‐arylisochromans, affording highly selectively 2‐(hydroxyethyl)benzophenones, compounds of potential for neuroprotective agents. Key intermediates have been isolated, indicating that the reaction proceeds through dehydrogenative oxygenation of the isochromans at the 1‐position, Csp3−O bond cleavage at the iron centre and hydrogenolysis of the resulting Fe−O bond with the H2 generated from the dehydrogenation step. In the absence of H2 but under iron catalysis, the peroxide intermediate is converted into an unexpected ketal compound, which transfers into a 2‐(hydroxyethyl)benzophenone when both O2 and H2 are admitted. The unique ability of the iron catalyst for oxygenation and hydrogenation in the same catalytic process under mild conditions allows for the stepwise preparation of a variety of isolable oxygenated products on a preparative scale, circumventing the need for using wasteful and/or toxic oxidants.