An unprecedented [2+2+1] hydrative annulation of 1,6‐enynes with terminal alkynes is achieved using catalytic cationic Rh(I). Thus, a modular assembly of cyclopenta[b]benzofuranols with two consecutive quarternary stereocenters is achieved from readily available alkynes. The reaction is proposed to go through a sequence of 5‐membered rhoda‐cycle formation, regioselective acetylene insertion, 1,5 H‐shift, substrate controlled stereoselective addition of water molecule followed by 1,2‐rhodium migration gave contracted rhoda‐cycle D and reductive elimination. Necessary control/labelling experiments were conducted to gain insight in to the mechanism.