A palladium-catalyzed strategy for isoindole N-oxide ring construction by C−H functionalization of aldonitrones is described. Our protocol is of general character, providing isoindole N-oxides with a variety of functional groups, including very sterically congested products. Further transformations into spirocyclic isoindolines, isoindoles, or a polycyclic isoquinolinium salt have been demonstrated as well. A mechanistic study suggests that the catalytic process proceeds via a Heck-type addition to the double C�N bond.