A novel Rh(III)-catalyzed C−H activation/[5 + 2] cascade annulation of aroyl hydrazides with iodonium ylides is accomplished, in which diverse seven-membered dibenzodiazepinediones were afforded in moderate to excellent yields. This annulation reaction features an ideal functional group tolerance and a wide substrate scope. Large-scale and derivatization reactions were conducted to demonstrate the potential utility of this transformation.