A novel imidazolium ylide activated [4 + 1] annulation approach is described for the diastereoselective synthesis of bicyclic and tricyclic fused dihydrofurans in water. This cascade annulation presumably proceeds via a Michael reaction triggered zwitterion enolate followed by concomitant intramolecular cyclization. The methodology has distinction of being the first report on imidazolium ylide mediated [4 + 1] annulation in water as a unified greener approach involving an in situ base regeneration system and an alternative to pyridine ylide.