Merging both C–H and C–C activation in a tandem process is a marked challenge. A novel Rh(III)-catalyzed C–H activation/ring opening C–C cleavage/cyclization of carboxylic acids with cyclopropanols was developed for the synthesis of 3-substituted phthalides and α,β-butenolides. This reaction displays excellent functional group tolerance with respect to both carboxylic acids and cyclopropanols and features relatively mild conditions. Remarkably, the utility of this method was highlighted by the rapid construction of bioactive compounds bearing a 3-substituted phthalide framework via late-stage functionalization.