An unprecedented reactivity of 3-sulfonylphthalide with 2-hydroxyaryl-p-quinone methides (HQMs) is reported here. A cascade of reactions starting with 1,6-addition and Dieckmann cyclization produced a diverse array of indenofurans and benzofurans in high yields, depending on the amount of base used, presumably via a common 8-membered ketolactone intermediate. The indenofurans could be transformed to benzofurans in the presence of excess base via a key spiro-lactone intermediate, which could be characterized via in situ oxidation to a stable spirolactone linked quinone methide, providing crucial evidence for the mechanism of the reaction. The three diverse oxygen heterocycles synthesized by our methodology constitute the core structure of several bioactive compounds including natural products.