An intermolecular C–H functionalization method is developed for the synthesis of 3-hydroxy-2-oxindoles. Rh(III)-catalyzed N-nitroso-directed C–H addition to ethyl 2-oxoacetate allows subsequent denitrosation-triggered cyclization construction of 3-hydroxy-2-oxindoles. The method features a broad substrate scope and its synthetic utility is demonstrated on the synthesis of target compounds bearing functional groups (hydroxyl, bromo) amenable to further elaboration.