An I₂-mediated [3 + 2] annulation of methyl-azaarenes with alkyl 2-isocyanoacetates or amino acid ester hydrochlorides has been demonstrated. This strategy involves CN bond cleavage of isocyanides and can selectively synthesize iodine-functionalized and non-iodine-functionalized fused imidazoles. Scale-up experiments and arylation, alkynylation, alkenylation and selenization of iodine-functionalized products demonstrated the potential applications of this reaction.