A highly regio- and stereoselective synthesis of functionalized benzofulvenes via Rh(III)-catalyzed cascade reactions of benzoyl acetonitrile/methylsulfone/acetate with propargyl alcohols is presented herein. Mechanistic modeling performed with density functional theory (DFT) calculations suggested that the hydroxyl group and CsOAc played important roles in mediating the 5-membered ring cyclization by forming a very thermodynamically stable Rh(III) intermediate. Another remarkable feature of this transformation is its excellent stereoselectivity in that only -isomers are obtained.