We have developed a method for recyclable hypervalent-iodine-mediated direct dehydrogenative α,β′- bifunctionalization of β-ketoesters and β-diketones under metal-free conditions, which affords a straightforward way to synthesize benzo-fused 2,3-dihydrofurans. This efficient, mild method, which has a wide substrate scope and good functional-group tolerance, was used for the multistep synthesis of the protected aglycone of a naturally occurring phenolic glycoside. A mechanism involving Michael addition to an enone intermediate and subsequent oxidative cyclization is proposed.