Comprehensive Summary Herein, we have developed a strategy of Rh(III)‐catalyzed C—H activation of N ‐nitrosoanilines and iodonium ylides to construct novel tetralydrocarbzol‐4‐one scaffolds, which provided valuable templates for sequential C—H functionalization such as alkylation, alkenylation, amidation and (hetero)arylation at C 5 ‐position of tetralydrocarbzol‐4‐one with different coupling partners. Gram‐scale synthesis and further transformations of tetralydrocarbzol‐4‐one derivatives to Ondansetron and its analogues demonstrated the utility of this protocol, which enabled the concise and diverse construction of biologically active molecules.