A novel I-2-DMSO-mediated cascade cyclization approach for synthesizing 2-hydroxy-pyrrol-3(2H)-one scaffold from readily accessible beta-ketosulfoxonium ylides and beta-enaminone derivatives has been developed. Under metal-free and mild conditions, this cascade transformation facilitates the formation of one C-C bond and one C-N bond in a single reaction vessel, exhibiting a wide range of functional group compatibility. In addition, this method added an active hydroxyl group to a quaternary carbon center.