We herein report the Rh(iii)-catalyzed C-H bond activation and addition of benzimidates to aldehydes to afford biologically important phthalides in a single step. The imidate is a novel and unexplored directing group that not only enables C-H bond activation and addition to aldehydes, but also serves to capture the reversibly formed alcohol intermediate. The reaction shows broad scope with a high level of functional group compatibility and is applicable to both aromatic and aliphatic aldehydes.