It has been known for a long time that thionyl chloride can effectively mediate the transformation of 4-carboxy-3,4-dihydro-3-phenyl-1(2H)-isoquinolones to indeno[1,2-c]isoquinolines. The mechanism of this unique transformation, however, remains to be established. Evidence is presented to demonstrate that (1) the two-electron dehydrogenation precedes Friedel–Crafts cyclization and (2) the two-electron dehydrogenation occurs via H-4 deprotonation and subsequent O-sulfinylation of the lactam moiety instead of C-sulfinylation of the carbon α to the carboxyl group.