A two-step formal (4 + 1) annulation-dehydration reaction offers a convenient route to C2-arylated indoles and benzofurans. This reaction exploits the bifunctional reactivity of electron-deficient benzyl chlorides with N-sulfonyl-2-aminobenzaldehydes or salicylaldehyde derivatives. The reaction tolerates both electron-withdrawing and donating groups on the substituted aldehydes, as well as variation of electron-withdrawing groups at the para position of the benzyl chloride reagent. This work also identifies interesting byproducts resulting from the self-reaction of these benzyl chlorides under basic conditions.