A diverse set of novel heterocyclic iodoniums was synthesized for the first time. The reactions of these unique iodoniums with environmentally benign water as the oxygen source provided structurally complex oxygen-incorporated heteropolycycles that are essential motifs in natural products and biologically active compounds. The transformation only required low-cost copper acetate. Further derivatization of the obtained polycycles expanded the structural diversity, which is important in the building of chemical libraries for drug discovery.