The stereoselective synthesis of highly substituted cyclobutanes is essential for the development of lead candidates in drug discovery. Herein, we present a novel Rh(III)-catalyzed reaction pathway for synthesizing substituted cyclobutanes, which involves a concerted N-C bond formation and C-C bond cleavage between 2-aryl quinazolinones and alkylidenecyclopropanes. Notably, the combination of Rh(III) catalyst and HFIP solvent plays a critical role in facilitating the formation of cyclobutane rings.