Alkynyl-λ3-iodanes have been established as alkynyl cation equivalents for the alkynylation of carbon- and heteroatom-based nucleophiles. Herein, we report an unprecedented reaction mode of this compound class, which features a Pd(II)-assisted 1,2-I(III) shift of an alkynylbenziodoxole. A Pd(II) catalyst mediates this shift and the subsequent interception of the transient vinylidene species with carboxylic acid (1,1-hydrocarboxylation). The product of this stereoselective rearrangement−addition reaction, β-oxyalkenylbenziodoxole, represents a novel and useful building block for further synthetic transformations.