A one-pot strategy has been developed for the efficient synthesis of highly functionalized dihydrothiophenes using β-ketosulfoxonium ylides, β-ketothioamides, and aldehydes. This cascade process involves C(sp3)-H insertion, aldol condensation, and intramolecular 1,4-conjugate addition, forming C-S and C-C bonds efficiently. The method offers good to high yields, a broad substrate scope, structural diversity, and scalability. Additionally, its synthetic utility is demonstrated through further transformation into a thiophene derivative, highlighting its applicability in the construction of complex molecules.