The unique reactivity of indolyl-substituted p-QMs as a new type of two-carbon synthon has been explored for the first time in a novel iron(III)-catalyzed tandem annulation. This (2+2) annulation/retro-4π electrocyclization/imino-Nazarov cyclization cascade reaction is characterized by an unusual structural reconstruction of indolyl-substituted p-QMs, leading to an expeditious assembly of synthetically important functionalized cyclopenta[b]indoles.