Will 265/70R16 tires work on stock Rubicon? Why doesn't anyone use this size?

That is correct. I eventually did a 1/2 in front spacer to level but not initially. I like this size on my rubicon.
 
Sizing down my wrangler

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I dont want to lift or go taller but wouldnt mind a little wider tire. I have 31x10.5 on my X. I found a set of 265 70 16s and it looks like they are just a tad wider and same height as my 245 75 16s. Will they rub on moab wheels and why doesnt anyone use this size?
Hi sir, just started research on tyre sizes for LJ Rubicon and saw your post on 265 70 16s. Did you install them and if so do you have any clearance issues? Previous owner put wider fender flares on but was running 33 12.5 15s and I have issues with tyre / fender contact. I am looking for smaller diameter and narrower wheel that does not look stupid.