Phenylhydroxylamine (13) oxalate was quite easily acylacetylated by heating with an equimolar amount of acyl Meldrum's acid (4) in acetonitrile to give an N-acylacetylphenylhydroxylamine (14) in high yield. When 14 was treated with another equimolar amount of the same 4 in refluxing toluene, a series of reactions, O-acylacetylation, 1-aza-1'-oxa [3, 3] sigmatropic rearrangement, decarboxylation, dehydrative cyclization, and deacylation, occurred consecutively to give a 2-substituted indole (16) in fair yield, though sometimes accompanied by the formation of a 5-substituted 4-isoxazolin-3-one (17). N-Benzoyl, N-acetyl, and N-benzyloxycarbonyl derivatives of phenylhydroxylamine (18) were treated with phenylacetyl Meldrum's acid (4i) in refluxing benzene containing copper powder to give readily rearranged ortho. alkylation products (19), which were converted to the corresponding N-acyl-2-benzylindoles (20) by treatment with hydrochloric acid in boiling ethanol or with anhydrous p-toluenesulfonic acid in benzene at room temperature.