Addition of CO to a tetrametallic magnesium hydride cluster results in both carbon-carbon bond formation and deoxygenation to generate an acetaldehyde enolate [C2OH3]- which remains coordinated to the cluster. To the best of our knowledge, this is the first example of formation of an isolable complex containing an [C2OH3]- fragment from reaction of CO with a metal hydride, and the first example of CO homologation and deoxygenation at a main group metal. DFT studies suggest that key steps in the mechanism involve nucleophilic attack of an oxymethylene on a formyl ligand to generate an unstable [C2O2H3]3- fragment, which undergoes subsequent deoxygenation.