Cyclic 2-diazo-1,3-dicarbonyl compounds react with diketene in the presence of rhodium(II) salts to give benzofurans as the major isolated products. The formation of intermediate products with exocyclic double bonds which isomerise to benzofurans provides support for the proposed mechanism which involves initial formation of a dioxaspirooctenone by a formal dipolar cycloaddition reaction of a carbenoid to the exocyclic double bond of diketene followed by the loss of carbon dioxide. Acyclic 2-diazo-1,3-dicarbonyl compounds give furans in poor yield.
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