o-Alkynyl-substituted alpha-diazoketones undergo internal cyclization to produce indenone derivatives upon treatment with catalytic quantities of Rh(II)-carboxylates. A variety of structural influences were encountered by varying the nature of the substituent group attached to the diazo center. The cyclization reaction involves addition of a rhodium-stabilized carbenoid onto the acetylenic pi-bond to generate a cycloalkenone carbenoid. The cyclized carbenoid was found to undergo both aromatic and aliphatic C-H insertion as well as cyclopropanation across a tethered pi-bond. Subjection of diazo phenyl acetic acid 3-phenylprop-2-ynyl ester to Rh(II) catalysis furnished 8-phenyl-1, 8-dihydro-2-oxacyclopenta[a]indenone in high yield. The formation of this compound involves cyclization of the initially formed carbenoid onto the alkyne to produce a butenolide which then undergoes C-H insertion into the neighboring aromatic system. When a vinyl ether is added, the initially formed rhodium carbenoid intermediate can be intercepted by the electron-rich pi-bond prior to cyclization. Different rhodium catalysts were shown to result in significant variation in the product ratios. The competition between bimolecular cyclopropanation, 1,2-hydrogen migration, and internal cyclization was probed using several enol ethers as well as diazoesters which possess different substituent groups on the ester backbone. The specific path followed was found to depend on electronic, steric, and conformational factors.