4-dimethylamino-2′-hydroxychalcone in crystals is well known for its aggregation induced emission (AIE) in the red region of spectrum. We however observe that in liquid solutions this dye and its analogues undergo reversible wavelength-dependent light-induced cyclization to the flavanone derivatives. Special care thus should be taken when this compound is used for optoelectronic applications requiring high purity, especially via solution-processed methods. The discussed intramolecular cyclization proceeds faster in nonpolar medium and is quenched completely in the presence of protic solvents or via formation of aggregates in crystal phase. In spite of that quantum yield of a single photoinduced transformation does not exceed 1%, continuous irradiation affords 92% of product which makes it the most efficient preparation route for 4′-dimethylminoflavanone and its derivatives among the ones reported before. According to the DFT and TDDFT calculations supported by the experimentally investigated spectral features, the mechanism of photoinduced formation of a 4′-dimethylaminoflavanone involves several transformations: excited state intramolecular proton transfer (ESIPT), excited and ground state rotational isomerization from s-trans to s-cis isomer, cyclization and enol-keto tautomerization via proton transfer in the ground state.