Reaction of 4-arylidene-2-phenyl-5(4H)-1,3-oxazolones with benzyne afforded predominantly, 3-arylidene-7-hydroxy-7-phenyl-1,4(H)-benzoxazepine-2-ones in addition to their N-phenyl derivatives. However, the reaction of the target oxazolones with an excess of benzyne gave only the N-phenyl derivatives of 1,4(H)-benzoxazepine-2-ones in good yields. The reaction mechanism describing product formation is also explained. Arylation of 1,4(H)-benzoxazepine-2-ones with benzyne proceeded successfully to give the N-phenyl products.