The rhodium(II) acetate catalysed decomposition of alpha-diazo-beta-keto-gamma,delta-alkenyl phosphonates 1 substituted in the delta-position by an aryl group gave rise to mixtures of isomeric hydroxy-naphthalenephosphonates, 3 resulting from a Wolff rearrangement-electrocyclization process and 5 resulting from an aromatic C-H insertion reaction. The 3:5 ratio was found to depend on the substitution pattern of the gamma,delta-double bond. The diazoesters 9 which are the analogs of diazophosphonates 1 showed similar behaviour. In particular the rhodium(II) acetate catalysed decomposition of ethyl 2-diazo-5,5-diphenyl-3-oxopent-4-enoate 9c led to ethyl 1-hydroxy-4-phenyl-2-naphthalenecarboxylate 11c and not to ethyl 2-hydroxy-4-phenyl-1-naphthalenecarboxylate 10c as previously reported. The structure of 11c was confirmed by X-ray crystallography. Copyright (C) 1996 Elsevier Science Ltd