The Schmidt rearrangement of substituted 3-phenyl-2-butanone with trimethylsilyl azide in 90% (v/v) aqueous TFA gave two types of product, fragmentation and rearrangement, the ratio of which depends on the substituent: more fragmentation for a more electron-donating substituent. Rate measurements by azotometry indicated the presence of an induction period, and the pseudo-first-order rate constants showed saturation kinetics with respect to the azide concentration. It was indicated that the reaction proceeds through pre-equilibrium in the formation of iminodiazonium (ID) ion and that the N(2) liberation from the ID ion is rate-determining. Under high azide concentration conditions, where the effective reactant is the ID ion, the reaction gave a linear Hammett plot with a ρ value of -0.50. The observed substituent effects on the rate and the product selectivity imply that path bifurcation on the way from the rate-determining TS to the product states occurs, as suggested by previous molecular dynamics simulations, in a similar manner to the analogous Beckmann rearrangement/fragmentation reactions.