It has been established that an electron‐deficient bis(ethoxycarbonyl)‐substituted cyclopentadienyl (CpE) rhodium(III) complex catalyzes the oxidative intramolecular 1,1‐oxyamination of alkenes with N‐benzoyl amino acids to produce oxazoloisoindole‐2,5‐diones. Experimental and theoretical mechanistic studies revealed that this oxidative 1,1‐oxyamination proceeds via not the aza‐Wacker reaction but the formation of a rhoda(III)oxazolidine initiated by the carboxylic acid‐directed N−H bond cleavage.