The azaphthalimide 2a is the first phthalimide oxygen found to undergo a neighboring‐group participation reaction with a vicinal N‐phenyl carboxylic acid chloride upon nucleophilic addition with alcohols. Owing to the free rotation of the N‐phenyl moiety, hetero‐anellated benzoxazinedione isomers 3 and 4 are accessible, whereby 3 is preferred to 4 as the pyridine nitrogen in 2a preferentially activates the o‐carbonyl group. Yields of up to 92% were obtained when bases such as HCl acceptors were avoided by heating 2a with alcohols. The reaction is restricted to primary and secondary alcohols, as 2a is nonplanar in respect of the heterocyclic and benzene moiety, which prevents tertiary alcohols attacking the pyrrolidinedione carbonyl group. (© Wiley‐VCH Verlag GmbH & Co. KGaA, 69451 Weinheim, Germany, 2004)