Many methods report the scission of N−O bonds of aromatic heterocycles and their subsequent functionalization. Oxidative addition is one of the presumed pathways through which aromatic N−O bond activation with transition metals is achieved. We report the first well-defined pathway of (benz)isoxazole's aromatic N−O bond activation through oxidative addition. We also provide control experiments, which show that aromatic N−O bonds may be broken by strong inorganic reductants. These results highlight that N−O bonds are susceptible to both reduction and oxidative addition, which has important implications for catalysis. Exploring the reactivity of one of these complexes toward a series of electrophiles leads to the discovery of a Staudingertype β-lactam synthesis upon the reaction with a ketene. Finally, we demonstrate that the choice of different metal/ligand combinations allows for selective oxidative addition into either C−I bonds or N−O bonds in the presence of the other.