A novel base-induced rearrangement of isoxazoles into imidazole derivatives is reported. In the isoxazole series, this represents the first example of a three-atom side-chain rearrangement involving a CNC sequence. The reactions are carried out under nitrogen and produced 2-aryl-4(5)-phenacyl-5(4)-phenyl-imidazoles in high yields. In the presence of oxygen, a cascade rearrangement-oxidation reaction sequence was observed and imidazole derivatives bearing an oxidized side-chain were isolated.