The N,O-diacylhydroxylamine derivative 4 has been prepared and its reactivity with nucleophiles investigated. On reaction with lithium enolates of cyclic or acyclic ketones, 4 is converted stereoselectively to the corresponding alkylidene phthalide. The stereochemical outcome of the transformation can be modified by changing the polarity of the reaction medium and the products isomerized under acidic conditions.