Insertion reactions of diazo carbonyls to azlactones in basic conditions have been performed. The developed method allows the preparation of a wide range of oxazole derivatives in yields ranging from 74 to 98%. Different substituents on both azlactone rings and diazo carbonyls do not compromise the methodology, even those containing stereogenic centers. Isotopic labeling experiments revealed the mechanism may proceed through a rare diazo carbonyl activation by an ammonium salt derivative.