A base-promoted reaction between alkyl 2-aroyl-1-chlorocyclopropanecarboxylates and acylhydrazones is described. In common solvents, the reactions proceed smoothly under mild conditions, providing mainly the formal substitution product , as well as a little amount of the formal [3 + 2] cycloaddition product . This strained bicyclic pyrazolidine , however, became the predominant product in DMSO. Moreover, a novel aromatization process of the fused pyrazolidine into 2,3,5-trisubstituted pyrrole has been successfully achieved in excellent yield via treatment with a HCl-pyridine system.