Irradiation of β‐phenylethynyl‐α‐diazo‐β‐ketoester with 300 or 350 nm light results in efficient and regioselective Wolff rearrangement producing only the product of alkynyl group migration. Addition of alcohols to the resulting α‐oxoketene yields α‐phenylethynyl‐β‐diester, which undergoes rapid (τ < 1 min) tautomerization to 1,1‐dicarbalkoxyallene. The latter then adds second molecule of alcohol in Michael fashion to form the final product, 2‐(1‐alkoxy‐2‐phenylvinyl)malonic ester. α‐Phenylethynyl‐β‐ketoacid produced from the ketene in aqueous solutions does not isomerize to an allene but rather undergoes decarboxylation to give β,γ‐acetylenic ester. Introduction of o‐(3‐hydroxy‐1‐propynyl) fragment in the structure of the parent α‐diazo‐β‐ketoester allowed us to achieve two goals simultaneously: ring closure by intramolecular nucleophilic attack of propargyl alcohol on photo‐generated ketene and the subsequent acetylene–allene rearrangement. The resulting enyne–allene undergoes spontaneous Myers–Saito cycloaromatization generating 1,4‐biradical. In alcohol solutions, however, ketene reaction with solvent outcompetes the intramolecular process. Copyright © 2011 John Wiley & Sons, Ltd.