Rhodium(II) acetate-catalyzed decomposition of 1-diazo-3-phenyl-4-(pyrrol-1-yl)-butan-2-one and its p-methoxy derivative resulted in their intramolecular cyclization to form the 6-phenyl-5,6-dihydroindolizin-7(8H)-ones and 1-(pyrrol-1-yl)methylindan-3-ones as major and minor products respectively in high yields (77–89%). The p-nitrophenyldiazo compound cyclized exclusively to the 5,6-dihydroindolizin-7(8H)-one in 76% yield.