Abstract In the presence of trifluoroacetic acid, N-phenyl-N′-phenoxyurea (1a) rearranges to N-(4′-hydroxy-2-biphenylyl) urea (2a) and N-carbamoyl-2-hydroxy-diphenylamine (3a). The rearrangement is an intramolecular reaction, and the transition state of the breakage of the NO bond is deduced to be polarized in the form N δ----O δ+. The reaction is entirely new and constitutes a fundamental aromatic rearrangement.