An attempted Regitz diazo transfer onto homophthalic anhydride led to the discovery of an unexpected ring contraction, which gave N-sulfonyl phthalide-3-carboxamide derivatives. The reaction is thought to proceed via a [3 + 2] cycloaddition of the substrate's enol form and the azide followed by a two-step fragmentation of the intermediate 1,2,3-triazoline with a loss of the nitrogen molecule.