[structure: see text]. A new strategy for the synthesis of substituted azulenes is reported, based on the reaction of beta'-bromo-alpha-diazo ketones with rhodium carboxylates. The key transformation involves intramolecular addition of a rhodium carbenoid to an arene pi-bond, electrocyclic ring opening, beta-elimination, tautomerization, and trapping to produce 1-hydroxyazulene derivatives. The synthetic utility of the method is enhanced by the ability of the triflate derivatives to participate in Suzuki coupling reactions, as illustrated in a synthesis of the antiulcer drug egualen sodium (KT1-32).