Diversely substituted alpha-hydroxyphosphonamides and alkynes have been efficiently synthesized through the reaction of C-silylated alpha-diazophosphines with different types of aldehydes (2 equiv) in a neutral medium under very mild conditions. The reaction with some chiral aldehydes is highly diastereoselective leading to phosphonamides as single diastereomers. The novel reaction is influenced by electronic and steric effects being precluded for aromatic aldehydes containing electron-releasing substituents on the phenyl ring and for bulky aliphatic aldehydes. The mechanistic studies of these processes, which are highly exothermic, provide evidence for a nucleophilic attack of the diazophosphine to the aldehyde leading to a betaine that rapidly rearranges to a diazomethylenephosphorane, which has been detected or captured in some instances. The diazomethylenephosphorane reacts with a second molecule of aldehyde according to a Wittig-type condensation, and the rate-determining step of the whole process is believed to be the decomposition of the resultant oxaphosphetane to afford the hydroxyphosphonamide and a diazocumulene. Finally, this intermediate loses molecular nitrogen giving a transient carbene that rapidly evolves toward the alkyne.