Motivated by the biosynthesis of azamerone, we report the first example of a diazo-Hooker reaction, which involves the formation of a phthalazine ring system by the oxidative rearrangement of a diazoketone. Computational studies indicate that the diazo-Hooker reaction proceeds via an 8π-electrocyclization followed by ring contraction and aromatization. The biosynthetic origin of the diazoketone functional group was also chemically mimicked using a related natural product, naphterpin, as a model system.