The three-component addition of isocyanides to phenol derivatives and aldehydes proceeds easily in methanol to form O-arylated compounds in a new Passerini-type reaction. The key step of the conversion lies in an irreversible Smilesrearrangement of intermediate phenoxyimidate adducts. It represents the first use of a Smilesrearrangement in a Passerini reaction. [reaction: see text]