The mechanism of poly(p-phenylenebenzoxazole) formation from terephthalic acid (TA) and diaminodihydroxybenzene dihydrochloride (DADHB) in polyphosphoric acid (PPA) was studied. The solubility of TA in PPA with 86% P2O5 content was determined to be 0.02% at 100 degrees C and 0.06% at 140 degrees C. Dissolved TA existed as three species, TA, alpha-(4-carboxybenzoyl)-omega-hydroxypoly(oxyphosphinico), and alpha,alpha＇-[1,4-phenylenebis(carbonyl)]bis[omega-hydroxypoly(oxyphosphinico)]. DADHB also reacts with PPA, and DADHB, alpha-(2,4-diamino-5-hydroxyphenyl)-omega-hydroxypoly(oxyphosphinico), and alpha,alpha＇-(4,6-diamino-1,3-phenylene)bis[(omega-hydroxypoly(oxyphosphinico)] were found. During the course of polymerization, conversion of DADHB was higher than that of TA. NMR, IR, and mass spectroscopy characterization of PBO oligomer and its product with benzoic-carboxy-C-13 acid suggested both chain ends were capped with DADHB, which is different from oligomers of conventional AA plus BE step-growth polymers. An unprecedented polymerization mechanism is proposed to account for this unusual oligomer structure and the remarkable fact that high molecular weight PBO was obtained even when 5% excess of one of the monomers, TA, was used. The reactivities of the two functional groups in DADHB toward carboxylic acid to form benzoxazole in PPA were different.