The photochemical or thermal decomposition of diazo Meldrum's acid (1) in methanolic solutions yields ketoester 3a, the product of the Wolff rearrangement, while products produced from the singlet carbene were not detected. This observation, combined with the analysis of activation parameters for the thermal decomposition of 1, as well as with the results of DFT B3PW91/6-311+G(3df,2p) and MP2/aug-cc-pVTZ// B3PW91/6-311+G(3df,2p) calculations, allows us to conclude that the Wolff rearrangement of 1 is a concerted process. The outcome of the photolysis of diazo Meldrum's acid depends on the wavelength of irradiation. Irradiation with 254 nm light results in an efficient (Phi(254) = 0.34) photo-Wolff reaction, while at 355 nm, the formation of diazirine 2 becomes the predominant process (Phi(350) = 0.024). This unusual wavelength selectivity indicates that Wolff rearrangement and isomerization originate from different electronically excited states of 1. The UV irradiation of diazirine 2 leads to the loss of nitrogen and the Wolff rearrangement, apparently via a carbene intermediate. This process is accompanied by a reverse isomerization to diazo Meldrum's acid. Triplet-sensitized photolysis of both isomers results in the formation of Meldrum's acid, the product of a formal reduction of 1 and 2. Mild heating of diazirine 2 produces quantitative yields of diazo Meldrum's acid. The activation parameters for thermal reactions of diazo 1 and diazirino 2 isomers were determined in aqueous and dioxane solutions.