Treatment of (o-ethynyl)phenyl epoxides with TpRuPPh(3)(CH3CN)(2)PF6 (10 mol%) in hot toluene (100 degreesC, 3-6 h) gave 2-naphthols or 1-alkylidene-2-indanones very selectively with isolated yields exceeding 72%, depending on the nature of the epoxide substituents. Surprisingly, the reaction intermediate proved to be a ruthenium-pi-ketene species that can be trapped efficiently by alcohol to give an ester compound. This phenomenon indicates a novel oxygen transfer from epoxide to its terminal alkyne catalyzed by a ruthenium complex. A plausible mechanism is proposed on the basis of reaction products and the deuterium-labeling experiment. The 2-naphthol products are thought to derive from 6-endo-dig cyclization of (o-alkenyl)phenyl ketene intermediates, whereas 1-alkylidene-2-indanones are given from the 5-endo-dig cyclization pathway.