1,3-Thiazolidines react with carbon monoxide, in the presence of catalytic quantities of chloro(1,5-cyclooctadiene)rhodium(I) dimer and potassium iodide, to give thiazolidinones in 56-88% yields. Reaction in the absence of KI afforded the six-membered ring thiazin-3-one, The rhodium(I) complex can catalyze the quantitative conversion of the thiazin-3-one to the thiazolidinone under carbon monoxide, with ketene as the reaction by-product. The conversion of thiazolidines to thiazolidinones involves a novel regiospecific insertion of carbon monoxide into one of two ring carbon-nitrogen bonds, as well as a metal-catalyzed ketene elimination process.