To obtain the subject compound in high conversion and selectivity from an acetylene derivative by reacting a specific alkinyl compound in the presence of a rhodium catalyst under an aqueous gas shift reaction condition.

A compound of formula I [the ring A is a homogeneous or heterogeneous ring; R is an atom or organic group which is inactive to the reaction, such as H, an alkyl, a cycloalkyl, etc.; (n) is 0 or a positive integer] is reacted with carbon monoxide in an amount of at least 1 mole based on the compound of formula I and with a hydrogen donor compound (preferably water) in an amount of 0.01-10 moles in the presence of 0.001-50 mol.% of a rhodium catalyst, if necessary, in the coexistence of 0.1-10 moles of an amine at 70-250°C to obtain the objective compound of formula II (e.g. 3-benzyl-1- benzofuran-2-one). In the reaction, the cyclization reaction and the carbonylation reaction are carried out.