Nitrile imines are important intermediates in 1,3-dipolar cycloaddition reactions, and they are also known to undergo efficient, unimolecular rearrangements to carbodiimides via 1H-diazirines and imidoylnitrenes under both thermal and photochemical reaction conditions. We now report a competing rearrangement, revealed by CASPT2(14,12) and B3LYP calculations, in which C-phenylnitrile imines 8 undergo ring expansion to 1-diazenyl-1,2,4,6-cycloheptatetraenes 12 akin to the phenylcarbene—cycloheptatetraene rearrangement. Amino-, hydroxy-, and thiol-groups in the meta positions of C-phenylnitrile imine lower the activation energies for this rearrangement so that it becomes potentially competitive with the cyclization to 1H-diazirines and hence rearrange to carbodiimides. The diazenylcycloheptatetraenes 12 thus formed can evolve further to cycloheptatetraene 30 and 2-diazenyl-phenylcarbene 16 over modest activation barriers, and the latter carbenes cyclize very easily to 2H- and 3H-indazoles, from which 6-methylenecyclohexadienylidene, phenylcarbene, fulvenallene, and their isomers are potentially obtainable. Moreover, another new rearrangement of benzonitrile imine forms 3-phenyl-3H-diazirine, which is a precursor of phenyldiazomethane and hence phenylcarbene. This reaction is competitive with the ring expansion. The new rearrangements predicted here should be experimentally observable, for example, under matrix photolysis or flash vacuum pyrolysis conditions.