The condensation of 3-hydroxy-4-methylbenzoic acid with aqueous formaldehyde and hydrochloric acid yields the lactone of 6-hydroxymethyl-1,3-benzodioxane-8-methyl-5-carboxylic acid. This dioxanylphthalide has also been produced in a similar type of condensation from 5-hydroxy-4-methylphthalide which can be obtained by demethylation with aluminum chloride of 5-methoxy-4-methylphthalide.Proof of the presence of them-dioxane and phthalide rings in the condensation product has been obtained by opening these rings in succession. The action of alkaline permanganate opens the phthalide ring to yield a substituted phthalic acid. Acid hydrolysis then opens them-dioxane ring with loss of formaldehyde and the formation of a new phthalide ring. Successive steps of decarboxylation, methylation, and oxidation of the new phthalide yield the known 3-methyl-4-methylphthalic acid.