The new efficient synthesis of biologically important 3-hydroxy-4-arylquinolin-2-ones through the Darzens condensation (epoxidation) of dichloroacetanilides with aromatic aldehydes followed by one-pot dechlorative epoxide-arene cyclization is described. This methodology has been utilized for the synthesis of naturally occurring viridicatol, a fungal metabolite isolated from the penicillium species.