An aromatic polyimide containing pendent hydroxyl groups ortho to the heterocyclic imide nitrogen was found to rearrange to a polybenzoxazole, with quantitative loss of carbon dioxide, upon heating above 490 degrees C in an inert atmosphere. A hydroxy-containing polyimide film based on 3,3＇,4,4＇-biphenyltetracarboxylic dianhydride (BPDA) and 3,3＇-dihydroxy-4,4＇-diaminobiphenyl (HAB) was pre pared and converted to a fully aromatic polybenzoxazole by heating at 500 degrees C for 1 h under nitrogen. The resulting polybenzoxazole film was found to be amorphous by small angle X-ray scattering (SAXS). The film also displayed excellent solvent resistance and good thermal stability by thermogravimetric analysis with 5% weight loss in nitrogen occurring at 625 degrees C. A hydroxy-containing imide model compound was also found to undergo thermal conversion to a bisbenzoxazole when heated above 400 degrees C under nitrogen.