3-hydroxybenzofuran-2-carbohydrazide (2) undergoes facile condensation with aromatic aldehydes to afford the corresponding N-arylidene-3-hydroxybenzofuran-2-carbohydrazide (3a-e) in good yields. Cyclo condensation of compounds (3a-e) with chloro acetyl chloride yields N-(3-chloro-2-oxo-4-arylazetidin-1-yl)-3-hydroxybenzofuran-2- carboxamide (4a-e). The structures of these compounds were established on the basis of analytical and spectral data. The newly synthesized compounds were evaluated for their antibacterial and antifungal activities.