Studies on the mechanism and intermediate products in the Friedel–Crafts reaction between oxetanols and phenols are presented. Formation of O-alkylated intermediates is identified using 1H NMR spectroscopy, in a reversible formation of the kinetic oxetane ether products. An interesting relationship between the electronic nature of the nucleophile and the degree of O-alkylation is uncovered. For phenols substituted with an electron withdrawing group such as CN, oxetane ethers are the only products isolated regardless of reaction time. Increasing the electron rich nature of the phenol leads to an increased proportion of the thermodynamic C-alkylated Friedel–Crafts products after just one hour and as the sole product/s after extended reaction times. These studies have enabled a more complete catalytic cycle to be proposed. Using the same lithium catalyst and carefully selected reaction times, several examples of oxetane ethers are successfully isolated as novel bioisosteres for ester groups.