A detailed experimental and DFT study of the S to N alkyl migration of substituted S-(1(3H)-isobenzofuranone-3-yl)isothiuronium bromide to N,N'-dimethyl-N-(3-oxo-1,3-dihydro-2-benzofuran-1-yl)thiourea provided evidence for the existence of an unusual double displacement mechanism involving two consecutive back-side SN2 reactions where a carboxylate anion has a crucial role both as a leaving group as well as an internal nucleophile. The thiazetidine zwitterionic species which is involved in this mechanism as an intermediate was characterized by infrared multiphoton dissociation spectroscopy and was trapped with methyl iodide. It was found that the intermediate has a structure of a free ion pair. The double displacement mechanism can be considered as a new type of inverse lactone neighboring group participation.