Photo-cleavable N-acyl-7-nitroindolines serve as a tool for the acylation of various nucleophiles. The mechanism by which the acylating species, the nitronic anhydride is formed, is not well understood. Reported here is a semiempirical AMPAC study of the reaction pathway in the ground and excited states. Results suggest an as yet experimentally unobserved ground state concerted suprafacial 1,5-sigmatropic shift pathway for the formation of the nitronic anhydride. The previously experimentally observed excited state pathway is considerably more complex. A concerted antarafacial shift is expected. However, on the S1 (lowest singlet excited state) manifold, the reaction appears to involve a shallow intermediate before proceeding by a hypothesized S1 to S0 (ground singlet) state crossing to the transition state for the concerted S0 shift, from which it likely proceeds onto a suprafacial shift to the nitronic anhydride. Triplet state behavior is explored and this system may possess a conical intersection of S0/S1/T1 potential energy surfaces. Further results explain the reactivity of the nitronic anhydride toward nucleophiles, as well as its susceptibility to protons, providing a complete mechanistic picture to explain the reaction behavior found by us and others.