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An efficient one-pot three-component reaction of ethyl acetoacetate with hydroxylamine hydrochloride and various aromatic aldehydes containing an electron donating group, was carried out. The current protocol gives diverse 4-arylidene-3-methylisoxazol-5 (4H) -ones providing good to excellent yield of products in an aqueous medium using iodine as a catalyst. This particular cyclocondensation reaction was performed in water, which is an environmentally benign universal solvent having unique properties being clean, efficient, inexpensive, and readily available.