The compound would be of little interest except that its tautomer is a subunit in some commercial dyes.

In solution, 1,3-cyclobutanedione exists in equilibrium with a less stable tautomer, called squaraine , 3-hydroxycyclobut-2-enone.

In such dyes, the ene-one tautomer predominates.

[2] A variety of substituted 1,3-Cyclobutanediones form upon spontaneous dimerization of disubstituted ketenes.

[3] 2,2,4,4-Tetramethylcyclobutanedione is thus formed by dehydrochlorination of isobutyryl chloride:[4] Ketene itself dimerizes mainly to give the lactone called diketene as well as a small amount of 1,3-cyclobutanedione.