Condensation of isatin with primary aryl amines gave a series of Schiff bases (1) which on reaction with thioglycolic acid in 1,4-dioxane afforded the formation of the corresponding 4- thiazolidinones (2). Compound 2 on condensation with substituted benzaldehydes in anhydrous sodium acetate furnished 3-aryl -5'-phenyl (substituted) spiro [3H-indole-3,2'-thiazolidines]-2-(1H), 4'(5'H)-diones (3). The latter (3) on reaction with hydrazine hydrochloride in anhydrous sodium acetate gave 3'-phenyl (substituted) -6'-aryl-2'(1H)-cis-3',3'a-dihydrospiro [3H-indole-3,5'-pyrazolo (3',4'-d)-thiazolo-2-(1H)-ones] (4). The structure has been established on the basis of spectral data. The partition coefficient for n-octanol/water solvent system and in vitro antibacterial activity of the 2'(1H)-cis-3',3'a-dihydrospiro [3H-indole-3,5'-pyrazolo (3',4'-d)-thiazolo-2-(1H)-one] derivatives have been evaluated.