The metal catalysed reaction of monosubstituted diazo esters and ketones with 4-[(Z)-ethylidene]-3-methyloxetan-2-one results in the formation of cyclopropanespiro-beta-lactones. In contrast to most alkene cyclopropanations, including those involving diketene, the reaction occurs diastereoselectively. A computational model of the reaction has been developed that accounts for the observed stereochemistry. The metal promoted thermal rearrangement of these spiro compounds is also unusual in that it affords pyranones, rather than the decarboxylation products characteristic of beta-lactones in general, or the furanones formed from diketene derived cyclopropanespiro-il-lactones. (c) 2011 Elsevier Ltd. All rights reserved.