DIazo transfer reaction onto γ-butyrolactams (activated by α-ethyloxalylation) gave rare α-diazo γ-butyrolactams. Decomposition of the latter by Rh ₂ (OAc) ₄ in the presence of alcohols and water gave products of O–H insertion of the respective metal-cabene species. Silver triflate (1 mol-%) was found to convert the γ-butyrolactams investigated into 1,5-dihydro-2H-pyrrol-2-ones which represent versatile building blocks. Particular instability was noted for α-diazo γ-butyrolactams bearing alkyl or o-substituted aryl substituents on the nitrogen atom. These were found to dimerize in solution or upon storage at room temperature to give fully conjugated bis-hydrazones along with the loss of a nitrogen molecule.