Thermally promoted tandem Wolff rearrangement – Staudinger [2+2] cycloaddition of α-cyano-α-diazo ketones and imines afforded 3-cyano-β-lactams in good to excellent yields as one diastereomer. The process represents the first example of generating cyanoketenes via the Wolff rearrangement of diazo compounds. The reaction is virtually insensitive to the substitution pattern in both reaction partners. It afforded high product yields even for imines bearing bulky tertiary alkyl substituents at the imine's nitrogen atom, which is indicative of the reaction proceeding predominantly as the concerted [2+2] cycloaddition rather than stepwise N-acylation – ring closure process. Examples of reductive manipulation of the resulting 3-cyano-β-lactams are provided opening an entry into 3-aminomethyl 2-azetidinones and azetidines.