Several γ,δ-unsaturated β-diketones were prepared by acylation of the lithium enolates of cyclic ketones by cinnamoyl chlorides. Reaction of the cinnamoylcyclohexanones with 2 equivalents of hydrazoic acid in sulfuric acid gave bicyclic lactams in good yields. The mechanism of this process involves a Schmidt reaction, followed by addition of HN 3 to the enone, migration of the aryl group onto nitrogen, and a cyclisation in which the arylamino group is displaced by the amide nitrogen. The scope of the reaction is limited to the preparation of 7-5 bicyclic systems from enoyl cyclohexanones, other precursors gave dihydropyrones or complex mixtures.