A diastereoselective (up to >99%) route to all carbon quaternary stereocenters at the C-3 position of cyclic lactams has been developed via Johnson-Claisen rearrangement of γ-hydroxy-α,β-unsaturated lactams. It has been observed that olefin geometry plays an important role in the development of the absolute stereochemistry of the product. Dependence of product configuration on the olefin geometry is explained by postulating probable transition states. The success of this method has been shown for multigram-scale synthesis of these substituted lactams from commercially available cheap starting materials. The synthetic usefulness of this method is also demonstrated by carrying out the total synthesis of (-)-physostigmine.