A novel photochemical method for the construction of previously unknown substituted 4a,7a-dihydroxy-5-methyl-3,4,4a,7a-tetrahydro-1H-cyclopenta[b]pyridine-2,7-diones based on readily available allomaltol derivatives containing an amide group was established. The proposed approach includes the photoinduced contraction of an allomaltol ring and the subsequent intramolecular cyclization of an unstable α-hydroxy-1,2-diketone intermediate. For the first time we have shown the use of a side chain amide function as a trapping element for the final cyclization of photogenerated α-hydroxy-1,2-diketones. The structures of two synthesized photoproducts were determined by X-ray diffraction.