A convergent cascade approach for the stereoselective synthesis of diverse lactones is described. The Rh2(TFA)4-catalyzed cascade reaction proceeds via a carboxylic acid O-H insertion/aldol cyclization with high chemo-, regio-, and diastereoselectivity. The cascade reaction provides quick access to highly functionalized γ-butyro- and δ-valerolactones from readily accessible ketoacid and diazo synthons. To demonstrate the utility of this approach, a thermally induced oxy-Cope ring-expansion strategy has been incorporated in the cascade sequence to access medium-sized lactones, which can undergo a serendipitous rearrangement to form spiro-lactones through an intramolecular aldol/trans-lactonization sequence. The reaction has proven to be general, with a range of ketoacids and diazo carbonyls to provide functionalized lactones of varying ring sizes.