Computations (SCS-MP2//B3LYP) reveal that the asymmetric synthesis of highly substituted γ-lactams with three stereogenic centers, including one quaternary center, proceeds through a Mannich reaction between the enol form of the anhydride and the E-imine, followed by a transannular acylation. This new mechanistic picture accounts for both the observed reactivity and stereoselectivity. CH-O and hydrogen bonding interactions in the Mannich step and torsional steering effects in the acylation step are responsible for stereocontrol. It is demonstrated that this new mechanistic picture applies to the related reactions of homophthalic anhydrides with imines and presents new vistas for the design of a new reaction to access complex molecular architectures.