An efficient synthesis of disubstituted γ-butyrolactones and spirocyclopropanes via a multicomponent reaction of aldehydes, Meldrum's acid and sulfoxonium ylides has been developed. Under mild conditions, electron-rich aromatic aldehydes reacted with Meldrum's acid and sulfoxonium ylides and produced trans-β,γ-disubstituted γ-butyrolactones, while neutral and electron-deficient aromatic aldehydes and aliphatic aldehydes led to the formation of trans-spirocyclopropanes. The cyclopropane could be converted to the γ-butyrolactone under Lewis acid conditions.