Stereoselective synthesis of trans-beta-methoxycarbonyl-gamma-aryl-gamma-butyrolactones (5) by the reaction of methoxycarbonylmethyl triphenyl arsonium bromide (1) and 2,2-dimethyl-5-substituted-benzal-1,3-dioxa-4,6-dioxa-4,6-dione (2) is carried out in the presence of potassium carbonate and trace water in dimethoxyethane. 1,2-Cis-cyclopropane 3 is formed as an intermediate. The stability of compound 3 in water is related to the property of the aryl substituent. With strong electron-donating groups [2a-c, Ar=4-CH3O-C6H4; 3,4-OCH2O-C6H3 or 4-(CH3)(2)N-C6H4] at room temperature 3 is formed in situ and transformed to gamma-butyrolactones 5a-c immediately, whereas when the aryl substituent is H or a weak electron-donating or electron-withdrawing group (2d-g, Ar=4-CH3-C6H4; C6H5; 4-Cl-C6H4 or 4-NO2-C6H4), 3 is stable to water at room temperature. On further heating in acetone, 3 is transformed to gamma-butyrolactones 5d-g (stepwise synthesis). One-pot synthesis of 5d-g from the reaction of 1 with 2d-g is also studied.