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Copper-assisted loss of nitrogen from the diazo group forms a metal carbenoid at the carbon bearing the ester substituent. That tethered electrophilic carbon adds across the nearby exocyclic alkene in an intramolecular cyclopropanation. Two C–C bonds form: one to the alkene ring carbon and one to its terminal methylene. The existing tether thereby also becomes the five-membered ketone ring in the product; the methyl ester stays attached to the former diazo carbon.

Cyclopropanation is suprafacial on the reacting alkene face. A folded tether geometry that permits the short intramolecular closure selects the approach face and accounts for the shown relationship of the angular methyl group and the new cyclopropane methylene bridge. This is a stereoselective conformational ring-closure model, not a freely rotating intermediate carbocation: the two new bonds are formed in the same cyclopropanation event. A detailed quantitative preference between folded conformers would require an energetic model beyond the structure alone.