A novel silver(I)-catalyzed ring-contractive rearrangement of 5-substituted 6-diazo-2-cyclohexenones has been developed, providing a new and efficient access to 5-alkylidene-2-cyclopentenones. The AgOTf-catalyzed reaction proceeds through metal-carbenoid formation followed by endocyclic allyl [1,2] migration with excellent stereoselectivity and broad substrate scope.