New methodology for the synthesis of substituted seven-membered lactams 3 has been developed. This method allows for the stereoselective introduction of substituents at the C-7 position of the azepinone ring as well as a to the acetic acid side chain. Dehydrative cyclization of dipeptidyl aldehydes 11 affords the corresponding bicyclic fused lactams 12 in good yield and high stereoselectivity. Lewis acid catalyzed reduction of 12 with triethylsilane provides azepinones 16 in homochiral form. Introduction of substituents at the C-7 position was effected by treatment of 12 with various alkyl nucleophiles. The resulting azepinones may be viewed as conformationally restricted dipeptidomimetic surrogates.