Selective formation of oxonium ylides from morpholines and α-diazo-β-ketoesters was achieved. This was applied to the high-concentration (0.5 M) dirhodium-catalyzed (0.1 mol %) [3 + 6 + 3 + 6] synthesis of 18-membered ring diaza macrocycles (46%–72%). Late-stage functionalization of these derivatives is demonstrated. Mechanistic evidence for a novel (undesired) diazo decomposition pathway is also reported.