The regioselective three-component condensation of azomethine ylides derived from isatins and α-amino acids with acrylamides or aroylacrylic acids as dipolarophiles has been realized through a one-pot 1,3-dipolar cycloaddition protocol. Decarboxylation of 2'-aroyl-2-oxo-1,1',2,2',5',6',7',7a'-octahydrospiro[indole-3,3'-pyrrolizine]-1'-carboxylic acids is accompanied by cyclative rearrangement with formation of dihydropyrrolizinyl indolones.