4 files changed, 93 insertions, 14 deletions

diff --git a/lib/compress.js b/lib/compress.js
index ab837f60..9333cdf9 100644
--- a/lib/compress.js
+++ b/lib/compress.js
@@ -8429,7 +8429,7 @@ merge(Compressor.prototype, {
                     fixed.name = make_node(AST_SymbolLambda, fixed.name, fixed.name);
                 }
                 if (fixed instanceof AST_Lambda) {
-                    var scope = self.scope;
+                    var scope = self.scope.resolve();
                     fixed.enclosed.forEach(function(def) {
                         if (fixed.variables.has(def.name)) return;
                         if (scope.var_names()[def.name]) return;
diff --git a/lib/parse.js b/lib/parse.js
index 69c14e4a..82717d26 100644
--- a/lib/parse.js
+++ b/lib/parse.js
@@ -753,7 +753,7 @@ function parse($TEXT, options) {
         }
     }
 
-    var statement = embed_tokens(function(strict_defun) {
+    var statement = embed_tokens(function() {
         handle_regexp();
         switch (S.token.type) {
           case "string":
@@ -844,9 +844,6 @@ function parse($TEXT, options) {
                 return for_();
 
               case "function":
-                if (!strict_defun && S.input.has_directive("use strict")) {
-                    croak("In strict mode code, functions can only be declared at top level or immediately within another function.");
-                }
                 next();
                 return function_(AST_Defun);
 
@@ -1038,7 +1035,7 @@ function parse($TEXT, options) {
         S.input.push_directives_stack();
         S.in_loop = 0;
         S.labels = [];
-        var body = block_(true);
+        var body = block_();
         if (S.input.has_directive("use strict")) {
             if (name) strict_verify_symbol(name);
             argnames.forEach(strict_verify_symbol);
@@ -1067,12 +1064,12 @@ function parse($TEXT, options) {
         });
     }
 
-    function block_(strict_defun) {
+    function block_() {
         expect("{");
         var a = [];
         while (!is("punc", "}")) {
             if (is("eof")) expect_token("punc", "}");
-            a.push(statement(strict_defun));
+            a.push(statement());
         }
         next();
         return a;
@@ -1616,7 +1613,7 @@ function parse($TEXT, options) {
         var body = [];
         S.input.push_directives_stack();
         while (!is("eof"))
-            body.push(statement(true));
+            body.push(statement());
         S.input.pop_directives_stack();
         var end = prev();
         var toplevel = options.toplevel;
diff --git a/test/compress/const.js b/test/compress/const.js
index 896e8c38..9ffb0d34 100644
--- a/test/compress/const.js
+++ b/test/compress/const.js
@@ -1135,3 +1135,43 @@ issue_4248: {
     }
     expect_stdout: "PASS"
 }
+
+issue_4261: {
+    options = {
+        inline: true,
+        reduce_funcs: true,
+        reduce_vars: true,
+        toplevel: true,
+        unused: true,
+    }
+    input: {
+        {
+            const a = 42;
+            (function() {
+                function f() {
+                    console.log(a);
+                }
+                function g() {
+                    while (f());
+                }
+                (function() {
+                    while (g());
+                })();
+            })();
+        }
+    }
+    expect: {
+        {
+            const a = 42;
+            (function() {
+                function g() {
+                    while (void console.log(a));
+                }
+                (function() {
+                    while (g());
+                })();
+            })();
+        }
+    }
+    expect_stdout: "42"
+}
diff --git a/test/compress/functions.js b/test/compress/functions.js
index c2ab23f6..3b57fb2b 100644
--- a/test/compress/functions.js
+++ b/test/compress/functions.js
@@ -2081,7 +2081,7 @@ issue_3016_1: {
         var b = 1;
         do {
             3[b];
-        } while(0);
+        } while (0);
         console.log(b);
     }
     expect_stdout: "1"
@@ -2112,7 +2112,7 @@ issue_3016_2: {
         do {
             a = 3,
             a[b];
-        } while(0);
+        } while (0);
         var a;
         console.log(b);
     }
@@ -2145,7 +2145,7 @@ issue_3016_2_ie8: {
         do {
             a = 3,
             a[b];
-        } while(0);
+        } while (0);
         var a;
         console.log(b);
     }
@@ -2175,7 +2175,7 @@ issue_3016_3: {
         var b = 1;
         do {
             console.log((a = void 0, a ? "FAIL" : a = "PASS"));
-        } while(b--);
+        } while (b--);
         var a;
     }
     expect_stdout: [
@@ -2208,7 +2208,7 @@ issue_3016_3_ie8: {
         var b = 1;
         do {
             console.log((a = void 0, a ? "FAIL" : a = "PASS"));
-        } while(b--);
+        } while (b--);
         var a;
     }
     expect_stdout: [
@@ -5141,3 +5141,45 @@ issue_4259: {
     }
     expect_stdout: "function"
 }
+
+issue_4261: {
+    options = {
+        inline: true,
+        reduce_funcs: true,
+        reduce_vars: true,
+        toplevel: true,
+        unused: true,
+    }
+    input: {
+        try {
+            throw 42;
+        } catch (e) {
+            (function() {
+                function f() {
+                    e.p;
+                }
+                function g() {
+                    while (f());
+                }
+                (function() {
+                    while (console.log(g()));
+                })();
+            })();
+        }
+    }
+    expect: {
+        try {
+            throw 42;
+        } catch (e) {
+            (function() {
+                function g() {
+                    while (void e.p);
+                }
+                (function() {
+                    while (console.log(g()));
+                })();
+            })();
+        }
+    }
+    expect_stdout: true
+}