diff --git a/compiler/packages/babel-plugin-react-forget/src/ReactiveScopes/CodegenReactiveFunction.ts b/compiler/packages/babel-plugin-react-forget/src/ReactiveScopes/CodegenReactiveFunction.ts
index 537730811d..396acc0f33 100644
--- a/compiler/packages/babel-plugin-react-forget/src/ReactiveScopes/CodegenReactiveFunction.ts
+++ b/compiler/packages/babel-plugin-react-forget/src/ReactiveScopes/CodegenReactiveFunction.ts
@@ -6,7 +6,12 @@
  */
 
 import * as t from "@babel/types";
-import { pruneUnusedLValues, pruneUnusedLabels, renameVariables } from ".";
+import {
+  pruneHoistedContexts,
+  pruneUnusedLValues,
+  pruneUnusedLabels,
+  renameVariables,
+} from ".";
 import { CompilerError, ErrorSeverity } from "../CompilerError";
 import { Environment, EnvironmentConfig, ExternalFunction } from "../HIR";
 import {
@@ -1514,6 +1519,7 @@ function codegenInstructionValue(
       pruneUnusedLabels(reactiveFunction);
       pruneUnusedLValues(reactiveFunction);
       renameVariables(reactiveFunction);
+      pruneHoistedContexts(reactiveFunction);
       const fn = codegenReactiveFunction(reactiveFunction, cx).unwrap();
       if (instrValue.expr.type === "ArrowFunctionExpression") {
         let body: t.BlockStatement | t.Expression = fn.body;
diff --git a/compiler/packages/babel-plugin-react-forget/src/__tests__/fixtures/compiler/hoisting-within-lambda.expect.md b/compiler/packages/babel-plugin-react-forget/src/__tests__/fixtures/compiler/hoisting-within-lambda.expect.md
new file mode 100644
index 0000000000..77b679730c
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-forget/src/__tests__/fixtures/compiler/hoisting-within-lambda.expect.md
@@ -0,0 +1,60 @@
+
+## Input
+
+```javascript
+function Component({}) {
+  const outer = () => {
+    const inner = () => {
+      return x;
+    };
+    const x = 3;
+    return inner();
+  };
+  return <div>{outer()}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{}],
+};
+
+```
+
+## Code
+
+```javascript
+import { unstable_useMemoCache as useMemoCache } from "react";
+function Component(t22) {
+  const $ = useMemoCache(2);
+  let t0;
+  if ($[0] === Symbol.for("react.memo_cache_sentinel")) {
+    t0 = () => {
+      const inner = () => x;
+
+      const x = 3;
+      return inner();
+    };
+    $[0] = t0;
+  } else {
+    t0 = $[0];
+  }
+  const outer = t0;
+  let t1;
+  if ($[1] === Symbol.for("react.memo_cache_sentinel")) {
+    t1 = <div>{outer()}</div>;
+    $[1] = t1;
+  } else {
+    t1 = $[1];
+  }
+  return t1;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{}],
+};
+
+```
+      
+### Eval output
+(kind: ok) <div>3</div>
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-forget/src/__tests__/fixtures/compiler/hoisting-within-lambda.js b/compiler/packages/babel-plugin-react-forget/src/__tests__/fixtures/compiler/hoisting-within-lambda.js
new file mode 100644
index 0000000000..934123cfa6
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-forget/src/__tests__/fixtures/compiler/hoisting-within-lambda.js
@@ -0,0 +1,15 @@
+function Component({}) {
+  const outer = () => {
+    const inner = () => {
+      return x;
+    };
+    const x = 3;
+    return inner();
+  };
+  return <div>{outer()}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{}],
+};