diff --git a/runtime/doc/eval.txt b/runtime/doc/eval.txt
index 7b421aa..196e71c 100644
--- a/runtime/doc/eval.txt
+++ b/runtime/doc/eval.txt
@@ -1,4 +1,4 @@
-*eval.txt*	For Vim version 7.4.  Last change: 2016 Jul 24
+*eval.txt*	For Vim version 7.4.  Last change: 2016 Jul 29
 
 
 		  VIM REFERENCE MANUAL	  by Bram Moolenaar
@@ -40,7 +40,7 @@
 There are nine types of variables:
 
 Number		A 32 or 64 bit signed number.  |expr-number| *Number*
-		64-bit Number is available only when compiled with the
+		64-bit Numbers are available only when compiled with the
 		|+num64| feature.
 		Examples:  -123  0x10  0177
 
@@ -1219,7 +1219,7 @@
 
 1. The body of the lambda expression is an |expr1| and not a sequence of |Ex|
    commands.
-2. The prefix "a:" is optional for arguments.  E.g.: >
+2. The prefix "a:" should not be used for arguments.  E.g.: >
 	:let F = {arg1, arg2 -> arg1 - arg2}
 	:echo F(5, 2)
 <	3
@@ -1228,6 +1228,18 @@
 	:let F = {-> 'error function'}
 	:echo F()
 <	error function
+							*closure*
+Lambda expressions can access outer scope variables and arguments.  This is
+often called a closure.  Example where "i" a and "a:arg" are used in a lambda
+while they exists in the function scope.  They remain valid even after the
+function returns: >
+	:function Foo(arg)
+	:  let i = 3
+	:  return {x -> x + i - a:arg}
+	:endfunction
+	:let Bar = Foo(4)
+	:echo Bar(6)
+<	5
 
 Examples for using a lambda expression with |sort()|, |map()| and |filter()|: >
 	:echo map([1, 2, 3], {idx, val -> val + 1})
@@ -1245,6 +1257,12 @@
 
 Note how execute() is used to execute an Ex command.  That's ugly though.
 
+
+Lambda expressions have internal names like '<lambda>42'.  If you get an error
+for a lambda expression, you can find what it is with the following command: >
+	:function {'<lambda>42'}
+See also: |numbered-function|
+
 ==============================================================================
 3. Internal variable				*internal-variables* *E461*
 
@@ -7494,7 +7512,8 @@
 
 test_settime({expr})					*test_settime()*
 		Set the time Vim uses internally.  Currently only used for
-		timestamps in the history, as they are used in viminfo.
+		timestamps in the history, as they are used in viminfo, and
+		for undo.
 		{expr} must evaluate to a number.  When the value is zero the
 		normal behavior is restored.
 
diff --git a/src/eval.c b/src/eval.c
index 6f10756..463c892 100644
--- a/src/eval.c
+++ b/src/eval.c
@@ -237,8 +237,8 @@
 
 static int get_env_len(char_u **arg);
 static char_u * make_expanded_name(char_u *in_start, char_u *expr_start, char_u *expr_end, char_u *in_end);
+static void check_vars(char_u *name, int len);
 static typval_T *alloc_string_tv(char_u *string);
-static hashtab_T *find_var_ht(char_u *name, char_u **varname);
 static void delete_var(hashtab_T *ht, hashitem_T *hi);
 static void list_one_var(dictitem_T *v, char_u *prefix, int *first);
 static void list_one_var_a(char_u *prefix, char_u *name, int type, char_u *string, int *first);
@@ -4332,6 +4332,9 @@
 	    {
 		partial_T *partial;
 
+		if (!evaluate)
+		    check_vars(s, len);
+
 		/* If "s" is the name of a variable of type VAR_FUNC
 		 * use its contents. */
 		s = deref_func_name(s, &len, &partial, !evaluate);
@@ -4363,7 +4366,10 @@
 	    else if (evaluate)
 		ret = get_var_tv(s, len, rettv, NULL, TRUE, FALSE);
 	    else
+	    {
+		check_vars(s, len);
 		ret = OK;
+	    }
 	}
 	vim_free(alias);
     }
@@ -5540,6 +5546,10 @@
 	    }
 	}
     }
+    else if (tv->v_type == VAR_FUNC)
+    {
+	abort = set_ref_in_func(tv->vval.v_string, copyID);
+    }
     else if (tv->v_type == VAR_PARTIAL)
     {
 	partial_T	*pt = tv->vval.v_partial;
@@ -5549,6 +5559,8 @@
 	 */
 	if (pt != NULL)
 	{
+	    abort = set_ref_in_func(pt->pt_name, copyID);
+
 	    if (pt->pt_dict != NULL)
 	    {
 		typval_T dtv;
@@ -6791,6 +6803,34 @@
 }
 
 /*
+ * Check if variable "name[len]" is a local variable or an argument.
+ * If so, "*eval_lavars_used" is set to TRUE.
+ */
+    static void
+check_vars(char_u *name, int len)
+{
+    int		cc;
+    char_u	*varname;
+    hashtab_T	*ht;
+
+    if (eval_lavars_used == NULL)
+	return;
+
+    /* truncate the name, so that we can use strcmp() */
+    cc = name[len];
+    name[len] = NUL;
+
+    ht = find_var_ht(name, &varname);
+    if (ht == get_funccal_local_ht() || ht == get_funccal_args_ht())
+    {
+	if (find_var(name, NULL, TRUE) != NULL)
+	    *eval_lavars_used = TRUE;
+    }
+
+    name[len] = cc;
+}
+
+/*
  * Handle expr[expr], expr[expr:expr] subscript and .name lookup.
  * Also handle function call with Funcref variable: func(expr)
  * Can all be combined: dict.func(expr)[idx]['func'](expr)
@@ -7274,13 +7314,20 @@
 {
     char_u	*varname;
     hashtab_T	*ht;
+    dictitem_T	*ret = NULL;
 
     ht = find_var_ht(name, &varname);
     if (htp != NULL)
 	*htp = ht;
     if (ht == NULL)
 	return NULL;
-    return find_var_in_ht(ht, *name, varname, no_autoload || htp != NULL);
+    ret = find_var_in_ht(ht, *name, varname, no_autoload || htp != NULL);
+    if (ret != NULL)
+	return ret;
+
+    /* Search in parent scope for lambda */
+    return find_var_in_scoped_ht(name, varname ? &varname : NULL,
+		no_autoload || htp != NULL);
 }
 
 /*
@@ -7341,7 +7388,7 @@
  * Return NULL if the name is not valid.
  * Set "varname" to the start of name without ':'.
  */
-    static hashtab_T *
+    hashtab_T *
 find_var_ht(char_u *name, char_u **varname)
 {
     hashitem_T	*hi;
@@ -7617,6 +7664,10 @@
     }
     v = find_var_in_ht(ht, 0, varname, TRUE);
 
+    /* Search in parent scope which is possible to reference from lambda */
+    if (v == NULL)
+	v = find_var_in_scoped_ht(name, varname ? &varname : NULL, TRUE);
+
     if ((tv->v_type == VAR_FUNC || tv->v_type == VAR_PARTIAL)
 				      && var_check_func_name(name, v == NULL))
 	return;
diff --git a/src/ex_cmds2.c b/src/ex_cmds2.c
index 83305b2..ec9f50a 100644
--- a/src/ex_cmds2.c
+++ b/src/ex_cmds2.c
@@ -1265,8 +1265,16 @@
 
     for (timer = first_timer; timer != NULL; timer = timer->tr_next)
     {
-	tv.v_type = VAR_PARTIAL;
-	tv.vval.v_partial = timer->tr_partial;
+	if (timer->tr_partial != NULL)
+	{
+	    tv.v_type = VAR_PARTIAL;
+	    tv.vval.v_partial = timer->tr_partial;
+	}
+	else
+	{
+	    tv.v_type = VAR_FUNC;
+	    tv.vval.v_string = timer->tr_callback;
+	}
 	abort = abort || set_ref_in_item(&tv, copyID, NULL, NULL);
     }
     return abort;
diff --git a/src/globals.h b/src/globals.h
index 7ca3ecd..ec6e152 100644
--- a/src/globals.h
+++ b/src/globals.h
@@ -1658,6 +1658,9 @@
 
 /* Abort conversion to string after a recursion error. */
 EXTERN int  did_echo_string_emsg INIT(= FALSE);
+
+/* Used for checking if local variables or arguments used in a lambda. */
+EXTERN int *eval_lavars_used INIT(= NULL);
 #endif
 
 /*
diff --git a/src/proto/eval.pro b/src/proto/eval.pro
index 5d9b35c..56f0b49 100644
--- a/src/proto/eval.pro
+++ b/src/proto/eval.pro
@@ -87,6 +87,7 @@
 char_u *get_tv_string_buf_chk(typval_T *varp, char_u *buf);
 dictitem_T *find_var(char_u *name, hashtab_T **htp, int no_autoload);
 dictitem_T *find_var_in_ht(hashtab_T *ht, int htname, char_u *varname, int no_autoload);
+hashtab_T *find_var_ht(char_u *name, char_u **varname);
 char_u *get_var_value(char_u *name);
 void new_script_vars(scid_T id);
 void init_var_dict(dict_T *dict, dictitem_T *dict_var, int scope);
diff --git a/src/proto/userfunc.pro b/src/proto/userfunc.pro
index feacd4c..e503bcd 100644
--- a/src/proto/userfunc.pro
+++ b/src/proto/userfunc.pro
@@ -46,7 +46,9 @@
 void restore_current_funccal(void *f);
 void list_func_vars(int *first);
 dict_T *get_current_funccal_dict(hashtab_T *ht);
+dictitem_T *find_var_in_scoped_ht(char_u *name, char_u **varname, int no_autoload);
 int set_ref_in_previous_funccal(int copyID);
 int set_ref_in_call_stack(int copyID);
 int set_ref_in_func_args(int copyID);
+int set_ref_in_func(char_u *name, int copyID);
 /* vim: set ft=c : */
diff --git a/src/testdir/test_lambda.vim b/src/testdir/test_lambda.vim
index cbd4add..02face8 100644
--- a/src/testdir/test_lambda.vim
+++ b/src/testdir/test_lambda.vim
@@ -21,7 +21,7 @@
   let s:timer_id = 0
   function! s:Foo()
     "let n = 0
-    let s:timer_id = timer_start(50, {-> execute("let s:n += 1 | echo s:n")}, {"repeat": -1})
+    let s:timer_id = timer_start(50, {-> execute("let s:n += 1 | echo s:n", "")}, {"repeat": -1})
   endfunction
 
   call s:Foo()
@@ -51,3 +51,161 @@
   let x = {'>' : 'foo'}
   call assert_equal('foo', x['>'])
 endfunc
+
+function! Test_lambda_capture_by_reference()
+  let v = 1
+  let l:F = {x -> x + v}
+  let v = 2
+  call assert_equal(12, l:F(10))
+endfunction
+
+function! Test_lambda_side_effect()
+  function! s:update_and_return(arr)
+    let a:arr[1] = 5
+    return a:arr
+  endfunction
+
+  function! s:foo(arr)
+    return {-> s:update_and_return(a:arr)}
+  endfunction
+
+  let arr = [3,2,1]
+  call assert_equal([3, 5, 1], s:foo(arr)())
+endfunction
+
+function! Test_lambda_refer_local_variable_from_other_scope()
+  function! s:foo(X)
+    return a:X() " refer l:x in s:bar()
+  endfunction
+
+  function! s:bar()
+    let x = 123
+    return s:foo({-> x})
+  endfunction
+
+  call assert_equal(123, s:bar())
+endfunction
+
+function! Test_lambda_do_not_share_local_variable()
+  function! s:define_funcs()
+    let l:One = {-> split(execute("let a = 'abc' | echo a"))[0]}
+    let l:Two = {-> exists("a") ? a : "no"}
+    return [l:One, l:Two]
+  endfunction
+
+  let l:F = s:define_funcs()
+
+  call assert_equal('no', l:F[1]())
+  call assert_equal('abc', l:F[0]())
+  call assert_equal('no', l:F[1]())
+endfunction
+
+function! Test_lambda_closure()
+  function! s:foo()
+    let x = 0
+    return {-> [execute("let x += 1"), x][-1]}
+  endfunction
+
+  let l:F = s:foo()
+  call test_garbagecollect_now()
+  call assert_equal(1, l:F())
+  call assert_equal(2, l:F())
+  call assert_equal(3, l:F())
+  call assert_equal(4, l:F())
+endfunction
+
+function! Test_lambda_with_a_var()
+  function! s:foo()
+    let x = 2
+    return {... -> a:000 + [x]}
+  endfunction
+  function! s:bar()
+    return s:foo()(1)
+  endfunction
+
+  call assert_equal([1, 2], s:bar())
+endfunction
+
+function! Test_lambda_call_lambda_from_lambda()
+  function! s:foo(x)
+    let l:F1 = {-> {-> a:x}}
+    return {-> l:F1()}
+  endfunction
+
+  let l:F = s:foo(1)
+  call assert_equal(1, l:F()())
+endfunction
+
+function! Test_lambda_delfunc()
+  function! s:gen()
+    let pl = l:
+    let l:Foo = {-> get(pl, "Foo", get(pl, "Bar", {-> 0}))}
+    let l:Bar = l:Foo
+    delfunction l:Foo
+    return l:Bar
+  endfunction
+
+  let l:F = s:gen()
+  call assert_fails(':call l:F()', 'E117:')
+endfunction
+
+function! Test_lambda_scope()
+  function! s:NewCounter()
+    let c = 0
+    return {-> [execute('let c += 1'), c][-1]}
+  endfunction
+
+  function! s:NewCounter2()
+    return {-> [execute('let c += 100'), c][-1]}
+  endfunction
+
+  let l:C = s:NewCounter()
+  let l:D = s:NewCounter2()
+
+  call assert_equal(1, l:C())
+  call assert_fails(':call l:D()', 'E15:') " E121: then E15:
+  call assert_equal(2, l:C())
+endfunction
+
+function! Test_lambda_share_scope()
+  function! s:New()
+    let c = 0
+    let l:Inc0 = {-> [execute('let c += 1'), c][-1]}
+    let l:Dec0 = {-> [execute('let c -= 1'), c][-1]}
+    return [l:Inc0, l:Dec0]
+  endfunction
+
+  let [l:Inc, l:Dec] = s:New()
+
+  call assert_equal(1, l:Inc())
+  call assert_equal(2, l:Inc())
+  call assert_equal(1, l:Dec())
+endfunction
+
+function! Test_lambda_circular_reference()
+  function! s:Foo()
+    let d = {}
+    let d.f = {-> d}
+    return d.f
+  endfunction
+
+  call s:Foo()
+  call test_garbagecollect_now()
+  let i = 0 | while i < 10000 | call s:Foo() | let i+= 1 | endwhile
+  call test_garbagecollect_now()
+endfunction
+
+function! Test_lambda_combination()
+  call assert_equal(2, {x -> {x -> x}}(1)(2))
+  call assert_equal(10, {y -> {x -> x(y)(10)}({y -> y})}({z -> z}))
+  call assert_equal(5.0, {x -> {y -> x / y}}(10)(2.0))
+  call assert_equal(6, {x -> {y -> {z -> x + y + z}}}(1)(2)(3))
+
+  call assert_equal(6, {x -> {f -> f(x)}}(3)({x -> x * 2}))
+  call assert_equal(6, {f -> {x -> f(x)}}({x -> x * 2})(3))
+
+  " Z combinator
+  let Z = {f -> {x -> f({y -> x(x)(y)})}({x -> f({y -> x(x)(y)})})}
+  let Fact = {f -> {x -> x == 0 ? 1 : x * f(x - 1)}}
+  call assert_equal(120, Z(Fact)(5))
+endfunction
diff --git a/src/userfunc.c b/src/userfunc.c
index 30eeb34..caa0cfd 100644
--- a/src/userfunc.c
+++ b/src/userfunc.c
@@ -15,6 +15,8 @@
 
 #if defined(FEAT_EVAL) || defined(PROTO)
 
+typedef struct funccall_S funccall_T;
+
 /*
  * Structure to hold info for a user function.
  */
@@ -47,6 +49,7 @@
     scid_T	uf_script_ID;	/* ID of script where function was defined,
 				   used for s: variables */
     int		uf_refcount;	/* for numbered function: reference count */
+    funccall_T	*uf_scoped;	/* l: local variables for closure */
     char_u	uf_name[1];	/* name of function (actually longer); can
 				   start with <SNR>123_ (<SNR> is K_SPECIAL
 				   KS_EXTRA KE_SNR) */
@@ -70,8 +73,6 @@
 #define FIXVAR_CNT	12	/* number of fixed variables */
 
 /* structure to hold info for a function that is currently being executed. */
-typedef struct funccall_S funccall_T;
-
 struct funccall_S
 {
     ufunc_T	*func;		/* function being called */
@@ -96,6 +97,11 @@
     proftime_T	prof_child;	/* time spent in a child */
 #endif
     funccall_T	*caller;	/* calling function or NULL */
+
+    /* for closure */
+    int		fc_refcount;
+    int		fc_copyID;	/* for garbage collection */
+    garray_T	fc_funcs;	/* list of ufunc_T* which refer this */
 };
 
 /*
@@ -259,6 +265,7 @@
 {
     garray_T	newargs;
     garray_T	newlines;
+    garray_T	*pnewargs;
     ufunc_T	*fp = NULL;
     int		varargs;
     int		ret;
@@ -266,6 +273,8 @@
     char_u	*start = skipwhite(*arg + 1);
     char_u	*s, *e;
     static int	lambda_no = 0;
+    int		*old_eval_lavars = eval_lavars_used;
+    int		eval_lavars = FALSE;
 
     ga_init(&newargs);
     ga_init(&newlines);
@@ -276,11 +285,19 @@
 	return NOTDONE;
 
     /* Parse the arguments again. */
+    if (evaluate)
+	pnewargs = &newargs;
+    else
+	pnewargs = NULL;
     *arg = skipwhite(*arg + 1);
-    ret = get_function_args(arg, '-', &newargs, &varargs, FALSE);
+    ret = get_function_args(arg, '-', pnewargs, &varargs, FALSE);
     if (ret == FAIL || **arg != '>')
 	goto errret;
 
+    /* Set up dictionaries for checking local variables and arguments. */
+    if (evaluate)
+	eval_lavars_used = &eval_lavars;
+
     /* Get the start and the end of the expression. */
     *arg = skipwhite(*arg + 1);
     s = *arg;
@@ -298,32 +315,42 @@
 	int	len;
 	char_u	*p;
 
-	fp = (ufunc_T *)alloc((unsigned)(sizeof(ufunc_T) + 20));
+	sprintf((char*)name, "<lambda>%d", ++lambda_no);
+
+	fp = (ufunc_T *)alloc((unsigned)(sizeof(ufunc_T) + STRLEN(name)));
 	if (fp == NULL)
 	    goto errret;
 
-	sprintf((char*)name, "<lambda>%d", ++lambda_no);
-
 	ga_init2(&newlines, (int)sizeof(char_u *), 1);
 	if (ga_grow(&newlines, 1) == FAIL)
 	    goto errret;
 
-	/* Add "return " before the expression.
-	 * TODO: Support multiple expressions.  */
+	/* Add "return " before the expression. */
 	len = 7 + e - s + 1;
 	p = (char_u *)alloc(len);
 	if (p == NULL)
 	    goto errret;
 	((char_u **)(newlines.ga_data))[newlines.ga_len++] = p;
 	STRCPY(p, "return ");
-	STRNCPY(p + 7, s, e - s);
-	p[7 + e - s] = NUL;
+	vim_strncpy(p + 7, s, e - s);
 
 	fp->uf_refcount = 1;
 	STRCPY(fp->uf_name, name);
 	hash_add(&func_hashtab, UF2HIKEY(fp));
 	fp->uf_args = newargs;
 	fp->uf_lines = newlines;
+	if (current_funccal != NULL && eval_lavars)
+	{
+	    fp->uf_scoped = current_funccal;
+	    current_funccal->fc_refcount++;
+	    if (ga_grow(&current_funccal->fc_funcs, 1) == FAIL)
+		goto errret;
+	    ((ufunc_T **)current_funccal->fc_funcs.ga_data)
+				    [current_funccal->fc_funcs.ga_len++] = fp;
+	    func_ref(current_funccal->func->uf_name);
+	}
+	else
+	    fp->uf_scoped = NULL;
 
 #ifdef FEAT_PROFILE
 	fp->uf_tml_count = NULL;
@@ -341,15 +368,15 @@
 	rettv->vval.v_string = vim_strsave(name);
 	rettv->v_type = VAR_FUNC;
     }
-    else
-	ga_clear_strings(&newargs);
 
+    eval_lavars_used = old_eval_lavars;
     return OK;
 
 errret:
     ga_clear_strings(&newargs);
     ga_clear_strings(&newlines);
     vim_free(fp);
+    eval_lavars_used = old_eval_lavars;
     return FAIL;
 }
 
@@ -624,6 +651,15 @@
     int		free_val)  /* a: vars were allocated */
 {
     listitem_T	*li;
+    int		i;
+
+    for (i = 0; i < fc->fc_funcs.ga_len; ++i)
+    {
+	ufunc_T	    *fp = ((ufunc_T **)(fc->fc_funcs.ga_data))[i];
+
+	if (fp != NULL)
+	    fp->uf_scoped = NULL;
+    }
 
     /* The a: variables typevals may not have been allocated, only free the
      * allocated variables. */
@@ -637,6 +673,16 @@
 	for (li = fc->l_varlist.lv_first; li != NULL; li = li->li_next)
 	    clear_tv(&li->li_tv);
 
+    for (i = 0; i < fc->fc_funcs.ga_len; ++i)
+    {
+	ufunc_T	    *fp = ((ufunc_T **)(fc->fc_funcs.ga_data))[i];
+
+	if (fp != NULL)
+	    func_unref(fc->func->uf_name);
+    }
+    ga_clear(&fc->fc_funcs);
+
+    func_unref(fc->func->uf_name);
     vim_free(fc);
 }
 
@@ -696,6 +742,11 @@
     /* Check if this function has a breakpoint. */
     fc->breakpoint = dbg_find_breakpoint(FALSE, fp->uf_name, (linenr_T)0);
     fc->dbg_tick = debug_tick;
+    /* Set up fields for closure. */
+    fc->fc_refcount = 0;
+    fc->fc_copyID = 0;
+    ga_init2(&fc->fc_funcs, sizeof(ufunc_T *), 1);
+    func_ref(fp->uf_name);
 
     if (STRNCMP(fp->uf_name, "<lambda>", 8) == 0)
 	islambda = TRUE;
@@ -758,7 +809,6 @@
     for (i = 0; i < argcount; ++i)
     {
 	int	    addlocal = FALSE;
-	dictitem_T  *v2;
 
 	ai = i - fp->uf_args.ga_len;
 	if (ai < 0)
@@ -778,9 +828,6 @@
 	{
 	    v = &fc->fixvar[fixvar_idx++].var;
 	    v->di_flags = DI_FLAGS_RO | DI_FLAGS_FIX;
-
-	    if (addlocal)
-		v2 = v;
 	}
 	else
 	{
@@ -789,36 +836,23 @@
 	    if (v == NULL)
 		break;
 	    v->di_flags = DI_FLAGS_RO | DI_FLAGS_FIX | DI_FLAGS_ALLOC;
-
-	    if (addlocal)
-	    {
-		v2 = (dictitem_T *)alloc((unsigned)(sizeof(dictitem_T)
-							     + STRLEN(name)));
-		if (v2 == NULL)
-		{
-		    vim_free(v);
-		    break;
-		}
-		v2->di_flags = DI_FLAGS_RO | DI_FLAGS_FIX | DI_FLAGS_ALLOC;
-	    }
 	}
 	STRCPY(v->di_key, name);
-	hash_add(&fc->l_avars.dv_hashtab, DI2HIKEY(v));
 
 	/* Note: the values are copied directly to avoid alloc/free.
 	 * "argvars" must have VAR_FIXED for v_lock. */
 	v->di_tv = argvars[i];
 	v->di_tv.v_lock = VAR_FIXED;
 
-	/* Named arguments can be accessed without the "a:" prefix in lambda
-	 * expressions.  Add to the l: dict. */
 	if (addlocal)
 	{
-	    STRCPY(v2->di_key, name);
-	    copy_tv(&v->di_tv, &v2->di_tv);
-	    v2->di_tv.v_lock = VAR_FIXED;
-	    hash_add(&fc->l_vars.dv_hashtab, DI2HIKEY(v2));
+	    /* Named arguments should be accessed without the "a:" prefix in
+	     * lambda expressions.  Add to the l: dict. */
+	    copy_tv(&v->di_tv, &v->di_tv);
+	    hash_add(&fc->l_vars.dv_hashtab, DI2HIKEY(v));
 	}
+	else
+	    hash_add(&fc->l_avars.dv_hashtab, DI2HIKEY(v));
 
 	if (ai >= 0 && ai < MAX_FUNC_ARGS)
 	{
@@ -1014,7 +1048,8 @@
      * free the funccall_T and what's in it. */
     if (fc->l_varlist.lv_refcount == DO_NOT_FREE_CNT
 	    && fc->l_vars.dv_refcount == DO_NOT_FREE_CNT
-	    && fc->l_avars.dv_refcount == DO_NOT_FREE_CNT)
+	    && fc->l_avars.dv_refcount == DO_NOT_FREE_CNT
+	    && fc->fc_refcount <= 0)
     {
 	free_funccal(fc, FALSE);
     }
@@ -1049,6 +1084,52 @@
 }
 
 /*
+ * Unreference "fc": decrement the reference count and free it when it
+ * becomes zero.  If "fp" is not NULL, "fp" is detached from "fc".
+ */
+    static void
+funccal_unref(funccall_T *fc, ufunc_T *fp)
+{
+    funccall_T	**pfc;
+    int		i;
+    int		freed = FALSE;
+
+    if (fc == NULL)
+	return;
+
+    if (--fc->fc_refcount <= 0)
+    {
+	for (pfc = &previous_funccal; *pfc != NULL; )
+	{
+	    if (fc == *pfc
+		    && fc->l_varlist.lv_refcount == DO_NOT_FREE_CNT
+		    && fc->l_vars.dv_refcount == DO_NOT_FREE_CNT
+		    && fc->l_avars.dv_refcount == DO_NOT_FREE_CNT)
+	    {
+		*pfc = fc->caller;
+		free_funccal(fc, TRUE);
+		freed = TRUE;
+	    }
+	    else
+		pfc = &(*pfc)->caller;
+	}
+    }
+    if (!freed)
+    {
+	func_unref(fc->func->uf_name);
+
+	if (fp != NULL)
+	{
+	    for (i = 0; i < fc->fc_funcs.ga_len; ++i)
+	    {
+		if (((ufunc_T **)(fc->fc_funcs.ga_data))[i] == fp)
+		    ((ufunc_T **)(fc->fc_funcs.ga_data))[i] = NULL;
+	    }
+	}
+    }
+}
+
+/*
  * Free a function and remove it from the list of functions.
  */
     static void
@@ -1072,6 +1153,8 @@
     else
 	hash_remove(&func_hashtab, hi);
 
+    funccal_unref(fp->uf_scoped, fp);
+
     vim_free(fp);
 }
 
@@ -2216,6 +2299,7 @@
     }
     fp->uf_args = newargs;
     fp->uf_lines = newlines;
+    fp->uf_scoped = NULL;
 #ifdef FEAT_PROFILE
     fp->uf_tml_count = NULL;
     fp->uf_tml_total = NULL;
@@ -2705,7 +2789,8 @@
 {
     return (fc->l_varlist.lv_copyID != copyID
 	    && fc->l_vars.dv_copyID != copyID
-	    && fc->l_avars.dv_copyID != copyID);
+	    && fc->l_avars.dv_copyID != copyID
+	    && fc->fc_copyID != copyID);
 }
 
 /*
@@ -3451,6 +3536,40 @@
 }
 
 /*
+ * Search variable in parent scope.
+ */
+    dictitem_T *
+find_var_in_scoped_ht(char_u *name, char_u **varname, int no_autoload)
+{
+    dictitem_T	*v = NULL;
+    funccall_T	*old_current_funccal = current_funccal;
+    hashtab_T	*ht;
+
+    if (current_funccal == NULL || current_funccal->func->uf_scoped == NULL)
+	return NULL;
+
+    /* Search in parent scope which is possible to reference from lambda */
+    current_funccal = current_funccal->func->uf_scoped;
+    while (current_funccal)
+    {
+	ht = find_var_ht(name, varname ? &(*varname) : NULL);
+	if (ht != NULL)
+	{
+	    v = find_var_in_ht(ht, *name,
+		    varname ? *varname : NULL, no_autoload);
+	    if (v != NULL)
+		break;
+	}
+	if (current_funccal == current_funccal->func->uf_scoped)
+	    break;
+	current_funccal = current_funccal->func->uf_scoped;
+    }
+    current_funccal = old_current_funccal;
+
+    return v;
+}
+
+/*
  * Set "copyID + 1" in previous_funccal and callers.
  */
     int
@@ -3461,6 +3580,7 @@
 
     for (fc = previous_funccal; fc != NULL; fc = fc->caller)
     {
+	fc->fc_copyID = copyID + 1;
 	abort = abort || set_ref_in_ht(&fc->l_vars.dv_hashtab, copyID + 1,
 									NULL);
 	abort = abort || set_ref_in_ht(&fc->l_avars.dv_hashtab, copyID + 1,
@@ -3480,6 +3600,7 @@
 
     for (fc = current_funccal; fc != NULL; fc = fc->caller)
     {
+	fc->fc_copyID = copyID;
 	abort = abort || set_ref_in_ht(&fc->l_vars.dv_hashtab, copyID, NULL);
 	abort = abort || set_ref_in_ht(&fc->l_avars.dv_hashtab, copyID, NULL);
     }
@@ -3501,4 +3622,42 @@
     return abort;
 }
 
+/*
+ * Mark all lists and dicts referenced through function "name" with "copyID".
+ * "list_stack" is used to add lists to be marked.  Can be NULL.
+ * "ht_stack" is used to add hashtabs to be marked.  Can be NULL.
+ *
+ * Returns TRUE if setting references failed somehow.
+ */
+    int
+set_ref_in_func(char_u *name, int copyID)
+{
+    ufunc_T	*fp;
+    funccall_T	*fc;
+    int		error = ERROR_NONE;
+    char_u	fname_buf[FLEN_FIXED + 1];
+    char_u	*tofree = NULL;
+    char_u	*fname;
+
+    if (name == NULL)
+	return FALSE;
+
+    fname = fname_trans_sid(name, fname_buf, &tofree, &error);
+    fp = find_func(fname);
+    if (fp != NULL)
+    {
+	for (fc = fp->uf_scoped; fc != NULL; fc = fc->func->uf_scoped)
+	{
+	    if (fc->fc_copyID != copyID)
+	    {
+		fc->fc_copyID = copyID;
+		set_ref_in_ht(&fc->l_vars.dv_hashtab, copyID, NULL);
+		set_ref_in_ht(&fc->l_avars.dv_hashtab, copyID, NULL);
+	    }
+	}
+    }
+    vim_free(tofree);
+    return FALSE;
+}
+
 #endif /* FEAT_EVAL */
diff --git a/src/version.c b/src/version.c
index 153b3f5..865ac92 100644
--- a/src/version.c
+++ b/src/version.c
@@ -759,6 +759,8 @@
 static int included_patches[] =
 {   /* Add new patch number below this line */
 /**/
+    2119,
+/**/
     2118,
 /**/
     2117,