diff --git a/lib/compress.js b/lib/compress.js
index 32212688..20928db3 100644
--- a/lib/compress.js
+++ b/lib/compress.js
@@ -4030,7 +4030,7 @@ merge(Compressor.prototype, {
             if (compressor.option("inline")
                 && !fn.uses_arguments
                 && !fn.uses_eval
-                && fn.body.length == 1
+                && can_flatten_body()
                 && (exp === fn ? !fn.name
                     : compressor.option("unused")
                         && (def = exp.definition()).references.length == 1
@@ -4038,11 +4038,9 @@ merge(Compressor.prototype, {
                         && fn.is_constant_expression(exp.scope))
                 && !self.pure
                 && !fn.contains_this()
-                && can_flatten_args(fn)
-                && (value = flatten_body(stat))) {
-                var expressions = flatten_args(fn);
-                expressions.push(value.clone(true));
-                return make_sequence(self, expressions).optimize(compressor);
+                && can_inject_symbols()
+                && (value = return_value(stat))) {
+                return make_sequence(self, flatten_fn()).optimize(compressor);
             }
             if (compressor.option("side_effects") && all(fn.body, is_empty)) {
                 var args = self.args.concat(make_node(AST_Undefined, self));
@@ -4072,7 +4070,64 @@ merge(Compressor.prototype, {
         }
         return self;
 
-        function can_flatten_args(fn) {
+        function can_flatten_body() {
+            var len = fn.body.length;
+            if (len == 1) return true;
+            stat = null;
+            for (var i = 0; i < len; i++) {
+                var line = fn.body[i];
+                if (line instanceof AST_Definitions) {
+                    if (stat && !all(line.definitions, function(var_def) {
+                        return !var_def.value;
+                    })) {
+                        return false;
+                    }
+                } else if (stat) {
+                    return false;
+                } else {
+                    stat = line;
+                }
+            }
+            return stat;
+        }
+
+        function can_inject_args(catches, defs, safe_to_inject) {
+            for (var i = 0, len = fn.argnames.length; i < len; i++) {
+                var arg = fn.argnames[i];
+                if (arg.__unused) continue;
+                if (!safe_to_inject
+                    || catches[arg.name]
+                    || identifier_atom(arg.name)
+                    || scope.var_names()[arg.name]) {
+                    return false;
+                }
+                if (in_loop) in_loop.push(arg.definition());
+            }
+            return true;
+        }
+
+        function can_inject_vars(catches, defs, safe_to_inject) {
+            var len = fn.body.length;
+            if (len == 1) return true;
+            if (!safe_to_inject) return false;
+            for (var i = 0; i < len; i++) {
+                var stat = fn.body[i];
+                if (stat instanceof AST_Definitions) {
+                    for (var j = stat.definitions.length; --j >= 0;) {
+                        var name = stat.definitions[j].name;
+                        if (catches[name.name]
+                            || identifier_atom(name.name)
+                            || scope.var_names()[name.name]) {
+                            return false;
+                        }
+                        if (defs) defs.push(name.definition());
+                    }
+                }
+            }
+            return true;
+        }
+
+        function can_inject_symbols() {
             var catches = Object.create(null);
             do {
                 scope = compressor.parent(++level);
@@ -4085,54 +4140,67 @@ merge(Compressor.prototype, {
                 }
             } while (!(scope instanceof AST_Scope));
             var safe_to_inject = compressor.toplevel.vars || !(scope instanceof AST_Toplevel);
-            for (var i = 0, len = fn.argnames.length; i < len; i++) {
-                var arg = fn.argnames[i];
-                if (arg.__unused) continue;
-                if (!safe_to_inject
-                    || catches[arg.name]
-                    || identifier_atom(arg.name)
-                    || scope.var_names()[arg.name]) {
-                    return false;
-                }
-                if (in_loop) in_loop.push(arg.definition());
-            }
-            return !in_loop || in_loop.length == 0 || !is_reachable(stat, in_loop);
+            if (!can_inject_vars(catches, in_loop, safe_to_inject)) return false;
+            if (!can_inject_args(catches, in_loop, safe_to_inject)) return false;
+            return !in_loop || in_loop.length == 0 || !is_reachable(fn, in_loop);
         }
 
-        function flatten_args(fn) {
-            var decls = [];
-            var expressions = [];
+        function append_var(decls, expressions, name, value) {
+            var def = name.definition();
+            scope.var_names()[name.name] = true;
+            scope.variables.set(name.name, def);
+            scope.enclosed.push(def);
+            decls.push(make_node(AST_VarDef, name, {
+                name: name,
+                value: null
+            }));
+            var sym = make_node(AST_SymbolRef, name, name);
+            def.references.push(sym);
+            if (value) expressions.push(make_node(AST_Assign, self, {
+                operator: "=",
+                left: sym,
+                right: value
+            }));
+        }
+
+        function flatten_args(decls, expressions) {
             for (var len = fn.argnames.length, i = len; --i >= 0;) {
                 var name = fn.argnames[i];
                 var value = self.args[i];
                 if (name.__unused || scope.var_names()[name.name]) {
-                    if (value) {
-                        expressions.unshift(value);
-                    }
+                    if (value) expressions.push(value);
                 } else {
-                    var def = name.definition();
-                    scope.var_names()[name.name] = true;
-                    scope.variables.set(name.name, def);
-                    scope.enclosed.push(def);
                     var symbol = make_node(AST_SymbolVar, name, name);
-                    def.orig.push(symbol);
-                    decls.unshift(make_node(AST_VarDef, name, {
-                        name: symbol,
-                        value: null
-                    }));
-                    var sym = make_node(AST_SymbolRef, name, name);
-                    def.references.push(sym);
+                    name.definition().orig.push(symbol);
                     if (!value && in_loop) value = make_node(AST_Undefined, self);
-                    if (value) expressions.unshift(make_node(AST_Assign, self, {
-                        operator: "=",
-                        left: sym,
-                        right: value
-                    }));
+                    append_var(decls, expressions, symbol, value);
                 }
             }
+            decls.reverse();
+            expressions.reverse();
             for (i = len, len = self.args.length; i < len; i++) {
                 expressions.push(self.args[i]);
             }
+        }
+
+        function flatten_body(decls, expressions) {
+            for (i = 0, len = fn.body.length; i < len; i++) {
+                var stat = fn.body[i];
+                if (stat instanceof AST_Definitions) {
+                    stat.definitions.forEach(function(var_def) {
+                        append_var(decls, expressions, var_def.name, var_def.value);
+                    });
+                } else {
+                    expressions.push(value.clone(true));
+                }
+            }
+        }
+
+        function flatten_fn() {
+            var decls = [];
+            var expressions = [];
+            flatten_args(decls, expressions);
+            flatten_body(decls, expressions);
             if (decls.length) {
                 i = scope.body.indexOf(compressor.parent(level - 1)) + 1;
                 scope.body.splice(i, 0, make_node(AST_Var, fn, {
@@ -4142,7 +4210,7 @@ merge(Compressor.prototype, {
             return expressions;
         }
 
-        function flatten_body(stat) {
+        function return_value(stat) {
             if (stat instanceof AST_Return) {
                 return stat.value;
             } else if (stat instanceof AST_SimpleStatement) {