diff --git a/lib/compress.js b/lib/compress.js
index 5a06572f..06873df8 100644
--- a/lib/compress.js
+++ b/lib/compress.js
@@ -4031,7 +4031,7 @@ merge(Compressor.prototype, {
             if (compressor.option("inline")
                 && !fn.uses_arguments
                 && !fn.uses_eval
-                && can_flatten_body()
+                && (value = can_flatten_body(stat))
                 && (exp === fn ? !fn.name
                     : compressor.option("unused")
                         && (def = exp.definition()).references.length == 1
@@ -4039,8 +4039,7 @@ merge(Compressor.prototype, {
                         && fn.is_constant_expression(exp.scope))
                 && !self.pure
                 && !fn.contains_this()
-                && can_inject_symbols()
-                && (value = return_value(stat))) {
+                && can_inject_symbols()) {
                 return make_sequence(self, flatten_fn()).optimize(compressor);
             }
             if (compressor.option("side_effects") && all(fn.body, is_empty)) {
@@ -4071,10 +4070,25 @@ merge(Compressor.prototype, {
         }
         return self;
 
-        function can_flatten_body() {
+        function return_value(stat) {
+            if (!stat) return make_node(AST_Undefined, self);
+            if (stat instanceof AST_Return) {
+                if (!stat.value) return make_node(AST_Undefined, self);
+                return stat.value.clone(true);
+            }
+            if (stat instanceof AST_SimpleStatement) {
+                return make_node(AST_UnaryPrefix, stat, {
+                    operator: "void",
+                    expression: stat.body.clone(true)
+                });
+            }
+        }
+
+        function can_flatten_body(stat) {
             var len = fn.body.length;
-            if (len == 1) return true;
-            if (compressor.option("inline") < 3) return false;
+            if (compressor.option("inline") < 3) {
+                return len == 1 && return_value(stat);
+            }
             stat = null;
             for (var i = 0; i < len; i++) {
                 var line = fn.body[i];
@@ -4090,7 +4104,7 @@ merge(Compressor.prototype, {
                     stat = line;
                 }
             }
-            return stat;
+            return return_value(stat);
         }
 
         function can_inject_args(catches, defs, safe_to_inject) {
@@ -4108,21 +4122,18 @@ merge(Compressor.prototype, {
             return true;
         }
 
-        function can_inject_vars(catches, defs, safe_to_inject) {
+        function can_inject_vars(catches, 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());
+                if (!(stat instanceof AST_Definitions)) continue;
+                if (!safe_to_inject) return false;
+                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;
                     }
                 }
             }
@@ -4143,7 +4154,7 @@ merge(Compressor.prototype, {
             } while (!(scope instanceof AST_Scope));
             var safe_to_inject = !(scope instanceof AST_Toplevel) || compressor.toplevel.vars;
             var inline = compressor.option("inline");
-            if (!can_inject_vars(catches, in_loop, inline >= 3 && safe_to_inject)) return false;
+            if (!can_inject_vars(catches, !in_loop && inline >= 3 && safe_to_inject)) return false;
             if (!can_inject_args(catches, in_loop, inline >= 2 && safe_to_inject)) return false;
             return !in_loop || in_loop.length == 0 || !is_reachable(fn, in_loop);
         }
@@ -4193,10 +4204,9 @@ merge(Compressor.prototype, {
                     stat.definitions.forEach(function(var_def) {
                         append_var(decls, expressions, var_def.name, var_def.value);
                     });
-                } else {
-                    expressions.push(value.clone(true));
                 }
             }
+            expressions.push(value);
         }
 
         function flatten_fn() {
@@ -4212,17 +4222,6 @@ merge(Compressor.prototype, {
             }
             return expressions;
         }
-
-        function return_value(stat) {
-            if (stat instanceof AST_Return) {
-                return stat.value;
-            } else if (stat instanceof AST_SimpleStatement) {
-                return make_node(AST_UnaryPrefix, stat, {
-                    operator: "void",
-                    expression: stat.body
-                });
-            }
-        }
     });
 
     OPT(AST_New, function(self, compressor){
diff --git a/test/compress/functions.js b/test/compress/functions.js
index 7f5d048b..f38977b3 100644
--- a/test/compress/functions.js
+++ b/test/compress/functions.js
@@ -1901,3 +1901,27 @@ inline_true: {
         "3",
     ]
 }
+
+use_before_init_in_loop: {
+    options = {
+        inline: true,
+        toplevel: true,
+    }
+    input: {
+        var a = "PASS";
+        for (var b = 2; --b >= 0;) (function() {
+            var c = function() {
+                return 1;
+            }(c && (a = "FAIL"));
+        })();
+        console.log(a);
+    }
+    expect: {
+        var a = "PASS";
+        for (var b = 2; --b >= 0;) (function() {
+            var c = (c && (a = "FAIL"), 1);
+        })();
+        console.log(a);
+    }
+    expect_stdout: "PASS"
+}