diff --git a/tsc/internal/binder/nameresolver.go b/tsc/internal/binder/nameresolver.go
index 4d0db524946cb..8c69fe1553bfd 100644
--- a/tsc/internal/binder/nameresolver.go
+++ b/tsc/internal/binder/nameresolver.go
@@ -74,8 +74,8 @@ loop:
 								lastLocation.Kind == ast.KindJSDocReturnTag ||
 								lastLocation.Kind == ast.KindTypeParameter)
 					}
-					if meaning&result.Flags()&ast.SymbolFlagsVariable != 0 {
-						// expression inside parameter will lookup as normal variable scope when targeting es2015+
+					if meaning&result.Flags()&(ast.SymbolFlagsVariable|ast.SymbolFlagsFunction) != 0 {
+						// Expressions inside parameters use the outer scope for declarations in the function body.
 						if r.useOuterVariableScopeInParameter(result, location, lastLocation) {
 							useResult = false
 						} else if result.Flags()&ast.SymbolFlagsFunctionScopedVariable != 0 {
diff --git a/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.errors.txt b/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.errors.txt
new file mode 100644
index 0000000000000..6f55fb08303b0
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.errors.txt
@@ -0,0 +1,37 @@
+defaultParameterBodyFunctionScope.ts(19,37): error TS2304: Cannot find name 'missing'.
+
+
+==== defaultParameterBodyFunctionScope.ts (1 errors) ====
+    const styles = { root: "outer" };
+    
+    export function read(value = styles.root) {
+        function styles() {}
+        styles();
+        return value;
+    }
+    
+    export function readClosure(value = () => styles.root) {
+        function styles() {}
+        return value();
+    }
+    
+    export function readDestructured({ value = styles.root } = {}) {
+        function styles() {}
+        return value;
+    }
+    
+    export function readMissing(value = missing) {
+                                        ~~~~~~~
+!!! error TS2304: Cannot find name 'missing'.
+        function missing() {}
+        return value;
+    }
+    
+    export function readParameter(styles = { root: "parameter" }, value = styles.root) {
+        return value;
+    }
+    
+    export const readNamed = function named(value = named) {
+        return value;
+    };
+    
\ No newline at end of file
diff --git a/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.js b/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.js
new file mode 100644
index 0000000000000..41ae37b313a23
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.js
@@ -0,0 +1,60 @@
+//// [tests/cases/compiler/defaultParameterBodyFunctionScope.ts] ////
+
+//// [defaultParameterBodyFunctionScope.ts]
+const styles = { root: "outer" };
+
+export function read(value = styles.root) {
+    function styles() {}
+    styles();
+    return value;
+}
+
+export function readClosure(value = () => styles.root) {
+    function styles() {}
+    return value();
+}
+
+export function readDestructured({ value = styles.root } = {}) {
+    function styles() {}
+    return value;
+}
+
+export function readMissing(value = missing) {
+    function missing() {}
+    return value;
+}
+
+export function readParameter(styles = { root: "parameter" }, value = styles.root) {
+    return value;
+}
+
+export const readNamed = function named(value = named) {
+    return value;
+};
+
+
+//// [defaultParameterBodyFunctionScope.js]
+const styles = { root: "outer" };
+export function read(value = styles.root) {
+    function styles() { }
+    styles();
+    return value;
+}
+export function readClosure(value = () => styles.root) {
+    function styles() { }
+    return value();
+}
+export function readDestructured({ value = styles.root } = {}) {
+    function styles() { }
+    return value;
+}
+export function readMissing(value = missing) {
+    function missing() { }
+    return value;
+}
+export function readParameter(styles = { root: "parameter" }, value = styles.root) {
+    return value;
+}
+export const readNamed = function named(value = named) {
+    return value;
+};
diff --git a/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.symbols b/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.symbols
new file mode 100644
index 0000000000000..c2eceabe5a1ec
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.symbols
@@ -0,0 +1,87 @@
+//// [tests/cases/compiler/defaultParameterBodyFunctionScope.ts] ////
+
+=== defaultParameterBodyFunctionScope.ts ===
+const styles = { root: "outer" };
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 0, 5))
+>root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 0, 16))
+
+export function read(value = styles.root) {
+>read : Symbol(read, Decl(defaultParameterBodyFunctionScope.ts, 0, 33))
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 2, 21))
+>styles.root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 0, 16))
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 0, 5))
+>root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 0, 16))
+
+    function styles() {}
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 2, 43))
+
+    styles();
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 2, 43))
+
+    return value;
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 2, 21))
+}
+
+export function readClosure(value = () => styles.root) {
+>readClosure : Symbol(readClosure, Decl(defaultParameterBodyFunctionScope.ts, 6, 1))
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 8, 28))
+>styles.root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 0, 16))
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 0, 5))
+>root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 0, 16))
+
+    function styles() {}
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 8, 56))
+
+    return value();
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 8, 28))
+}
+
+export function readDestructured({ value = styles.root } = {}) {
+>readDestructured : Symbol(readDestructured, Decl(defaultParameterBodyFunctionScope.ts, 11, 1))
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 13, 34))
+>styles.root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 0, 16))
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 0, 5))
+>root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 0, 16))
+
+    function styles() {}
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 13, 64))
+
+    return value;
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 13, 34))
+}
+
+export function readMissing(value = missing) {
+>readMissing : Symbol(readMissing, Decl(defaultParameterBodyFunctionScope.ts, 16, 1))
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 18, 28))
+
+    function missing() {}
+>missing : Symbol(missing, Decl(defaultParameterBodyFunctionScope.ts, 18, 46))
+
+    return value;
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 18, 28))
+}
+
+export function readParameter(styles = { root: "parameter" }, value = styles.root) {
+>readParameter : Symbol(readParameter, Decl(defaultParameterBodyFunctionScope.ts, 21, 1))
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 23, 30))
+>root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 23, 40))
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 23, 61))
+>styles.root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 23, 40))
+>styles : Symbol(styles, Decl(defaultParameterBodyFunctionScope.ts, 23, 30))
+>root : Symbol(root, Decl(defaultParameterBodyFunctionScope.ts, 23, 40))
+
+    return value;
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 23, 61))
+}
+
+export const readNamed = function named(value = named) {
+>readNamed : Symbol(readNamed, Decl(defaultParameterBodyFunctionScope.ts, 27, 12))
+>named : Symbol(named, Decl(defaultParameterBodyFunctionScope.ts, 27, 24))
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 27, 40))
+>named : Symbol(named, Decl(defaultParameterBodyFunctionScope.ts, 27, 24))
+
+    return value;
+>value : Symbol(value, Decl(defaultParameterBodyFunctionScope.ts, 27, 40))
+
+};
+
diff --git a/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.types b/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.types
new file mode 100644
index 0000000000000..0b64b83ba538b
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/defaultParameterBodyFunctionScope.types
@@ -0,0 +1,97 @@
+//// [tests/cases/compiler/defaultParameterBodyFunctionScope.ts] ////
+
+=== defaultParameterBodyFunctionScope.ts ===
+const styles = { root: "outer" };
+>styles : { root: string; }
+>{ root: "outer" } : { root: string; }
+>root : string
+>"outer" : "outer"
+
+export function read(value = styles.root) {
+>read : (value?: string) => string
+>value : string
+>styles.root : string
+>styles : { root: string; }
+>root : string
+
+    function styles() {}
+>styles : () => void
+
+    styles();
+>styles() : void
+>styles : () => void
+
+    return value;
+>value : string
+}
+
+export function readClosure(value = () => styles.root) {
+>readClosure : (value?: () => string) => string
+>value : () => string
+>() => styles.root : () => string
+>styles.root : string
+>styles : { root: string; }
+>root : string
+
+    function styles() {}
+>styles : () => void
+
+    return value();
+>value() : string
+>value : () => string
+}
+
+export function readDestructured({ value = styles.root } = {}) {
+>readDestructured : ({ value }?: { value?: string | undefined; }) => string
+>value : string
+>styles.root : string
+>styles : { root: string; }
+>root : string
+>{} : {}
+
+    function styles() {}
+>styles : () => void
+
+    return value;
+>value : string
+}
+
+export function readMissing(value = missing) {
+>readMissing : (value?: any) => any
+>value : any
+>missing : any
+
+    function missing() {}
+>missing : () => void
+
+    return value;
+>value : any
+}
+
+export function readParameter(styles = { root: "parameter" }, value = styles.root) {
+>readParameter : (styles?: { root: string; }, value?: string) => string
+>styles : { root: string; }
+>{ root: "parameter" } : { root: string; }
+>root : string
+>"parameter" : "parameter"
+>value : string
+>styles.root : string
+>styles : { root: string; }
+>root : string
+
+    return value;
+>value : string
+}
+
+export const readNamed = function named(value = named) {
+>readNamed : (value?: typeof readNamed) => typeof readNamed
+>function named(value = named) {    return value;} : (value?: typeof readNamed) => typeof readNamed
+>named : (value?: typeof readNamed) => typeof readNamed
+>value : (value?: typeof readNamed) => typeof readNamed
+>named : (value?: typeof readNamed) => typeof readNamed
+
+    return value;
+>value : (value?: typeof readNamed) => typeof readNamed
+
+};
+
diff --git a/tsc/testdata/tests/cases/compiler/defaultParameterBodyFunctionScope.ts b/tsc/testdata/tests/cases/compiler/defaultParameterBodyFunctionScope.ts
new file mode 100644
index 0000000000000..30cc64616d933
--- /dev/null
+++ b/tsc/testdata/tests/cases/compiler/defaultParameterBodyFunctionScope.ts
@@ -0,0 +1,33 @@
+// @target: esnext
+// @strict: true
+
+const styles = { root: "outer" };
+
+export function read(value = styles.root) {
+    function styles() {}
+    styles();
+    return value;
+}
+
+export function readClosure(value = () => styles.root) {
+    function styles() {}
+    return value();
+}
+
+export function readDestructured({ value = styles.root } = {}) {
+    function styles() {}
+    return value;
+}
+
+export function readMissing(value = missing) {
+    function missing() {}
+    return value;
+}
+
+export function readParameter(styles = { root: "parameter" }, value = styles.root) {
+    return value;
+}
+
+export const readNamed = function named(value = named) {
+    return value;
+};