diff --git a/ocaml/testsuite/tests/typing-local/crossing.ml b/ocaml/testsuite/tests/typing-local/crossing.ml
index 0fedb2bc6ea..a650ef4e790 100644
--- a/ocaml/testsuite/tests/typing-local/crossing.ml
+++ b/ocaml/testsuite/tests/typing-local/crossing.ml
@@ -224,7 +224,7 @@ val f : unit -> local_ int = <fun>
 |}]
 
 let g : _ -> _ =
-  fun () -> f ()
+  fun () -> let x = f () in x
 [%%expect{|
 val g : unit -> int = <fun>
 |}]
@@ -236,11 +236,11 @@ val f : unit -> local_ string = <fun>
 |}]
 
 let g : _ -> _ =
-  fun () -> f ()
+  fun () -> let x = f () in x
 [%%expect{|
-Line 2, characters 12-16:
-2 |   fun () -> f ()
-                ^^^^
+Line 2, characters 28-29:
+2 |   fun () -> let x = f () in x
+                                ^
 Error: This value escapes its region
 |}]
 
diff --git a/ocaml/testsuite/tests/typing-local/local.ml b/ocaml/testsuite/tests/typing-local/local.ml
index 5498d01722e..5e13483b978 100644
--- a/ocaml/testsuite/tests/typing-local/local.ml
+++ b/ocaml/testsuite/tests/typing-local/local.ml
@@ -636,6 +636,16 @@ Error: This value escapes its region
         Adding 1 more argument will make the value non-local
 |}]
 
+(* The fixed version. Note that in the printed type, local returning is implicit
+    *)
+let bug4_fixed : local_ (string -> foo:string -> unit) -> local_ (string -> unit) =
+  fun f -> local_ f ~foo:"hello"
+[%%expect{|
+val bug4_fixed : local_ (string -> foo:string -> unit) -> string -> unit =
+  <fun>
+|}]
+
+
 let bug4' () =
   let local_ f arg ~foo = () in
   let local_ perm ~foo = f ~foo in
@@ -763,7 +773,7 @@ val baduse : ('a -> 'b -> 'c) -> 'a -> 'b -> 'c lazy_t = <fun>
 Line 2, characters 20-45:
 2 | let result = baduse (fun a b -> local_ (a,b)) 1 2
                         ^^^^^^^^^^^^^^^^^^^^^^^^^
-Error: This function is local returning, but was expected otherwise
+Error: This function is local-returning, but was expected otherwise
 |}]
 
 
@@ -1383,6 +1393,39 @@ let foo () =
 val foo : unit -> int = <fun>
 |}]
 
+(* tail-calling local-returning functions make the current function
+   local-returning as well; mode-crossing is irrelavent here. Whether or not the
+   function actually allocates in parent-region is also irrelavent here, but we
+   allocate just to demonstrate the potential leaking. *)
+let foo () = local_
+  let _ = local_ (52, 24) in
+  42
+[%%expect{|
+val foo : unit -> local_ int = <fun>
+|}]
+
+let bar () =
+  let _x = 52 in
+  foo ()
+[%%expect{|
+val bar : unit -> local_ int = <fun>
+|}]
+
+(* if not at tail, then not affected *)
+let bar' () =
+  let _x = foo () in
+  52
+[%%expect{|
+val bar' : unit -> int = <fun>
+|}]
+
+(* nontail attribute works as well *)
+let bar' () =
+  foo () [@nontail]
+[%%expect{|
+val bar' : unit -> int = <fun>
+|}]
+
 (* Parameter modes must be matched by the type *)
 
 let foo : 'a -> unit = fun (local_ x) -> ()
@@ -1406,7 +1449,7 @@ let foo : unit -> string = fun () -> local_ "hello"
 Line 1, characters 27-51:
 1 | let foo : unit -> string = fun () -> local_ "hello"
                                ^^^^^^^^^^^^^^^^^^^^^^^^
-Error: This function is local returning, but was expected otherwise
+Error: This function is local-returning, but was expected otherwise
 |}]
 
 (* Unboxed type constructors do not affect regionality *)
diff --git a/ocaml/typing/typecore.ml b/ocaml/typing/typecore.ml
index 41a36251b6c..470a1b18529 100644
--- a/ocaml/typing/typecore.ml
+++ b/ocaml/typing/typecore.ml
@@ -185,6 +185,7 @@ type error =
   | Uncurried_function_escapes
   | Local_return_annotation_mismatch of Location.t
   | Function_returns_local
+  | Tail_call_local_returning
   | Bad_tail_annotation of [`Conflict|`Not_a_tailcall]
   | Optional_poly_param
   | Exclave_in_nontail_position
@@ -266,20 +267,20 @@ let mk_expected ?explanation ty = { ty; explanation; }
 let case lhs rhs =
   {c_lhs = lhs; c_guard = None; c_rhs = rhs}
 
-type function_position = Tail | Nontail
+type position_in_function = FTail | FNontail
 
 
-type region_position =
+type position_in_region =
   (* not the tail of a region*)
   | RNontail
   (* tail of a region,
      together with the mode of that region,
      and whether it is also the tail of a function
      (for tail call escape detection) *)
-  | RTail of Value_mode.t * function_position
+  | RTail of Value_mode.t * position_in_function
 
 type expected_mode =
-  { position : region_position;
+  { position : position_in_region;
     escaping_context : Env.escaping_context option;
     (* the upper bound of mode*)
     mode : Value_mode.t;
@@ -304,23 +305,59 @@ type expected_mode =
     (* for t in tuple_modes, t <= regional_to_global mode *)
   }
 
-let tail_call_escape = function
-  | RTail (_, Tail) -> true
-  | _ -> false
+type position_and_mode = {
+  (* apply_position of the current application  *)
+  apply_position : apply_position;
+  (* [Some m] if [position] is [Tail], where m is the mode of the surrounding
+     function's return mode *)
+  region_mode : Value_mode.t option;
+}
+
+let position_and_mode_default = {
+  apply_position = Default;
+  region_mode = None;
+}
 
-let apply_position env (expected_mode : expected_mode) sexp : apply_position =
+(** The function produces two values, apply_position and region_mode.
+    Invariant: if apply_position = Tail, then region_mode = Some ... *)
+let position_and_mode env (expected_mode : expected_mode) sexp
+  : position_and_mode =
   let fail err =
     raise (Error (sexp.pexp_loc, env, Bad_tail_annotation err))
   in
-  match
-    Builtin_attributes.tailcall sexp.pexp_attributes,
-    tail_call_escape expected_mode.position
-  with
-  | Ok (None | Some `Tail_if_possible), false  -> Default
-  | Ok (None | Some `Tail | Some `Tail_if_possible), true -> Tail
-  | Ok (Some `Nontail), _ -> Nontail
-  | Ok (Some `Tail), false -> fail `Not_a_tailcall
-  | Error `Conflict, _ -> fail `Conflict
+  let requested =
+    match Builtin_attributes.tailcall sexp.pexp_attributes with
+    | Ok r -> r
+    | Error `Conflict -> fail `Conflict
+  in
+  match expected_mode.position with
+  | RTail (m ,FTail) -> begin
+      match requested with
+      | Some `Tail | Some `Tail_if_possible | None ->
+          {apply_position = Tail; region_mode = Some m}
+      | Some `Nontail -> {apply_position = Nontail; region_mode = None}
+    end
+  | RNontail | RTail(_, FNontail) -> begin
+      match requested with
+      | None | Some `Tail_if_possible ->
+          {apply_position = Default; region_mode = None}
+      | Some `Nontail -> {apply_position = Nontail; region_mode = None}
+      | Some `Tail -> fail `Not_a_tailcall
+  end
+
+(* ap_mode is the return mode of the current application *)
+let check_tail_call_local_returning loc env ap_mode {region_mode; _} =
+  match region_mode with
+  | Some region_mode -> begin
+    (* This application is at the tail of a function with a region;
+        if ap_mode is local, funct_ret_mode needs to be local as well. *)
+      match
+        Value_mode.submode (Value_mode.of_alloc ap_mode) region_mode
+      with
+      | Ok () -> ()
+      | Error _ -> raise (Error (loc, env, Tail_call_local_returning))
+    end
+  | None -> ()
 
 let mode_default mode =
   { position = RNontail;
@@ -333,14 +370,14 @@ let mode_default mode =
 mode is the mode of the function region *)
 let mode_return mode =
   { (mode_default (Value_mode.local_to_regional mode)) with
-    position = RTail (mode, Tail);
+    position = RTail (mode, FTail);
     escaping_context = Some Return;
   }
 
 (* used when entering a region.*)
 let mode_region mode =
   { (mode_default (Value_mode.local_to_regional mode)) with
-    position = RTail (mode, Nontail);
+    position = RTail (mode, FNontail);
     escaping_context = None;
   }
 
@@ -411,7 +448,7 @@ let mode_argument ~funct ~index ~position ~partial_app alloc_mode =
 
 let mode_lazy =
   { mode_global with
-    position = RTail (Value_mode.global, Tail) }
+    position = RTail (Value_mode.global, FTail) }
 
 
 let submode ~loc ~env ~reason mode expected_mode =
@@ -4378,9 +4415,9 @@ and type_expect_
       end
   | Pexp_apply(sfunct, sargs) ->
       assert (sargs <> []);
-      let position = apply_position env expected_mode sexp in
+      let pm = position_and_mode env expected_mode sexp in
       let funct_mode, funct_expected_mode =
-        match position with
+        match pm.apply_position with
         | Tail ->
           let mode = Value_mode.local_to_regional (Value_mode.newvar ()) in
           mode, mode_tailcall_function mode
@@ -4445,12 +4482,12 @@ and type_expect_
         | _ ->
             (rt, funct), sargs
       in
-      let (args, ty_res, ap_mode, position) =
-        type_application env loc expected_mode position funct funct_mode sargs rt
+      let (args, ty_res, ap_mode, pm) =
+        type_application env loc expected_mode pm funct funct_mode sargs rt
       in
 
       rue {
-        exp_desc = Texp_apply(funct, args, position, ap_mode);
+        exp_desc = Texp_apply(funct, args, pm.apply_position, ap_mode);
         exp_loc = loc; exp_extra = [];
         exp_type = ty_res;
         exp_attributes = sexp.pexp_attributes;
@@ -4866,7 +4903,7 @@ and type_expect_
           (mk_expected ~explanation:While_loop_conditional Predef.type_bool)
       in
       let body_env = Env.add_region_lock env in
-      let position = RTail (Value_mode.local, Nontail) in
+      let position = RTail (Value_mode.local, FNontail) in
       let wh_body =
         type_statement ~explanation:While_loop_body
           ~position body_env sbody
@@ -4892,7 +4929,7 @@ and type_expect_
         type_for_loop_index ~loc ~env ~param
       in
       let new_env = Env.add_region_lock new_env in
-      let position = RTail (Value_mode.local, Nontail) in
+      let position = RTail (Value_mode.local, FNontail) in
       let for_body =
         type_statement ~explanation:For_loop_body ~position new_env sbody
       in
@@ -5013,7 +5050,7 @@ and type_expect_
   | Pexp_send (e, {txt=met}) ->
       if !Clflags.principal then begin_def ();
       let obj = type_exp env mode_global e in
-      let ap_pos = apply_position env expected_mode sexp in
+      let pm = position_and_mode env expected_mode sexp in
       let (meth, typ) =
         match obj.exp_desc with
         | Texp_ident(_, _, {val_kind = Val_self(sign, meths, _, _)}, _) ->
@@ -5117,7 +5154,7 @@ and type_expect_
             assert false
       in
       rue {
-        exp_desc = Texp_send(obj, meth, ap_pos,
+        exp_desc = Texp_send(obj, meth, pm.apply_position,
           register_allocation expected_mode
         );
         exp_loc = loc; exp_extra = [];
@@ -5126,14 +5163,14 @@ and type_expect_
         exp_env = env }
   | Pexp_new cl ->
       let (cl_path, cl_decl) = Env.lookup_class ~loc:cl.loc cl.txt env in
-      let ap_pos = apply_position env expected_mode sexp in
+      let pm = position_and_mode env expected_mode sexp in
       begin match cl_decl.cty_new with
           None ->
             raise(Error(loc, env, Virtual_class cl.txt))
         | Some ty ->
             rue {
               exp_desc =
-                Texp_new (cl_path, cl, cl_decl, ap_pos);
+                Texp_new (cl_path, cl, cl_decl, pm.apply_position);
               exp_loc = loc; exp_extra = [];
               exp_type = instance ty;
               exp_attributes = sexp.pexp_attributes;
@@ -6430,7 +6467,8 @@ and type_apply_arg env ~app_loc ~funct ~index ~position ~partial_app (lbl, arg)
       (lbl, Arg (arg, Value_mode.global))
   | Omitted _ as arg -> (lbl, arg)
 
-and type_application env app_loc expected_mode position funct funct_mode sargs ret_tvar =
+and type_application env app_loc expected_mode pm
+      funct funct_mode sargs ret_tvar =
   let is_ignore funct =
     is_prim ~name:"%ignore" funct &&
     (try ignore (filter_arrow_mono env (instance funct.exp_type) Nolabel); true
@@ -6454,11 +6492,12 @@ and type_application env app_loc expected_mode position funct funct_mode sargs r
       submode ~loc:app_loc ~env ~reason:Other
         mode_res expected_mode;
       let marg =
-        mode_argument ~funct ~index:0 ~position ~partial_app:false marg
+        mode_argument ~funct ~index:0 ~position:(pm.apply_position)
+          ~partial_app:false marg
       in
       let exp = type_expect env marg sarg (mk_expected ty_arg) in
       check_partial_application ~statement:false exp;
-      ([Nolabel, Arg exp], ty_res, ap_mode, position)
+      ([Nolabel, Arg exp], ty_res, ap_mode, pm)
   | _ ->
       let ty = funct.exp_type in
       let ignore_labels =
@@ -6484,10 +6523,11 @@ and type_application env app_loc expected_mode position funct funct_mode sargs r
           (Value_mode.regional_to_local_alloc funct_mode) sargs ret_tvar
       in
       let partial_app = is_partial_apply untyped_args in
-      let position = if partial_app then Default else position in
+      let pm = if partial_app then position_and_mode_default else pm in
       let args =
         List.mapi (fun index arg ->
-            type_apply_arg env ~app_loc ~funct ~index ~position ~partial_app arg)
+            type_apply_arg env ~app_loc ~funct ~index
+              ~position:(pm.apply_position) ~partial_app arg)
           untyped_args
       in
       let ty_ret, mode_ret, args =
@@ -6505,7 +6545,9 @@ and type_application env app_loc expected_mode position funct funct_mode sargs r
       in
       submode ~loc:app_loc ~env ~reason:(Application ty_ret)
         mode_ret expected_mode;
-      args, ty_ret, ap_mode, position
+
+      check_tail_call_local_returning app_loc env ap_mode pm;
+      args, ty_ret, ap_mode, pm
 
 and type_construct env (expected_mode : expected_mode) loc lid sarg
       ty_expected_explained attrs =
@@ -8249,7 +8291,11 @@ let report_error ~loc env = function
         "Optional parameters cannot be polymorphic"
   | Function_returns_local ->
       Location.errorf ~loc
-        "This function is local returning, but was expected otherwise"
+        "This function is local-returning, but was expected otherwise"
+  | Tail_call_local_returning ->
+      Location.errorf ~loc
+        "@[This application is local-returning, but is at the tail @ \
+          position of a function that is not local-returning@]"
   | Layout_not_enabled c ->
       Location.errorf ~loc
         "@[Layout %s is used here, but the appropriate layouts extension is \
diff --git a/ocaml/typing/typecore.mli b/ocaml/typing/typecore.mli
index 26105952cc7..941b76b004a 100644
--- a/ocaml/typing/typecore.mli
+++ b/ocaml/typing/typecore.mli
@@ -262,6 +262,7 @@ type error =
   | Uncurried_function_escapes
   | Local_return_annotation_mismatch of Location.t
   | Function_returns_local
+  | Tail_call_local_returning
   | Bad_tail_annotation of [`Conflict|`Not_a_tailcall]
   | Optional_poly_param
   | Exclave_in_nontail_position