diff --git a/compiler/fir/analysis-tests/testData/resolve/cfg/inlineLambdasAreInplace.fir.txt b/compiler/fir/analysis-tests/testData/resolve/cfg/inlineLambdasAreInplace.fir.txt
index 61e25883f6e..e879f6f34e7 100644
--- a/compiler/fir/analysis-tests/testData/resolve/cfg/inlineLambdasAreInplace.fir.txt
+++ b/compiler/fir/analysis-tests/testData/resolve/cfg/inlineLambdasAreInplace.fir.txt
@@ -25,7 +25,7 @@ FILE: inlineLambdasAreInplace.kt
     }
     public final fun testGeneric(): R|kotlin/Unit| {
         lvar x: R|kotlin/String?| = String()
-        lval lambda: R|() -> kotlin/Unit| = R|/any|<R|() -> kotlin/Unit|>(<L> = any@fun <anonymous>(): R|kotlin/Unit| <inline=Inline>  {
+        lval lambda: R|() -> kotlin/Unit| = R|/any|<R|() -> kotlin/Unit|>(<L> = any@fun <anonymous>(): R|kotlin/Unit| <inline=NoInline>  {
             R|<local>/x| = Null(null)
         }
         )
diff --git a/compiler/fir/analysis-tests/testData/resolveWithStdlib/inference/plusAssignWithLambdaInRhs.dot b/compiler/fir/analysis-tests/testData/resolveWithStdlib/inference/plusAssignWithLambdaInRhs.dot
index 2f40f2054f0..4deedf29d46 100644
--- a/compiler/fir/analysis-tests/testData/resolveWithStdlib/inference/plusAssignWithLambdaInRhs.dot
+++ b/compiler/fir/analysis-tests/testData/resolveWithStdlib/inference/plusAssignWithLambdaInRhs.dot
@@ -121,7 +121,7 @@ digraph plusAssignWithLambdaInRhs_kt {
             46 [label="Postponed exit from lambda"];
             47 [label="Function call: R|/A.A|<R|T|>(...)" style="filled" fillcolor=yellow];
             48 [label="Jump: ^postpone R|/A.A|<R|T|>(<L> = A@fun <anonymous>(resolve: R|(T) -> kotlin/Unit|): R|kotlin/Unit| <inline=NoInline>  {
-    R|<local>/queue|.R|kotlin/collections/plusAssign|<R|() -> kotlin/Unit|>(fun <anonymous>(): R|kotlin/Unit| <inline=Inline>  {
+    R|<local>/queue|.R|kotlin/collections/plusAssign|<R|() -> kotlin/Unit|>(fun <anonymous>(): R|kotlin/Unit| <inline=NoInline>  {
         R|<local>/resolve|.R|SubstitutionOverride<kotlin/Function1.invoke: R|kotlin/Unit|>|(R|<local>/computation|.R|SubstitutionOverride<kotlin/Function0.invoke: R|T|>|())
     }
     )
diff --git a/compiler/fir/analysis-tests/testData/resolveWithStdlib/inference/plusAssignWithLambdaInRhs.fir.txt b/compiler/fir/analysis-tests/testData/resolveWithStdlib/inference/plusAssignWithLambdaInRhs.fir.txt
index 6b5a6a201ff..85521b52e14 100644
--- a/compiler/fir/analysis-tests/testData/resolveWithStdlib/inference/plusAssignWithLambdaInRhs.fir.txt
+++ b/compiler/fir/analysis-tests/testData/resolveWithStdlib/inference/plusAssignWithLambdaInRhs.fir.txt
@@ -1,7 +1,7 @@
 FILE: plusAssignWithLambdaInRhs.kt
     public final fun test(): R|kotlin/Unit| {
         lval list: R|kotlin/collections/MutableList<kotlin/Function1<kotlin/String, kotlin/String>>| = Null(null)!!
-        R|<local>/list|.R|kotlin/collections/plusAssign|<R|(kotlin/String) -> kotlin/String|>(fun <anonymous>(it: R|kotlin/String|): R|kotlin/String| <inline=Inline>  {
+        R|<local>/list|.R|kotlin/collections/plusAssign|<R|(kotlin/String) -> kotlin/String|>(fun <anonymous>(it: R|kotlin/String|): R|kotlin/String| <inline=NoInline>  {
             ^ R|<local>/it|
         }
         )
@@ -18,7 +18,7 @@ FILE: plusAssignWithLambdaInRhs.kt
     public final fun <T> postpone(computation: R|() -> T|): R|A<T>| {
         lval queue: R|kotlin/collections/MutableList<kotlin/Function0<kotlin/Unit>>| = R|kotlin/collections/mutableListOf|<R|() -> kotlin/Unit|>()
         ^postpone R|/A.A|<R|T|>(<L> = A@fun <anonymous>(resolve: R|(T) -> kotlin/Unit|): R|kotlin/Unit| <inline=NoInline>  {
-            R|<local>/queue|.R|kotlin/collections/plusAssign|<R|() -> kotlin/Unit|>(fun <anonymous>(): R|kotlin/Unit| <inline=Inline>  {
+            R|<local>/queue|.R|kotlin/collections/plusAssign|<R|() -> kotlin/Unit|>(fun <anonymous>(): R|kotlin/Unit| <inline=NoInline>  {
                 R|<local>/resolve|.R|SubstitutionOverride<kotlin/Function1.invoke: R|kotlin/Unit|>|(R|<local>/computation|.R|SubstitutionOverride<kotlin/Function0.invoke: R|T|>|())
             }
             )
diff --git a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/expression/FirReturnSyntaxAndLabelChecker.kt b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/expression/FirReturnSyntaxAndLabelChecker.kt
index c1c5515ed52..d7a1122417d 100644
--- a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/expression/FirReturnSyntaxAndLabelChecker.kt
+++ b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/expression/FirReturnSyntaxAndLabelChecker.kt
@@ -62,6 +62,9 @@ object FirReturnSyntaxAndLabelChecker : FirReturnExpressionChecker() {
     }
 
     private fun isReturnAllowed(targetSymbol: FirFunctionSymbol<*>, context: CheckerContext): Boolean {
+        if (context.containingDeclarations.lastOrNull() is FirValueParameter) {
+            return false
+        }
         for (containingDeclaration in context.containingDeclarations.asReversed()) {
             when (containingDeclaration) {
                 // return from member of local class or anonymous object
diff --git a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/transformers/FirCallCompletionResultsWriterTransformer.kt b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/transformers/FirCallCompletionResultsWriterTransformer.kt
index adbaf515de9..3acf8c423e7 100644
--- a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/transformers/FirCallCompletionResultsWriterTransformer.kt
+++ b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/transformers/FirCallCompletionResultsWriterTransformer.kt
@@ -209,7 +209,9 @@ class FirCallCompletionResultsWriterTransformer(
                     (symbol as? FirNamedFunctionSymbol)?.fir?.isInline == true || symbol.isArrayConstructorWithLambda
                 for ((argument, parameter) in newArgumentList.mapping) {
                     val lambda = (argument.unwrapArgument() as? FirAnonymousFunctionExpression)?.anonymousFunction ?: continue
+                    val parameterIsSomeFunction = parameter.returnTypeRef.coneType.isSomeFunctionType(session)
                     val inlineStatus = when {
+                        !parameterIsSomeFunction -> InlineStatus.NoInline
                         parameter.isCrossinline && functionIsInline -> InlineStatus.CrossInline
                         parameter.isNoinline -> InlineStatus.NoInline
                         functionIsInline -> InlineStatus.Inline
diff --git a/compiler/testData/diagnostics/tests/controlStructures/kt799.fir.kt b/compiler/testData/diagnostics/tests/controlStructures/kt799.fir.kt
index 735cec3ae46..3f3d13edbe6 100644
--- a/compiler/testData/diagnostics/tests/controlStructures/kt799.fir.kt
+++ b/compiler/testData/diagnostics/tests/controlStructures/kt799.fir.kt
@@ -19,7 +19,7 @@ val <!IMPLICIT_NOTHING_PROPERTY_TYPE!>b<!> = <!RETURN_NOT_ALLOWED!>return<!> 1
 val c = doSmth(if (true) 3 else <!RETURN_NOT_ALLOWED!>return<!>)
 
 
-fun f(mi: Int = if (true) 0 else return) {}
+fun f(mi: Int = if (true) 0 else <!RETURN_NOT_ALLOWED!>return<!>) {}
 
 fun doSmth(i: Int) {
 }
diff --git a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsGeneric.fir.kt b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsGeneric.fir.kt
index 827eb0eeb58..822be5543dc 100644
--- a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsGeneric.fir.kt
+++ b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsGeneric.fir.kt
@@ -1,7 +1,7 @@
 
 fun box() : String {
     test {
-        return@box "123"
+        <!RETURN_NOT_ALLOWED!>return@box<!> "123"
     }
 
     return "OK"
diff --git a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsNonFunction.fir.kt b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsNonFunction.fir.kt
deleted file mode 100644
index e0f80a40b85..00000000000
--- a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsNonFunction.fir.kt
+++ /dev/null
@@ -1,11 +0,0 @@
-fun box() : String {
-    test {
-        return@box "123"
-    }
-
-    return "OK"
-}
-
-<!NOTHING_TO_INLINE!>inline<!> fun test(p: Any) {
-    p.toString()
-}
diff --git a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsNonFunction.kt b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsNonFunction.kt
index 44118e915a2..769edd0065d 100644
--- a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsNonFunction.kt
+++ b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/lambdaAsNonFunction.kt
@@ -1,3 +1,4 @@
+// FIR_IDENTICAL
 fun box() : String {
     test {
         <!RETURN_NOT_ALLOWED!>return@box<!> "123"