diff --git a/collects/redex/private/rg.rkt b/collects/redex/private/rg.rkt
index b4d636f11b..941bec0e0e 100644
--- a/collects/redex/private/rg.rkt
+++ b/collects/redex/private/rg.rkt
@@ -307,12 +307,13 @@
                          (let ([ctx (recur context)]
                                [ctm (recur contractum)])
                            (λ (r s a e h)
-                             (let-values ([(term env) (ctm r s a e h)])
-                               (ctx r s a env term))))]
+                             (let*-values ([(tctm env) (ctm r s a e h)]
+                                           [(tctx env) (ctx r s a env the-hole)])
+                               (values (plug tctx tctm) env))))]
                         [`(hide-hole ,pattern)
                          (let ([g (recur pattern)])
                            (λ (r s a e h)
-                             (g r s a e the-hole)))]
+                             (g r s a e the-not-hole)))]
                         [`any
                          (λ (r s a e h)
                            (let*-values ([(lang nt) ((next-any-decision) langc sexpc)]
diff --git a/collects/redex/tests/rg-test.rkt b/collects/redex/tests/rg-test.rkt
index 3bf80b5506..6983ae4a21 100644
--- a/collects/redex/tests/rg-test.rkt
+++ b/collects/redex/tests/rg-test.rkt
@@ -412,6 +412,10 @@
      #:num (build-list 5 (λ (x) (λ (_) x)))))
    '(+ (+ 1 2) (+ 0 (+ 3 4))))
   
+  (test (let/ec k
+          (generate-term lang (side-condition (in-hole C_1 1) (k (term C_1))) 5))
+        (term hole))
+  
   (test (generate-term lang (in-hole (in-hole (1 hole) hole) 5) 5) '(1 5))
   (test (generate-term lang (hole 4) 5) (term (hole 4)))
   (test (generate-term/decisions