diff --git a/pkgs/racket-pkgs/racket-test/tests/racket/letrec.rktl b/pkgs/racket-pkgs/racket-test/tests/racket/letrec.rktl
index 24d51afaed..d23686c8d4 100644
--- a/pkgs/racket-pkgs/racket-test/tests/racket/letrec.rktl
+++ b/pkgs/racket-pkgs/racket-test/tests/racket/letrec.rktl
@@ -88,4 +88,11 @@
    y)
  letrec-exn?)
 
+(err/rt-test
+ (letrec ([a 1]
+          [b (set! a (lambda () c))]
+          [c (a)])
+   c)
+ letrec-exn?)
+
 (report-errs)
diff --git a/racket/src/racket/src/letrec_check.c b/racket/src/racket/src/letrec_check.c
index 6eeb084ff7..166862a7de 100644
--- a/racket/src/racket/src/letrec_check.c
+++ b/racket/src/racket/src/letrec_check.c
@@ -1319,13 +1319,19 @@ static Scheme_Object *letrec_check_set(Scheme_Object *o, Letrec_Check_Frame *fra
                                        Scheme_Object *uvars, Scheme_Object *pvars, Scheme_Object *pos)
 {
   Scheme_Set_Bang *sb;
-  Scheme_Object *val;
+  Scheme_Object *val, *rhs_uvars, *rhs_pvars, *rhs_pos;
   int position;
 
   sb = (Scheme_Set_Bang *)o;
   val = sb->val;
 
-  val = letrec_check_expr(val, frame, uvars, pvars, pos);
+  /* Treat `set!` as allowing the right-hand side to escape.  (We
+     could do better if `sb->var` is a variable that we know about.) */
+  rhs_uvars = merge_vars(uvars, pvars);
+  rhs_pvars = rem_vars(pvars);
+  rhs_pos = scheme_false;
+
+  val = letrec_check_expr(val, frame, rhs_uvars, rhs_pvars, rhs_pos);
   sb->val = val;
 
   if (SAME_TYPE(SCHEME_TYPE(sb->var), scheme_local_type)) {