diff --git a/collects/tests/racket/submodule.rktl b/collects/tests/racket/submodule.rktl
index 1b40de865d..2c68e8582b 100644
--- a/collects/tests/racket/submodule.rktl
+++ b/collects/tests/racket/submodule.rktl
@@ -798,6 +798,7 @@
 (test 10 values x-from-submodule-out)
 
 ;; ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;
+;; check `syntax-local-submodules' in compile and expand modes
 
 (let ([e '(module x racket/base
             (require (for-syntax racket/base))
@@ -817,6 +818,21 @@
     (eval (expand e))
     (test '(m) dynamic-require ''x 'x)))
 
+;; ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;
+;; check context on `#%module-begin' for a subform
+
+(module check-submodule-module-begin '#%kernel
+  (module mb racket/base
+    (require (for-syntax racket/base))
+    (provide (except-out (all-from-out racket/base) #%module-begin)
+             (rename-out [module-begin #%module-begin]))
+    (define-syntax (module-begin stx)
+      #`(#%module-begin #,(datum->syntax stx ;; should have initial imports
+                                         '(provide (all-defined-out))))))
+  (module n (submod ".." mb)
+    (void)
+    (void)))
+
 ;; ;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;
 
 (report-errs)
diff --git a/src/racket/src/module.c b/src/racket/src/module.c
index ca2a956ba3..dde2dbd7d9 100644
--- a/src/racket/src/module.c
+++ b/src/racket/src/module.c
@@ -7154,7 +7154,7 @@ static Scheme_Object *do_module(Scheme_Object *form, Scheme_Comp_Env *env,
     check_mb = 1;
   }
 
-  fm = scheme_datum_to_syntax(fm, form, form, 0, 2);
+  fm = scheme_datum_to_syntax(fm, form, mb_ctx, 0, 2);
 
   if (check_mb) {
     SCHEME_EXPAND_OBSERVE_TAG(rec[drec].observer, fm);