diff --git a/src/mzscheme/src/eval.c b/src/mzscheme/src/eval.c
index 351622f00d..05cd6df987 100644
--- a/src/mzscheme/src/eval.c
+++ b/src/mzscheme/src/eval.c
@@ -7843,7 +7843,16 @@ do_local_expand(const char *name, int for_stx, int catch_lifts, int for_expr, in
   orig_l = l;
 
   observer = scheme_get_expand_observe();
-  SCHEME_EXPAND_OBSERVE_ENTER_LOCAL(observer, l);
+  if (observer) {
+    if (for_expr) {
+      SCHEME_EXPAND_OBSERVE_ENTER_LOCAL_EXPR(observer, l);
+    } else {
+      SCHEME_EXPAND_OBSERVE_ENTER_LOCAL(observer, l);
+    }
+    if (for_stx) {
+      SCHEME_EXPAND_OBSERVE_PHASE_UP(observer);
+    }
+  }
 
   if (local_mark) {
     /* Since we have an expression from local context,
@@ -7904,14 +7913,14 @@ do_local_expand(const char *name, int for_stx, int catch_lifts, int for_expr, in
     l = scheme_add_remove_mark(l, local_mark);
   }
 
-  SCHEME_EXPAND_OBSERVE_EXIT_LOCAL(observer, l);
-
   if (for_expr) {
     Scheme_Object *a[2];
+    SCHEME_EXPAND_OBSERVE_EXIT_LOCAL_EXPR(observer, l, exp_expr);
     a[0] = l;
     a[1] = exp_expr;
     return scheme_values(2, a);
   } else
+    SCHEME_EXPAND_OBSERVE_EXIT_LOCAL(observer, l);
     return l;
 }
 
diff --git a/src/mzscheme/src/schexpobs.h b/src/mzscheme/src/schexpobs.h
index d6dc3b90f4..9308200f90 100644
--- a/src/mzscheme/src/schexpobs.h
+++ b/src/mzscheme/src/schexpobs.h
@@ -106,6 +106,8 @@ extern Scheme_Object *scheme_get_expand_observe();
         _SCHEME_EXPOBS(observer,123,NULL)
 #define SCHEME_EXPAND_OBSERVE_PRIM_LETSTAR_VALUES(observer) \
         _SCHEME_EXPOBS(observer,124,NULL)
+#define SCHEME_EXPAND_OBSERVE_PRIM_EXPRESSION(obs) \
+        _SCHEME_EXPOBS(obs,138,scheme_false)
 
 #define SCHEME_EXPAND_OBSERVE_VARIABLE(observer,e1,e2)       \
         _SCHEME_EXPOBS(observer,125,scheme_make_pair(e1, e2))
@@ -137,4 +139,9 @@ extern Scheme_Object *scheme_get_expand_observe();
 #define SCHEME_EXPAND_OBSERVE_LOCAL_POST(obs,stx) \
         _SCHEME_EXPOBS(obs,133,stx)
 
+#define SCHEME_EXPAND_OBSERVE_ENTER_LOCAL_EXPR(obs,stx) \
+        _SCHEME_EXPOBS(obs,139,stx)
+#define SCHEME_EXPAND_OBSERVE_EXIT_LOCAL_EXPR(obs,stx,opaque) \
+        _SCHEME_EXPOBS(obs,140,scheme_make_pair(stx,opaque))
+
 #endif
diff --git a/src/mzscheme/src/syntax.c b/src/mzscheme/src/syntax.c
index 4de050d09c..9ae1191995 100644
--- a/src/mzscheme/src/syntax.c
+++ b/src/mzscheme/src/syntax.c
@@ -4463,6 +4463,7 @@ static Scheme_Object *expression_syntax(Scheme_Object *form, Scheme_Comp_Env *en
 
 static Scheme_Object *expression_expand(Scheme_Object *form, Scheme_Comp_Env *env, Scheme_Expand_Info *erec, int drec)
 {
+  SCHEME_EXPAND_OBSERVE_PRIM_EXPRESSION(erec[drec].observer);
   return single_expand(form, scheme_no_defines(env), erec, drec, 0,
                        !(env->flags & SCHEME_TOPLEVEL_FRAME));
 }
@@ -4986,10 +4987,19 @@ void scheme_bind_syntaxes(const char *where, Scheme_Object *names, Scheme_Object
   Resolve_Info *ri;
   Optimize_Info *oi;
   int vc, nc, j, i;
-  Scheme_Compile_Info mrec;
-  
-  certs = rec[drec].certs;
+  Scheme_Compile_Expand_Info mrec;
 
+  certs = rec[drec].certs;
+  eenv = scheme_new_comp_env(exp_env, insp, 0);
+
+  /* First expand for expansion-observation */
+  {
+    scheme_init_expand_recs(rec, drec, &mrec, 1);
+    SCHEME_EXPAND_OBSERVE_PHASE_UP(mrec.observer);
+    a = scheme_expand_expr_lift_to_let(a, eenv, &mrec, 0);
+  }
+
+  /* Then compile */
   mrec.comp = 1;
   mrec.dont_mark_local_use = 0;
   mrec.resolve_module_ids = 1;
@@ -4997,19 +5007,8 @@ void scheme_bind_syntaxes(const char *where, Scheme_Object *names, Scheme_Object
   mrec.certs = certs;
   mrec.observer = NULL;
 
-  eenv = scheme_new_comp_env(exp_env, insp, 0);
-
-  {
-    mrec.comp = 0;
-    mrec.observer = rec[drec].observer;
-    SCHEME_EXPAND_OBSERVE_PHASE_UP(mrec.observer);
-    a = scheme_expand_expr_lift_to_let(a, eenv, &mrec, 0);
-    mrec.comp = 1;
-    mrec.observer = NULL;
-  }
-  
   a = scheme_compile_expr_lift_to_let(a, eenv, &mrec, 0);
-    
+
   /* For internal defn, don't simplify as resolving, because the
        expression may have syntax objects with a lexical rename that
        is still being extended.