diff --git a/src/cmp/cmpflet.lsp b/src/cmp/cmpflet.lsp
index 0f6dd6e88..6ddb1641c 100644
--- a/src/cmp/cmpflet.lsp
+++ b/src/cmp/cmpflet.lsp
@@ -54,12 +54,13 @@
 
     ;; When we are in a LABELs form, we have to propagate the external
     ;; variables from one function to the other functions that use it.
-    (dolist (f1 local-funs)
-      (let ((vars (fun-referenced-vars f1)))
-	(dolist (f2 local-funs)
-	  (when (and (not (eq f1 f2))
-		     (member f1 (fun-referenced-funs f2)))
-	    (add-referred-variables-to-function f2 vars)))))
+    (when (eq origin 'LABELS)
+      (dolist (f1 local-funs)
+	(let ((vars (fun-referenced-vars f1)))
+	  (dolist (f2 local-funs)
+	    (when (and (not (eq f1 f2))
+		       (member f1 (fun-referenced-funs f2) :test #'eq))
+	      (add-to-fun-referenced-vars f2 vars))))))
 
     ;; Now we can compile the body itself.
     (let ((*cmp-env* new-env))
@@ -243,10 +244,13 @@
 	  (cmperr "The name of a macro ~A was found in special form FUNCTION." fname))
 	(return-from local-function-ref nil))
       (incf (fun-ref fun))
-      (cond (build-object
-	     (setf (fun-ref-ccb fun) t))
-	    (*current-function*
-	     (push fun (fun-referenced-funs *current-function*))))
+      (if build-object
+	  (setf (fun-ref-ccb fun) t)
+	  (let ((caller *current-function*))
+	    (when (and caller
+		       (not (member fun (fun-referenced-funs caller) :test #'eq)))
+	      (push fun (fun-referenced-funs caller))
+	      (push caller (fun-referencing-funs fun)))))
       ;; we introduce a variable to hold the funob
       (let ((var (fun-var fun)))
 	(cond (ccb (when build-object
diff --git a/src/cmp/cmplam.lsp b/src/cmp/cmplam.lsp
index 31527ad88..4ccbc7f37 100644
--- a/src/cmp/cmplam.lsp
+++ b/src/cmp/cmplam.lsp
@@ -69,11 +69,30 @@ The function thus belongs to the type of functions that ecl_make_cfun accepts."
 	 (<= narg si::c-arguments-limit)
 	 narg)))
 
-(defun add-referred-variables-to-function (fun var-list)
-  (setf (fun-referenced-vars fun)
-	(set-difference (union (fun-referenced-vars fun) var-list)
-			(fun-local-vars fun)))
-  fun)
+(defun add-to-fun-referenced-vars (fun var-list)
+  (loop with new-vars = (fun-referenced-vars fun)
+     with locals = (fun-local-vars fun)
+     with change = nil
+     for v in var-list
+     when (and (not (member v locals :test #'eq))
+	       (not (member v new-vars :test #'eq)))
+     do (setf change t new-vars (cons v new-vars))
+     finally (when change
+	       (setf (fun-referenced-vars fun) new-vars)
+	       (return t))))
+
+(defun add-to-fun-referenced-funs (fun fun-list)
+  (loop with new-funs = (fun-referenced-funs fun)
+     with change = nil
+     for f in fun-list
+     when (and (not (member f new-funs :test #'eq))
+	       (not (child-function-p fun f)))
+     do (setf change t
+	      new-funs (cons f new-funs)
+	      (fun-referencing-funs f) (cons fun (fun-referencing-funs f)))
+     finally (when change
+	       (setf (fun-referenced-funs fun) new-funs)
+	       (return t))))
 
 (defun c1compile-function (lambda-list-and-body &key (fun (make-fun))
 			   (name (fun-name fun)) (CB/LB 'CB))
@@ -93,7 +112,6 @@ The function thus belongs to the type of functions that ecl_make_cfun accepts."
 	 (no-entry (assoc 'SI::C-LOCAL decl))
 	 (lambda-expr (c1lambda-expr lambda-list-and-body
 				     (si::function-block-name name)))
-	 (children (fun-child-funs fun))
 	 cfun exported minarg maxarg)
     (when (and no-entry (policy-debug-ihs-frame))
       (setf no-entry nil)
@@ -125,21 +143,11 @@ The function thus belongs to the type of functions that ecl_make_cfun accepts."
 	  (fun-maxarg fun) maxarg
 	  (fun-description fun) name
 	  (fun-no-entry fun) no-entry)
-    (reduce #'add-referred-variables-to-function
-	    (mapcar #'fun-referenced-vars children)
-	    :initial-value fun)
-    (reduce #'add-referred-variables-to-function
-	    (mapcar #'fun-referenced-vars (fun-referenced-funs fun))
-	    :initial-value fun)
-    ;; Add all non-global functions which are referenced by children
-    ;; excluding those created inside this function.
-    (loop with children = (fun-child-funs fun)
-       for child in children
-       do (loop for f in (fun-referenced-funs child)
-	     unless (or (fun-global f)
-			(child-function-p fun f))
-	     do (pushnew f (fun-referenced-funs fun)))
-       finally (update-fun-closure-type-many children))
+    (loop for child in (fun-child-funs fun)
+       do (add-to-fun-referenced-vars fun (fun-referenced-vars child))
+       do (add-to-fun-referenced-funs fun (fun-referenced-funs child)))
+    (loop for f in (fun-referenced-funs fun)
+       do (add-to-fun-referenced-vars fun (fun-referenced-vars f)))
     (update-fun-closure-type fun)
     (when global
       (if (fun-closure fun)
diff --git a/src/cmp/cmptypes.lsp b/src/cmp/cmptypes.lsp
index 33e213a65..4cb87ffa1 100644
--- a/src/cmp/cmptypes.lsp
+++ b/src/cmp/cmptypes.lsp
@@ -162,6 +162,7 @@
   (referenced-vars nil)	;;; List of external variables referenced here.
   (referenced-funs nil)	;;; List of external functions called in this one.
 			;;; We only register direct calls, not calls via object.
+  (referencing-funs nil);;; Functions that reference this one
   (child-funs nil)	;;; List of local functions defined here.
   #+new-cmp
   (debug 0)		;;; Debug quality