diff --git a/src/cmp/cmpenv-api.lsp b/src/cmp/cmpenv-api.lsp
index 1892c4b6e..78d8ae89f 100644
--- a/src/cmp/cmpenv-api.lsp
+++ b/src/cmp/cmpenv-api.lsp
@@ -25,6 +25,54 @@ that are susceptible to be changed by PROCLAIM."
 (defun cmp-env-copy (&optional (env *cmp-env*))
   (cons (car env) (cdr env)))
 
+(defun set-closure-env (definition lexenv &optional (env *cmp-env*))
+  "Set up an environment for compilation of closures: Register closed
+over macros in the compiler environment and enclose the definition of
+the closure in let/flet forms for variables/functions it closes over."
+  (loop for record in lexenv
+     do (cond ((not (listp record))
+               (multiple-value-bind (record-def record-lexenv)
+                   (function-lambda-expression record)
+                 (cond ((eql (car record-def) 'LAMBDA)
+                        (setf record-def (cdr record-def)))
+                       ((eql (car record-def) 'EXT:LAMBDA-BLOCK)
+                        (setf record-def (cddr record-def)))
+                       (t
+                        (error "~&;;; Error: Not a valid lambda expression: ~s." record-def)))
+                 ;; allow for closures which close over closures.
+                 ;; (first record-def) is the lambda list, (rest
+                 ;; record-def) the definition of the local function
+                 ;; in record
+                 (setf (rest record-def)
+                       (list (set-closure-env (if (= (length record-def) 2)
+                                                  (second record-def)
+                                                  `(progn ,@(rest record-def)))
+                                              record-lexenv env)))
+                 (setf definition
+                       `(flet ((,(compiled-function-name record)
+                                   ,@record-def))
+                          ,definition))))
+              ((and (listp record) (symbolp (car record)))
+               (cond ((eq (car record) 'si::macro)
+                      (cmp-env-register-macro (cddr record) (cadr record) env))
+                     ((eq (car record) 'si::symbol-macro)
+                      (cmp-env-register-symbol-macro-function (cddr record) (cadr record) env))
+                     (t
+                      (setf definition
+                            `(let ((,(car record) ',(cdr record)))
+                               ,definition)))
+                     ))
+              ;; ((and (integerp (cdr record)) (= (cdr record) 0))
+              ;;  Tags: We have lost the information, which tag
+              ;;  corresponds to the lex-env record. If we are
+              ;;  compiling a closure over a tag, we will get an
+              ;;  error later on.
+              ;;  )
+              ;; (t
+              ;;  Blocks: Not yet implemented
+              )
+     finally (return definition)))
+
 (defmacro cmp-env-variables (&optional (env '*cmp-env*))
   `(car ,env))
 
@@ -102,6 +150,11 @@ that are susceptible to be changed by PROCLAIM."
         (cmp-env-variables env))
   env)
 
+(defun cmp-env-register-symbol-macro-function (name function &optional (env *cmp-env*))
+  (push (list name 'si::symbol-macro function)
+        (cmp-env-variables env))
+  env)
+
 (defun cmp-env-register-block (blk &optional (env *cmp-env*))
   (push (list :block (blk-name blk) blk)
         (cmp-env-variables env))
diff --git a/src/cmp/cmpmain.lsp b/src/cmp/cmpmain.lsp
index 736ab4392..e68d936be 100755
--- a/src/cmp/cmpmain.lsp
+++ b/src/cmp/cmpmain.lsp
@@ -734,6 +734,7 @@ compiled successfully, returns the pathname of the compiled file"
 #+dlopen
 (defun compile (name &optional (def nil supplied-p)
                       &aux form data-pathname
+                      (lexenv nil)
                       (*suppress-compiler-messages* (or *suppress-compiler-messages*
                                                         (not *compile-verbose*)))
                       (*compiler-in-use* *compiler-in-use*)
@@ -761,7 +762,11 @@ after compilation."
          (when (functionp def)
            (unless (function-lambda-expression def)
              (return-from compile def))
-           (setf def (function-lambda-expression def)))
+           (multiple-value-setq (def lexenv)
+             (function-lambda-expression def))
+           (when (eq lexenv t)
+             (warn "COMPILE can not compile C closures")
+             (return-from compile (values def t nil))))
          (setq form (if name
                         `(setf (fdefinition ',name) #',def)
                         `(set 'GAZONK #',def))))
@@ -777,17 +782,20 @@ after compilation."
         (t
          (setq form `(setf (fdefinition ',name) #',form))))
 
-  (let*((*load-time-values* 'values) ;; Only the value is kept
-        (tmp-names (safe-mkstemp (format nil "TMP:ECL~3,'0x" (incf *gazonk-counter*))))
-        (data-pathname (first tmp-names))
-        (c-pathname (compile-file-pathname data-pathname :type :c))
-        (h-pathname (compile-file-pathname data-pathname :type :h))
-        (o-pathname (compile-file-pathname data-pathname :type :object))
-        (so-pathname (compile-file-pathname data-pathname))
-        (init-name (compute-init-name so-pathname :kind :fasl))
-        (compiler-conditions nil))
+  (let* ((*load-time-values* 'values) ;; Only the value is kept
+         (tmp-names (safe-mkstemp (format nil "TMP:ECL~3,'0x" (incf *gazonk-counter*))))
+         (data-pathname (first tmp-names))
+         (c-pathname (compile-file-pathname data-pathname :type :c))
+         (h-pathname (compile-file-pathname data-pathname :type :h))
+         (o-pathname (compile-file-pathname data-pathname :type :object))
+         (so-pathname (compile-file-pathname data-pathname))
+         (init-name (compute-init-name so-pathname :kind :fasl))
+         (compiler-conditions nil)
+         (*permanent-data* t)        ; needed for literal objects in closures
+         (*cmp-env-root* *cmp-env-root*))
 
     (with-compiler-env (compiler-conditions)
+      (setf form (set-closure-env form lexenv *cmp-env-root*))
       (print-compiler-info)
       (data-init)
       (t1expr form)