diff --git a/src/Lean/Compiler/LCNF/LambdaLifting.lean b/src/Lean/Compiler/LCNF/LambdaLifting.lean
index fe1648391c..06f607fbef 100644
--- a/src/Lean/Compiler/LCNF/LambdaLifting.lean
+++ b/src/Lean/Compiler/LCNF/LambdaLifting.lean
@@ -40,6 +40,10 @@ structure Context where
   We use this feature to implement `@[inline] instance ...` and `@[always_inline] instance ...`
   -/
   minSize : Nat := 0
+  /--
+  Allow for eta contraction instead of lifting to a lambda if possible.
+  -/
+  allowEtaContraction : Bool := true
 
 
 /-- State for the `LiftM` monad. -/
@@ -81,6 +85,13 @@ partial def mkAuxDeclName : LiftM Name := do
   if (← getDecl? nameNew).isNone then return nameNew
   mkAuxDeclName
 
+def replaceFunDecl (decl : FunDecl) (value : LetValue) : LiftM LetDecl := do
+  /- We reuse `decl`s `fvarId` to avoid substitution -/
+  let declNew := { fvarId := decl.fvarId, binderName := decl.binderName, type := decl.type, value }
+  modifyLCtx fun lctx => lctx.addLetDecl declNew
+  eraseFunDecl decl
+  return declNew
+
 open Internalize in
 /--
 Create a new auxiliary declaration. The array `closure` contains all free variables
@@ -100,11 +111,7 @@ def mkAuxDecl (closure : Array Param) (decl : FunDecl) : LiftM LetDecl := do
     auxDecl.erase
     pure declName
   let value := .const auxDeclName us (closure.map (.fvar ·.fvarId))
-  /- We reuse `decl`s `fvarId` to avoid substitution -/
-  let declNew := { fvarId := decl.fvarId, binderName := decl.binderName, type := decl.type, value }
-  modifyLCtx fun lctx => lctx.addLetDecl declNew
-  eraseFunDecl decl
-  return declNew
+  replaceFunDecl decl value
 where
   go (nameNew : Name) (safe : Bool) (inlineAttr? : Option InlineAttributeKind) : InternalizeM Decl := do
     let params := (← closure.mapM internalizeParam) ++ (← decl.params.mapM internalizeParam)
@@ -115,6 +122,20 @@ where
     let decl := { name := nameNew, levelParams := [], params, type, value, safe, inlineAttr?, recursive := false : Decl }
     return decl.setLevelParams
 
+def etaContractibleDecl? (decl : FunDecl) : LiftM (Option LetDecl) := do
+  if !(← read).allowEtaContraction then return none
+  let .let { fvarId := letVar, value := .const declName us args, .. } (.return retVar) := decl.value
+    | return none
+  if letVar != retVar then return none
+  if args.size != decl.params.size then return none
+  if (← getDecl? declName).isNone then return none
+  for arg in args, param in decl.params do
+    let .fvar argVar := arg | return none
+    if argVar != param.fvarId then return none
+
+  let value := .const declName us #[]
+  replaceFunDecl decl value
+
 mutual
   partial def visitFunDecl (funDecl : FunDecl) : LiftM FunDecl := do
     let value ← withParams funDecl.params <| visitCode funDecl.value
@@ -128,9 +149,13 @@ mutual
     | .fun decl k =>
       let decl ← visitFunDecl decl
       if (← shouldLift decl) then
-        let scope ← getScope
-        let (_, params, _) ← Closure.run (inScope := scope.contains) <| Closure.collectFunDecl decl
-        let declNew ← mkAuxDecl params decl
+        let declNew ← do
+          if let some letDecl ← etaContractibleDecl? decl then
+            pure letDecl
+          else
+            let scope ← getScope
+            let (_, params, _) ← Closure.run (inScope := scope.contains) <| Closure.collectFunDecl decl
+            mkAuxDecl params decl
         let k ← withFVar declNew.fvarId <| visitCode k
         return .let declNew k
       else
@@ -155,8 +180,17 @@ def main (decl : Decl) : LiftM Decl := do
 
 end LambdaLifting
 
-partial def Decl.lambdaLifting (decl : Decl) (liftInstParamOnly : Bool) (suffix : Name) (inheritInlineAttrs := false) (minSize := 0) : CompilerM (Array Decl) := do
-  let (decl, s) ← LambdaLifting.main decl |>.run { mainDecl := decl, liftInstParamOnly, suffix, inheritInlineAttrs, minSize } |>.run {} |>.run {}
+partial def Decl.lambdaLifting (decl : Decl) (liftInstParamOnly : Bool) (allowEtaContraction : Bool)
+    (suffix : Name) (inheritInlineAttrs := false) (minSize := 0) : CompilerM (Array Decl) := do
+  let ctx := {
+    mainDecl := decl,
+    liftInstParamOnly,
+    suffix,
+    inheritInlineAttrs,
+    minSize,
+    allowEtaContraction
+  }
+  let (decl, s) ← LambdaLifting.main decl |>.run ctx |>.run {} |>.run {}
   return s.decls.push decl
 
 /--
@@ -166,7 +200,8 @@ def lambdaLifting : Pass where
   phase      := .mono
   name       := `lambdaLifting
   run        := fun decls => do
-    decls.foldlM (init := #[]) fun decls decl => return decls ++ (← decl.lambdaLifting false (suffix := `_lam))
+    decls.foldlM (init := #[]) fun decls decl =>
+      return decls ++ (← decl.lambdaLifting false true (suffix := `_lam))
 
 /--
 During eager lambda lifting, we inspect declarations that are not inlineable or instances (doing it
@@ -182,7 +217,7 @@ def eagerLambdaLifting : Pass where
       if decl.inlineable || (← Meta.isInstance decl.name) then
         return decls.push decl
       else
-        return decls ++ (← decl.lambdaLifting (liftInstParamOnly := true) (suffix := `_elam))
+        return decls ++ (← decl.lambdaLifting (liftInstParamOnly := true) (allowEtaContraction := false) (suffix := `_elam))
 
 builtin_initialize
   registerTraceClass `Compiler.eagerLambdaLifting (inherited := true)
diff --git a/tests/lean/run/eta_lambda_lift.lean b/tests/lean/run/eta_lambda_lift.lean
new file mode 100644
index 0000000000..15f2a47048
--- /dev/null
+++ b/tests/lean/run/eta_lambda_lift.lean
@@ -0,0 +1,17 @@
+import Lean.Util.FindExpr
+
+/-!
+This test asserts that the compiler will eta contract trivial lambdas instead of lambda lifting
+them.
+-/
+
+/--
+trace: [Compiler.lambdaLifting] size: 2
+    def test e : Option Lean.Expr :=
+      let _f.1 := Lean.Expr.hasMVar;
+      let _x.2 := Lean.Expr.findImpl? _f.1 e;
+      return _x.2
+-/
+#guard_msgs in
+set_option trace.Compiler.lambdaLifting true in
+def test (e : Lean.Expr) := e.find? (fun e => e.hasMVar)