diff --git a/src/frontends/lean/match_expr.cpp b/src/frontends/lean/match_expr.cpp
index cfa1996a17..e0cc227d62 100644
--- a/src/frontends/lean/match_expr.cpp
+++ b/src/frontends/lean/match_expr.cpp
@@ -36,9 +36,9 @@ expr parse_match(parser & p, unsigned, expr const *, pos_info const & pos) {
         if (p.curr_is_token(get_colon_tk())) {
             p.next();
             expr type = p.parse_expr();
-            fn = mk_local(mk_fresh_name(), *g_match_name, type, binder_info());
+            fn = mk_local(mk_fresh_name(), *g_match_name, type, mk_rec_info(true));
         } else {
-            fn = mk_local(mk_fresh_name(), *g_match_name, mk_expr_placeholder(), binder_info());
+            fn = mk_local(mk_fresh_name(), *g_match_name, mk_expr_placeholder(), mk_rec_info(true));
         }
 
         p.check_token_next(get_with_tk(), "invalid 'match' expression, 'with' expected");
diff --git a/src/kernel/expr.h b/src/kernel/expr.h
index 31c239b69e..3ae8717baf 100644
--- a/src/kernel/expr.h
+++ b/src/kernel/expr.h
@@ -216,7 +216,8 @@ class binder_info {
         inferred by class-instance resolution. */
     unsigned m_inst_implicit:1;
     /** \brief Auxiliary internal attribute used to mark local constants representing recursive functions
-        in recursive equations */
+        in recursive equations. TODO(Leo): rename to eqn_decl since we also mark non recursive equations
+        (e.g., `match ... with ... end`) with this flag. */
     unsigned m_rec:1;
 public:
     binder_info(bool implicit = false, bool strict_implicit = false, bool inst_implicit = false, bool rec = false):
diff --git a/src/library/equations_compiler/compiler.cpp b/src/library/equations_compiler/compiler.cpp
index 1fad0d97d1..abf8132928 100644
--- a/src/library/equations_compiler/compiler.cpp
+++ b/src/library/equations_compiler/compiler.cpp
@@ -135,6 +135,32 @@ struct pull_nested_rec_fn : public replace_visitor {
         t = is_lam ? ctx.mk_lambda(locals, t) : ctx.mk_pi(locals, t);
         m_mctx = ctx.mctx();
         m_lctx_stack.pop_back();
+        /* We clear the cache whenever we visit a binder because of
+           collect_local_props.
+
+           When pulling a recursive call (f t), the resulting term
+           may contain local variables that do not occur in (f t).
+           Thus, the cached value for (f t) may not be valid
+           in other contexts.
+
+           By clearing the cache we conservatively fix this issue.
+
+           Here is an example:
+
+           def filter : list A → list A
+           | nil      := nil
+           | (a :: l) :=
+              match (H a) with
+              | (is_true h_1) := a :: filter l
+              | (is_false h_2) := filter l
+              end
+
+           The first (filter l) is replaced with a term
+           (_f_1 l h_1) where _f_1 is a new fresh local.
+           We cannot replace the second (filter l)
+           with (_f_1 l h_1), since h_1 is not in the scope.
+        */
+        m_cache.clear();
         return t;
     }
 
@@ -175,9 +201,31 @@ struct pull_nested_rec_fn : public replace_visitor {
             });
     }
 
+    /* Collect local propositions. This is needed when the nested recursive call will
+       be defined by well-founded recursion, and we don't know whether local propositions
+       are hints for helping the "decreasing tactic".
+       In the future, we should add a mechanism that will only include these propositions
+       if the recursive call will be defined using well founded recursion.
+    */
+    void collect_local_props(name_set & found, buffer<expr> & R) {
+        type_context ctx = mk_type_context(lctx());
+        lctx().for_each([&](local_decl const & d) {
+                if (!base_lctx().find_local_decl(d.get_name()) &&
+                    !found.contains(d.get_name()) &&
+                    !d.get_info().is_rec() &&
+                    ctx.is_prop(d.get_type())) {
+                    found.insert(d.get_name());
+                    R.push_back(d.mk_ref());
+                }
+            });
+    }
+
     void collect_locals(expr const & e, buffer<expr> & R) {
         name_set found;
+        /* Collect used local declarations. */
         collect_locals_core(e, found, R);
+        /* Collect local propositions. */
+        collect_local_props(found, R);
         for (unsigned i = 0; i < R.size(); i++) {
             expr const & x = R[i];
             collect_locals_core(lctx().get_local_decl(x).get_type(), found, R);
diff --git a/tests/lean/run/bin_tree.lean b/tests/lean/run/bin_tree.lean
new file mode 100644
index 0000000000..a3b75d664b
--- /dev/null
+++ b/tests/lean/run/bin_tree.lean
@@ -0,0 +1,25 @@
+def pairs_with_sum' : Π (m n) {d}, m + n = d → list {p : ℕ × ℕ // p.1 + p.2 = d}
+| 0     n d h := [⟨(0, n), h⟩]
+| (m+1) n d h := ⟨(m+1, n), h⟩ :: pairs_with_sum' m (n+1) (by simp at h; simp [h])
+
+def pairs_with_sum (n) : list {p : ℕ × ℕ // p.1 + p.2 = n} :=
+pairs_with_sum' n 0 rfl
+
+inductive bin_tree
+| leaf : bin_tree
+| branch : bin_tree → bin_tree → bin_tree
+open bin_tree
+
+def size : bin_tree → ℕ
+| leaf := 0
+| (branch l r) := size l + size r + 1
+
+def trees_of_size : Π s, list {bt : bin_tree // size bt = s}
+| 0     := [⟨leaf, rfl⟩]
+| (n+1) :=
+  do ⟨(s1, s2), (h : s1 + s2 = n)⟩ ← pairs_with_sum n,
+     ⟨t1, sz1⟩ ← have s1 < n+1, by apply nat.lt_succ_of_le; rw -h; apply nat.le_add_right,
+                trees_of_size s1,
+     ⟨t2, sz2⟩ ← have s2 < n+1, by apply nat.lt_succ_of_le; rw -h; apply nat.le_add_left,
+                trees_of_size s2,
+     return ⟨branch t1 t2, by rw [-h, -sz1, -sz2]; refl⟩
diff --git a/tests/lean/run/term_app2.lean b/tests/lean/run/term_app2.lean
index 593813c84c..f7117159f6 100644
--- a/tests/lean/run/term_app2.lean
+++ b/tests/lean/run/term_app2.lean
@@ -54,3 +54,15 @@ def num_consts : term → nat
 #eval num_consts (term.app "f" [term.const "x", term.app "g" [term.const "x", term.const "y"]])
 
 #check num_consts.equations._eqn_2
+
+def num_consts' : term → nat
+| (term.const n)  := 1
+| (term.app n ts) :=
+  ts.attach.foldl
+   (λ r ⟨t, h⟩,
+     have sizeof t < 1 + (sizeof n + sizeof ts), from
+       nat.lt_one_add_of_lt (nat.lt_add_of_lt (list.sizeof_lt_sizeof_of_mem h)),
+     r + num_consts' t)
+   0
+
+#check num_consts'.equations._eqn_2