diff --git a/src/Lean/Compiler/Simp.lean b/src/Lean/Compiler/Simp.lean
index 16c38ff1ff..00245998cc 100644
--- a/src/Lean/Compiler/Simp.lean
+++ b/src/Lean/Compiler/Simp.lean
@@ -50,11 +50,6 @@ inductive LocalFunInfo where
     if it is small.
     -/
     many
-  | /--
-    We always inline this local function. We use this annotation for
-    type class instance elements.
-    -/
-    mustInline
   deriving Repr, Inhabited
 
 /--
@@ -89,14 +84,6 @@ def LocalFunInfoMap.add (s : LocalFunInfoMap) (key : Name) : LocalFunInfoMap :=
     | none       => { map := map.insert key .once }
     | _          => { map }
 
-/--
-Mark the function with binder name `key` as `.mustInline`.
-We use this marker for auxiliary functions in type class instances.
--/
-def LocalFunInfoMap.addMustInline (s : LocalFunInfoMap) (key : Name) : LocalFunInfoMap :=
-  match s with
-  | { map } => { map := map.insert key .mustInline }
-
 structure Config where
   smallThreshold : Nat := 1
 
@@ -123,7 +110,13 @@ abbrev SimpM := ReaderT Context $ StateRefT State CompilerM
 
 /-
 Ensure binder names are unique, and update local function information.
-If `mustInline = true`, then local functions in `e` are marked as `.mustInline`.
+If `mustInline = true`, then local functions in `e` are marked with binders of the
+form `_mustInline.<idx>`.
+Remark: we used to store the `mustInline` information in the map `localInfoMap`,
+using a `.mustInline` constructor at `LocalFunInfo`. However, this was incorrect
+because there is no guarantee that we will be able to inline all occurrences of the
+function in the current `simp` step. Since, we recompute `localInfoMap` from scratch
+at the beginning of each compiler pass, the information was being lost.
 -/
 
 structure Internalize.State where
@@ -131,9 +124,7 @@ structure Internalize.State where
   localInfoMap : LocalFunInfoMap
 
 private def updateFunInfo (key : Name) (mustInline : Bool) : StateM Internalize.State Unit :=
-  if mustInline then
-    modify fun s => { s with localInfoMap := s.localInfoMap.addMustInline key  }
-  else
+  unless mustInline do
     modify fun s => { s with localInfoMap := s.localInfoMap.add key  }
 
 /--
@@ -185,9 +176,12 @@ where
     | .lam n d b bi => return .lam n (instantiate d) (← go b (ctx.push none)) bi
     | .letE binderName type value body nonDep =>
       let idx ← modifyGet fun { nextIdx, localInfoMap } => (nextIdx, { nextIdx := nextIdx + 1, localInfoMap })
-      let binderName' := match binderName with
-        | .num p _ => .num p idx
-        | _ => .num binderName idx
+      let binderName' :=
+        if mustInline then
+          .num `_mustInline idx
+        else match binderName with
+          | .num p _ => .num p idx
+          | _ => .num binderName idx
       let type := instantiate type
       let value ← go value ctx
       let ctxVal := match value with
@@ -260,9 +254,11 @@ def simpAppApp? (e : Expr) : OptionT SimpM Expr := do
   return mkAppN f e.getAppArgs
 
 def isOnceOrMustInline (binderName : Name) : SimpM Bool := do
-  match (← get).localInfoMap.map.find? binderName with
-  | some .once | some .mustInline => return true
-  | _ => return false
+  if binderName.getPrefix == `_mustInline then
+    return true
+  else match (← get).localInfoMap.map.find? binderName with
+    | some .once  => return true
+    | _ => return false
 
 def isSmallValue (value : Expr) : SimpM Bool := do
   lcnfSizeLe value (← read).config.smallThreshold