diff --git a/core/ast/src/function/ordinary_function.rs b/core/ast/src/function/ordinary_function.rs
index 76701afabe8..43add223a47 100644
--- a/core/ast/src/function/ordinary_function.rs
+++ b/core/ast/src/function/ordinary_function.rs
@@ -5,7 +5,9 @@ use crate::{
     join_nodes,
     operations::{ContainsSymbol, contains},
     scope::{FunctionScopes, Scope},
-    scope_analyzer::{analyze_binding_escapes, collect_bindings},
+    scope_analyzer::{
+        analyze_binding_escapes, collect_bindings, optimize_scope_indices_with_root_function_scope,
+    },
     visitor::{VisitWith, Visitor, VisitorMut},
 };
 use boa_interner::{Interner, ToIndentedString};
@@ -279,9 +281,25 @@ impl FunctionExpression {
         strict: bool,
         scope: &Scope,
         interner: &Interner,
+    ) -> Result<(), &'static str> {
+        self.analyze_scope_with_options(strict, scope, interner, false)
+    }
+
+    /// Analyze the scope of the function expression, with extra scope analysis options.
+    ///
+    /// # Errors
+    /// Any scope or binding errors that happened during the analysis.
+    pub fn analyze_scope_with_options(
+        &mut self,
+        strict: bool,
+        scope: &Scope,
+        interner: &Interner,
+        force_function_scope: bool,
     ) -> Result<(), &'static str> {
         collect_bindings(self, strict, false, scope, interner)?;
-        analyze_binding_escapes(self, false, scope.clone(), interner)
+        analyze_binding_escapes(self, false, scope.clone(), interner)?;
+        optimize_scope_indices_with_root_function_scope(self, scope, force_function_scope);
+        Ok(())
     }
 }
 
diff --git a/core/ast/src/scope_analyzer.rs b/core/ast/src/scope_analyzer.rs
index 56875874ae9..69a58beed55 100644
--- a/core/ast/src/scope_analyzer.rs
+++ b/core/ast/src/scope_analyzer.rs
@@ -1223,15 +1223,31 @@ impl BindingCollectorVisitor<'_> {
 pub(crate) fn optimize_scope_indices<'a, N>(node: &'a mut N, scope: &Scope)
 where
     &'a mut N: Into<NodeRefMut<'a>>,
+{
+    optimize_scope_indices_with_root_function_scope(node, scope, false);
+}
+
+/// Optimize scope indices when scopes only contain local bindings, optionally forcing the
+/// root function-like scope to be treated as requiring a function environment.
+pub(crate) fn optimize_scope_indices_with_root_function_scope<'a, N>(
+    node: &'a mut N,
+    scope: &Scope,
+    force_root_function_scope: bool,
+) where
+    &'a mut N: Into<NodeRefMut<'a>>,
 {
     let mut visitor = ScopeIndexVisitor {
         index: scope.scope_index(),
+        force_root_function_scope,
+        root_function_scope_forced: false,
     };
     let _ = visitor.visit(node.into());
 }
 
 struct ScopeIndexVisitor {
     index: u32,
+    force_root_function_scope: bool,
+    root_function_scope_forced: bool,
 }
 
 impl<'ast> VisitorMut<'ast> for ScopeIndexVisitor {
@@ -1658,6 +1674,14 @@ impl ScopeIndexVisitor {
             scope.set_index(self.index);
         }
 
+        let force_function_scope =
+            if !arrow && self.force_root_function_scope && !self.root_function_scope_forced {
+                self.root_function_scope_forced = true;
+                true
+            } else {
+                force_function_scope
+            };
+
         if force_function_scope || !scopes.function_scope().all_bindings_local() {
             scopes.requires_function_scope = true;
             self.index += 1;
diff --git a/core/engine/src/builtins/function/mod.rs b/core/engine/src/builtins/function/mod.rs
index 45e9c79232c..6b6791a6de9 100644
--- a/core/engine/src/builtins/function/mod.rs
+++ b/core/engine/src/builtins/function/mod.rs
@@ -647,9 +647,12 @@ impl BuiltInFunctionObject {
             false,
             Span::new(function_span_start, function_span_end),
         );
-        if let Err(reason) =
-            function.analyze_scope(strict, context.realm().scope(), context.interner())
-        {
+        if let Err(reason) = function.analyze_scope_with_options(
+            strict,
+            context.realm().scope(),
+            context.interner(),
+            true,
+        ) {
             return Err(js_error!(SyntaxError: "failed to analyze function scope: {}", reason));
         }
 
diff --git a/core/engine/src/builtins/function/tests.rs b/core/engine/src/builtins/function/tests.rs
index 7200a610e3c..80292e65339 100644
--- a/core/engine/src/builtins/function/tests.rs
+++ b/core/engine/src/builtins/function/tests.rs
@@ -194,3 +194,39 @@ fn function_constructor_early_errors_super() {
         ),
     ]);
 }
+
+#[test]
+fn function_constructor_nested_scope_indices_regression() {
+    run_test_actions([TestAction::assert_eq(
+        indoc! {r#"
+            (() => {
+                const compiledCode = `
+                    const noop = () => {}
+                    function Counter() {
+                        const [v, setV] = [0, noop]
+
+                        const onClick = () => {
+                            setV(v => v + 1)
+                        }
+
+                        return null
+                    }
+                    return Counter()
+                `;
+
+                const React = {};
+                const f = new Function("React", compiledCode);
+                return f(React);
+            })()
+        "#},
+        JsValue::null(),
+    )]);
+}
+
+#[test]
+fn function_constructor_nested_lexical_capture() {
+    run_test_actions([TestAction::assert_eq(
+        "Function(\"function f(){ const x = 1; return () => x; } return f()()\")()",
+        1,
+    )]);
+}