diff --git a/src/lint/linter/__tests__/xhpast/undeclared-variables.lint-test b/src/lint/linter/__tests__/xhpast/undeclared-variables.lint-test
--- a/src/lint/linter/__tests__/xhpast/undeclared-variables.lint-test
+++ b/src/lint/linter/__tests__/xhpast/undeclared-variables.lint-test
@@ -172,6 +172,13 @@
   }
 }
 
+function some_func($x, $y) {
+  $func = function($z) use ($x) {
+    echo $x;
+    echo $y;
+    echo $z;
+  };
+}
 ~~~~~~~~~~
 error:28:3
 error:30:3
@@ -191,3 +198,4 @@
 error:150:9
 error:164:9
 error:171:5
+error:178:10
diff --git a/src/lint/linter/xhpast/rules/ArcanistUndeclaredVariableXHPASTLinterRule.php b/src/lint/linter/xhpast/rules/ArcanistUndeclaredVariableXHPASTLinterRule.php
--- a/src/lint/linter/xhpast/rules/ArcanistUndeclaredVariableXHPASTLinterRule.php
+++ b/src/lint/linter/xhpast/rules/ArcanistUndeclaredVariableXHPASTLinterRule.php
@@ -164,6 +164,17 @@
         $scope_destroyed_at = min($scope_destroyed_at, $call->getOffset());
       }
 
+      $func_decls = $body->selectDescendantsOfType('n_FUNCTION_DECLARATION');
+      foreach ($func_decls as $func_decl) {
+        if ($func_decl->getChildByIndex(2)->getTypeName() != 'n_EMPTY') {
+          continue;
+        }
+
+        foreach ($func_decl->selectDescendantsOfType('n_VARIABLE') as $var) {
+          $exclude_tokens[$var->getID()] = true;
+        }
+      }
+
       // Now we have every declaration except foreach(), handled below. Build
       // two maps, one which just keeps track of which tokens are part of
       // declarations ($declaration_tokens) and one which has the first offset