diff --git a/src/engine.rs b/src/engine.rs
index ec3365ab..127a4277 100644
--- a/src/engine.rs
+++ b/src/engine.rs
@@ -1611,10 +1611,10 @@ impl Engine {
 
             // Module-qualified function call
             Expr::FnCall(x) if x.1.is_some() => {
-                let ((name, _, capture, pos), modules, hash, args_expr, def_val) = x.as_ref();
+                let ((name, _, _, pos), modules, hash, args_expr, def_val) = x.as_ref();
                 self.make_qualified_function_call(
                     scope, mods, state, lib, this_ptr, modules, name, args_expr, *def_val, *hash,
-                    *capture, level,
+                    level,
                 )
                 .map_err(|err| err.fill_position(*pos))
             }
diff --git a/src/fn_call.rs b/src/fn_call.rs
index 1357e7fa..437a86dc 100644
--- a/src/fn_call.rs
+++ b/src/fn_call.rs
@@ -384,9 +384,27 @@ impl Engine {
                 }),
         );
 
+        // Merge in encapsulated environment, if any
+        let mut lib_merged;
+
+        let unified_lib = if let Some(ref env_lib) = fn_def.lib {
+            if !lib.is_empty() {
+                // In the special case of the main script not defining any function
+                env_lib
+            } else {
+                lib_merged = lib.clone();
+                lib_merged.merge(env_lib);
+                &lib_merged
+            }
+        } else {
+            lib
+        };
+
         // Evaluate the function at one higher level of call depth
+        let stmt = &fn_def.body;
+
         let result = self
-            .eval_stmt(scope, mods, state, lib, this_ptr, &fn_def.body, level + 1)
+            .eval_stmt(scope, mods, state, unified_lib, this_ptr, stmt, level + 1)
             .or_else(|err| match *err {
                 // Convert return statement to return value
                 EvalAltResult::Return(x, _) => Ok(x),
@@ -1082,7 +1100,6 @@ impl Engine {
         args_expr: &[Expr],
         def_val: Option<bool>,
         hash_script: u64,
-        _capture: bool,
         level: usize,
     ) -> Result<Dynamic, Box<EvalAltResult>> {
         let modules = modules.as_ref().unwrap();
diff --git a/src/module/mod.rs b/src/module/mod.rs
index fa509656..f98d1f89 100644
--- a/src/module/mod.rs
+++ b/src/module/mod.rs
@@ -288,7 +288,7 @@ impl Module {
     /// If there is an existing function of the same name and number of arguments, it is replaced.
     #[cfg(not(feature = "no_function"))]
     #[inline]
-    pub(crate) fn set_script_fn(&mut self, fn_def: ScriptFnDef) -> u64 {
+    pub(crate) fn set_script_fn(&mut self, fn_def: Shared<ScriptFnDef>) -> u64 {
         // None + function name + number of arguments.
         let num_params = fn_def.params.len();
         let hash_script = calc_fn_hash(empty(), &fn_def.name, num_params, empty());
@@ -1392,53 +1392,18 @@ impl Module {
             module.modules.insert(alias.to_string(), m);
         });
 
+        // Non-private functions defined become module functions
         #[cfg(not(feature = "no_function"))]
         {
             let ast_lib: Shared<Module> = ast.lib().clone().into();
 
             ast.iter_functions()
-                .filter(|(access, _, _, _)| access.is_public())
-                .for_each(|(_, name, num_params, func)| {
-                    let ast_lib = ast_lib.clone();
-
-                    module.set_raw_fn_as_scripted(
-                        name,
-                        num_params,
-                        move |engine: &Engine, lib: &Module, args: &mut [&mut Dynamic]| {
-                            let mut lib_merged;
-
-                            let unified_lib = if lib.is_empty() {
-                                // In the special case of the main script not defining any function
-                                &ast_lib
-                            } else {
-                                lib_merged = lib.clone();
-                                lib_merged.merge(&ast_lib);
-                                &lib_merged
-                            };
-
-                            engine
-                                .call_script_fn(
-                                    &mut Default::default(),
-                                    &mut Default::default(),
-                                    &mut Default::default(),
-                                    unified_lib,
-                                    &mut None,
-                                    &func.name,
-                                    func.as_ref(),
-                                    args,
-                                    0,
-                                )
-                                .map_err(|err| {
-                                    // Wrap the error in a module-error
-                                    EvalAltResult::ErrorInModule(
-                                        "".to_string(),
-                                        err,
-                                        Position::none(),
-                                    )
-                                    .into()
-                                })
-                        },
-                    );
+                .filter(|(access, _, _, _)| !access.is_private())
+                .for_each(|(_, _, _, func)| {
+                    // Encapsulate AST environment
+                    let mut func = func.as_ref().clone();
+                    func.lib = Some(ast_lib.clone());
+                    module.set_script_fn(func.into());
                 });
         }
 
diff --git a/src/optimize.rs b/src/optimize.rs
index a314cdac..631f68d6 100644
--- a/src/optimize.rs
+++ b/src/optimize.rs
@@ -823,6 +823,7 @@ pub fn optimize_into_ast(
                         #[cfg(not(feature = "no_closure"))]
                         externals: fn_def.externals.clone(),
                         pos: fn_def.pos,
+                        lib: None,
                     }
                     .into()
                 })
@@ -862,7 +863,7 @@ pub fn optimize_into_ast(
                 });
         } else {
             _functions.into_iter().for_each(|fn_def| {
-                module.set_script_fn(fn_def);
+                module.set_script_fn(fn_def.into());
             });
         }
 
diff --git a/src/parser.rs b/src/parser.rs
index 12f8660a..77b460f7 100644
--- a/src/parser.rs
+++ b/src/parser.rs
@@ -549,6 +549,8 @@ pub struct ScriptFnDef {
     pub body: Stmt,
     /// Position of the function definition.
     pub pos: Position,
+    /// Encapsulated running environment, if any.
+    pub lib: Option<Shared<Module>>,
 }
 
 impl fmt::Display for ScriptFnDef {
@@ -3373,6 +3375,7 @@ fn parse_fn(
         externals,
         body,
         pos: settings.pos,
+        lib: None,
     })
 }
 
@@ -3550,6 +3553,7 @@ fn parse_anon_fn(
         externals: Default::default(),
         body,
         pos: settings.pos,
+        lib: None,
     };
 
     let expr = Expr::FnPointer(Box::new((fn_name, settings.pos)));