diff --git a/compiler/src/dmd/func.d b/compiler/src/dmd/func.d
index af39609c13..bcae282f09 100644
--- a/compiler/src/dmd/func.d
+++ b/compiler/src/dmd/func.d
@@ -3759,9 +3759,9 @@ extern (C++) final class FuncLiteralDeclaration : FuncDeclaration
     // backend
     bool deferToObj;
 
-    extern (D) this(const ref Loc loc, const ref Loc endloc, Type type, TOK tok, ForeachStatement fes, Identifier id = null)
+    extern (D) this(const ref Loc loc, const ref Loc endloc, Type type, TOK tok, ForeachStatement fes, Identifier id = null, StorageClass storage_class = STC.undefined_)
     {
-        super(loc, endloc, null, STC.undefined_, type);
+        super(loc, endloc, null, storage_class, type);
         this.ident = id ? id : Id.empty;
         this.tok = tok;
         this.fes = fes;
@@ -3775,7 +3775,7 @@ extern (C++) final class FuncLiteralDeclaration : FuncDeclaration
     {
         //printf("FuncLiteralDeclaration::syntaxCopy('%s')\n", toChars());
         assert(!s);
-        auto f = new FuncLiteralDeclaration(loc, endloc, type.syntaxCopy(), tok, fes, ident);
+        auto f = new FuncLiteralDeclaration(loc, endloc, type.syntaxCopy(), tok, fes, ident, storage_class & STC.auto_);
         f.treq = treq; // don't need to copy
         FuncDeclaration.syntaxCopy(f);
         return f;
diff --git a/compiler/src/dmd/parse.d b/compiler/src/dmd/parse.d
index 8d028b2357..ed85a5de96 100644
--- a/compiler/src/dmd/parse.d
+++ b/compiler/src/dmd/parse.d
@@ -4856,6 +4856,10 @@ class Parser(AST, Lexer = dmd.lexer.Lexer) : Lexer
                     token.value == TOK.identifier && peekNext() == TOK.goesTo ||
                     token.value == TOK.ref_ && peekNext() == TOK.leftParenthesis &&
                         skipAttributes(peekPastParen(peek(&token)), &tk) &&
+                        (tk.value == TOK.goesTo || tk.value == TOK.leftCurly) ||
+                    token.value == TOK.auto_ && peekNext() == TOK.ref_ &&
+                        peekNext2() == TOK.leftParenthesis &&
+                        skipAttributes(peekPastParen(peek(peek(&token))), &tk) &&
                         (tk.value == TOK.goesTo || tk.value == TOK.leftCurly)
                    )
                 {
@@ -4867,6 +4871,8 @@ class Parser(AST, Lexer = dmd.lexer.Lexer) : Lexer
                     // identifier => expression
                     // ref (parameters) { statements... }
                     // ref (parameters) => expression
+                    // auto ref (parameters) { statements... }
+                    // auto ref (parameters) => expression
 
                     s = parseFunctionLiteral();
 
@@ -4994,7 +5000,20 @@ class Parser(AST, Lexer = dmd.lexer.Lexer) : Lexer
         case TOK.delegate_:
             save = token.value;
             nextToken();
-            if (token.value == TOK.ref_)
+            if (token.value == TOK.auto_)
+            {
+                nextToken();
+                if (token.value == TOK.ref_)
+                {
+                    // function auto ref (parameters) { statements... }
+                    // delegate auto ref (parameters) { statements... }
+                    stc = STC.auto_ | STC.ref_;
+                    nextToken();
+                }
+                else
+                    error("`auto` can only be used as part of `auto ref` for function literal return values");
+            }
+            else if (token.value == TOK.ref_)
             {
                 // function ref (parameters) { statements... }
                 // delegate ref (parameters) { statements... }
@@ -5022,6 +5041,20 @@ class Parser(AST, Lexer = dmd.lexer.Lexer) : Lexer
             }
             goto case TOK.leftParenthesis;
 
+        case TOK.auto_:
+            {
+                nextToken();
+                if (token.value == TOK.ref_)
+                {
+                    // auto ref (parameters) => expression
+                    // auto ref (parameters) { statements... }
+                    stc = STC.auto_ | STC.ref_;
+                    nextToken();
+                }
+                else
+                    error("`auto` can only be used as part of `auto ref` for function literal return values");
+                goto case TOK.leftParenthesis;
+            }
         case TOK.ref_:
             {
                 // ref (parameters) => expression
@@ -5074,7 +5107,7 @@ class Parser(AST, Lexer = dmd.lexer.Lexer) : Lexer
 
         auto tf = new AST.TypeFunction(parameterList, tret, linkage, stc);
         tf = cast(AST.TypeFunction)tf.addSTC(stc);
-        auto fd = new AST.FuncLiteralDeclaration(loc, Loc.initial, tf, save, null);
+        auto fd = new AST.FuncLiteralDeclaration(loc, Loc.initial, tf, save, null, null, stc & STC.auto_);
 
         if (token.value == TOK.goesTo)
         {
@@ -8384,6 +8417,22 @@ LagainStc:
             e = parseNewExp(null);
             break;
 
+        case TOK.auto_:
+            {
+                if (peekNext() == TOK.ref_ && peekNext2() == TOK.leftParenthesis)
+                {
+                    Token* tk = peekPastParen(peek(peek(&token)));
+                    if (skipAttributes(tk, &tk) && (tk.value == TOK.goesTo || tk.value == TOK.leftCurly))
+                    {
+                        // auto ref (arguments) => expression
+                        // auto ref (arguments) { statements... }
+                        goto case_delegate;
+                    }
+                }
+                nextToken();
+                error("found `%s` when expecting `ref` and function literal following `auto`", token.toChars());
+                goto Lerr;
+            }
         case TOK.ref_:
             {
                 if (peekNext() == TOK.leftParenthesis)
diff --git a/compiler/test/compilable/test21243.d b/compiler/test/compilable/test21243.d
new file mode 100644
index 0000000000..20838dc973
--- /dev/null
+++ b/compiler/test/compilable/test21243.d
@@ -0,0 +1,21 @@
+// Parsing - expressions
+auto a = auto ref (int x) => x;
+auto b = auto ref (int x) { return x; };
+auto c = function auto ref (int x) { return x; };
+auto d = delegate auto ref (int x) { return x; };
+
+// Parsing - aliases
+alias e = auto ref (int x) => x;
+alias f = auto ref (int x) { return x; };
+alias g = function auto ref (int x) { return x; };
+alias h = delegate auto ref (int x) { return x; };
+
+// Semantic
+void test()
+{
+    alias fun(alias x) = auto ref () => x;
+    int n = 123;
+    auto _ = fun!123();
+    static assert(!__traits(compiles, &fun!123())); // rvalue
+    fun!n() = 456; // lvalue
+}
diff --git a/compiler/test/fail_compilation/fail21243.d b/compiler/test/fail_compilation/fail21243.d
new file mode 100644
index 0000000000..25df235e9c
--- /dev/null
+++ b/compiler/test/fail_compilation/fail21243.d
@@ -0,0 +1,19 @@
+/+ TEST_OUTPUT:
+---
+fail_compilation/fail21243.d(16): Error: found `(` when expecting `ref` and function literal following `auto`
+fail_compilation/fail21243.d(16): Error: semicolon expected following auto declaration, not `int`
+fail_compilation/fail21243.d(16): Error: semicolon needed to end declaration of `x` instead of `)`
+fail_compilation/fail21243.d(16): Error: declaration expected, not `)`
+fail_compilation/fail21243.d(17): Error: `auto` can only be used as part of `auto ref` for function literal return values
+fail_compilation/fail21243.d(18): Error: basic type expected, not `(`
+fail_compilation/fail21243.d(18): Error: function declaration without return type. (Note that constructors are always named `this`)
+fail_compilation/fail21243.d(18): Deprecation: storage class `auto` has no effect in type aliases
+fail_compilation/fail21243.d(18): Error: semicolon expected to close `alias` declaration
+fail_compilation/fail21243.d(18): Error: declaration expected, not `=>`
+fail_compilation/fail21243.d(19): Error: `auto` can only be used as part of `auto ref` for function literal return values
+---
++/
+auto a = auto (int x) => x;
+auto b = function auto (int x) { return x; };
+alias c = auto (int x) => x;
+alias d = function auto (int x) { return x; };