diff --git a/asteroid/frontend.py b/asteroid/frontend.py
index 9f130ba8..b95fd20e 100644
--- a/asteroid/frontend.py
+++ b/asteroid/frontend.py
@@ -69,7 +69,7 @@ def dbg_print(string):
     'TRY',
     'WHILE',
     #'WITH',
-    } | primary_lookahead
+    } | exp_lookahead
 
 ###########################################################################################
 class Parser:
@@ -105,6 +105,7 @@ def stmt_list(self):
         sl = []
         while self.lexer.peek().type in stmt_lookahead:
             sl += [('lineinfo', state.lineinfo)]
+            sl += [('clear-ret-val',)]
             sl += [self.stmt()]
         return ('list', sl)
 
@@ -131,7 +132,7 @@ def stmt_list(self):
     #    | TRY stmt_list (CATCH pattern DO stmt_list)+ END
     #    | THROW exp '.'?
     #    | function_def
-    #    | call_or_index '.'?
+    #    | exp '.'?
     def stmt(self):
         dbg_print("parsing STMT")
         tt = self.lexer.peek().type  # tt - Token Type
@@ -391,10 +392,10 @@ def stmt(self):
             self.lexer.match_optional('DOT')
             return ('throw', e)
 
-        elif tt in primary_lookahead:
-            v = self.call_or_index()
+        elif tt in exp_lookahead:
+            v = self.exp()
             self.lexer.match_optional('DOT')
-            return v
+            return ('set-ret-val', v)
 
         else:
             raise SyntaxError("syntax error at '{}'"
diff --git a/asteroid/grammar.txt b/asteroid/grammar.txt
index 8626eb6f..04358b89 100644
--- a/asteroid/grammar.txt
+++ b/asteroid/grammar.txt
@@ -37,7 +37,7 @@
     | BREAK '.'?
     | RETURN exp? '.'?
     | function_def
-    | call_or_index '.'?
+    | exp '.'?
 
   function_def
     : FUNCTION ID body_defs END
diff --git a/asteroid/test-suites/regression-tests/test136.ast b/asteroid/test-suites/regression-tests/test136.ast
new file mode 100644
index 00000000..05212d1f
--- /dev/null
+++ b/asteroid/test-suites/regression-tests/test136.ast
@@ -0,0 +1,3 @@
+-- test expressions computing return values
+let x = (lambda with i do i+1) 1.
+assert(x is 2).
diff --git a/asteroid/test-suites/regression-tests/test137.ast b/asteroid/test-suites/regression-tests/test137.ast
new file mode 100644
index 00000000..58258031
--- /dev/null
+++ b/asteroid/test-suites/regression-tests/test137.ast
@@ -0,0 +1,18 @@
+-- test expressions computing return values
+
+load system io.
+
+function f1 with () do
+   3+3.
+   io @println "hello".
+   5.
+end
+
+function f2 with () do
+   3+3.
+   io @println "hello".
+end
+
+assert(f1() is 5).
+assert(f2() is none).
+
diff --git a/asteroid/walk.py b/asteroid/walk.py
index b05fe42a..8bbb81e1 100644
--- a/asteroid/walk.py
+++ b/asteroid/walk.py
@@ -26,6 +26,12 @@
 #########################################################################
 __retval__ = None  # return value register for escaped code
 
+#########################################################################
+# return values for function computed by the last expression executed
+# in the context of a function.  note that we consider global code
+# to be part of the 'top-level' function
+function_return_value = [None]
+
 ###########################################################################################
 # check if the two type tags match
 def match(tag1, tag2):
@@ -883,12 +889,19 @@ def handle_call(obj_ref, fval, actual_val_args, fname):
     # function calls transfer control - save our caller's lineinfo
     old_lineinfo = state.lineinfo
 
+    global function_return_value
     try:
+        function_return_value.append(None)
         walk(stmts)
+        val = function_return_value.pop()
+        if val:
+            return_value = val
+        else:
+            return_value = ('none', None)
     except ReturnValue as val:
+        # we got here because a return statement threw a return object
+        function_return_value.pop()
         return_value = val.value
-    else:
-        return_value = ('none', None) # need that in case function has no return statement
 
     # coming back from a function call - restore caller's env
     state.lineinfo = old_lineinfo
@@ -1281,7 +1294,7 @@ def apply_exp(node):
         return handle_builtins(node)
 
     # handle function application
-    # retrive the function name from the AST
+    # retrieve the function name from the AST
     if f[0] in ['function-exp','apply']:
         # cannot use the function expression as a name,
         # could be a very complex computation. the apply
@@ -1613,6 +1626,19 @@ def constraint_exp(node):
         "constraint pattern: '{}' cannot be used as a constructor."
         .format(term2string(node)))
 
+#########################################################################
+def set_ret_val(node):
+
+    (SET_RET_VAL, exp) = node
+    assert_match(SET_RET_VAL,'set-ret-val')
+
+    global function_return_value
+    val = walk(exp)
+    function_return_value.pop()
+    function_return_value.append(val)
+
+    return
+
 #########################################################################
 # walk
 #########################################################################
@@ -1620,7 +1646,13 @@ def walk(node):
     # node format: (TYPE, [child1[, child2[, ...]]])
     type = node[0]
 
-    if type in dispatch_dict:
+    if type == 'clear-ret-val':
+        # implemented here instead of dictionary for efficiency reasons
+        global function_return_value
+        function_return_value.pop()
+        function_return_value.append(None)
+        return
+    elif type in dispatch_dict:
         node_function = dispatch_dict[type]
         return node_function(node)
     else:
@@ -1630,6 +1662,7 @@ def walk(node):
 dispatch_dict = {
     # statements - statements do not produce return values
     'lineinfo'      : process_lineinfo,
+    'set-ret-val'   : set_ret_val,
     'noop'          : lambda node : None,
     'assert'        : assert_stmt,
     'unify'         : unify_stmt,
@@ -1651,7 +1684,6 @@ def walk(node):
     'head-tail'     : head_tail_exp,
     'raw-to-list'   : lambda node : walk(('to-list', node[1], node[2], node[3])),
     'raw-head-tail' : lambda node : walk(('head-tail', node[1], node[2])),
-    'seq'           : lambda node : ('seq', walk(node[1]), walk(node[2])),
     'none'          : lambda node : node,
     'nil'           : lambda node : node,
     'function-exp'  : function_exp,