diff --git a/ChangeLog b/ChangeLog
index 318c8df33..1d1d8f9f5 100644
--- a/ChangeLog
+++ b/ChangeLog
@@ -1,5 +1,8 @@
 2016-10-05  Peter Stephenson  <p.stephenson@samsung.com>
 
+	* 39571: Src/exec.c, Test/C03traps.ztst: "&&" inside a shell
+	function could mess up ERR_EXIT outside.
+
 	* 39568: Src/exec.c, Test/C03traps.ztst: "! <complex-command>"
 	should suppress ERR_EXIT inside the complex command.
 
diff --git a/Src/exec.c b/Src/exec.c
index 741c80e30..c0ed2c475 100644
--- a/Src/exec.c
+++ b/Src/exec.c
@@ -1229,7 +1229,7 @@ execlist(Estate state, int dont_change_job, int exiting)
     }
     while (wc_code(code) == WC_LIST && !breaks && !retflag && !errflag) {
 	int donedebug;
-	int this_noerrexit = 0;
+	int this_noerrexit = 0, this_donetrap = 0;
 
 	ltype = WC_LIST_TYPE(code);
 	csp = cmdsp;
@@ -1353,10 +1353,10 @@ execlist(Estate state, int dont_change_job, int exiting)
 			/* We've skipped to the end of the list, not executing *
 			 * the final pipeline, so don't perform error handling *
 			 * for this sublist.                                   */
-			donetrap = 1;
+			this_donetrap = 1;
 			goto sublist_done;
 		    } else if (WC_SUBLIST_TYPE(code) == WC_SUBLIST_END) {
-			donetrap = 1;
+			this_donetrap = 1;
 			/*
 			 * Treat this in the same way as if we reached
 			 * the end of the sublist normally.
@@ -1386,10 +1386,10 @@ execlist(Estate state, int dont_change_job, int exiting)
 			/* We've skipped to the end of the list, not executing *
 			 * the final pipeline, so don't perform error handling *
 			 * for this sublist.                                   */
-			donetrap = 1;
+			this_donetrap = 1;
 			goto sublist_done;
 		    } else if (WC_SUBLIST_TYPE(code) == WC_SUBLIST_END) {
-			donetrap = 1;
+			this_donetrap = 1;
 			/*
 			 * Treat this in the same way as if we reached
 			 * the end of the sublist normally.
@@ -1439,7 +1439,7 @@ sublist_done:
 	/* Check whether we are suppressing traps/errexit *
 	 * (typically in init scripts) and if we haven't  *
 	 * already performed them for this sublist.       */
-	if (!noerrexit && !this_noerrexit && !donetrap) {
+	if (!noerrexit && !this_noerrexit && !donetrap && !this_donetrap) {
 	    if (sigtrapped[SIGZERR] && lastval) {
 		dotrap(SIGZERR);
 		donetrap = 1;
diff --git a/Test/C03traps.ztst b/Test/C03traps.ztst
index 0faec02e9..5057dcf6e 100644
--- a/Test/C03traps.ztst
+++ b/Test/C03traps.ztst
@@ -476,7 +476,7 @@
     fi
   }
   fn
-0:ERRRETURN not triggered in if condition
+0:ERR_RETURN not triggered in if condition
 >Oh, yes
 
   fn() {
@@ -490,7 +490,7 @@
     fi
   }
   fn
-1:ERRRETURN in "if"
+1:ERR_RETURN in "if"
 
   fn() {
     emulate -L zsh
@@ -503,7 +503,7 @@
     fi
   }
   fn
-1:ERRRETURN in "else" branch (regression test)
+1:ERR_RETURN in "else" branch (regression test)
 
   $ZTST_testdir/../Src/zsh -f =(<<<"
   if false; then
@@ -515,7 +515,7 @@
     print Yes
   fi
   ")
-0:ERRRETURN when false "if" is the first statement in an "else" (regression)
+0:ERR_RETURN when false "if" is the first statement in an "else" (regression)
 >Yes
 F:Must be tested with a top-level script rather than source or function
 
@@ -527,7 +527,7 @@ F:Must be tested with a top-level script rather than source or function
       print after
   }
   fn
-1:ERRRETURN, basic case
+1:ERR_RETURN, basic case
 >before
 
   fn() {
@@ -539,7 +539,7 @@ F:Must be tested with a top-level script rather than source or function
       print after
   }
   fn
-0:ERRETURN with "!"
+0:ERR_RETURN with "!"
 >before
 >after
 
@@ -553,7 +553,7 @@ F:Must be tested with a top-level script rather than source or function
       print after
   }
   fn
-1:ERRETURN with "!" and a following false
+1:ERR_RETURN with "!" and a following false
 >before
 
   fn() {
@@ -566,7 +566,7 @@ F:Must be tested with a top-level script rather than source or function
       print after
   }
   fn
-0:ERRETURN with "!" suppressed inside complex structure
+0:ERR_RETURN with "!" suppressed inside complex structure
 >before
 >after
 
@@ -580,9 +580,22 @@ F:Must be tested with a top-level script rather than source or function
       print after
   }
   fn
-1:ERRETURN with no "!" suppression (control case)
+1:ERR_RETURN with no "!" suppression (control case)
 >before
 
+  (setopt err_return
+    fn() {
+      print before-in
+      false && false
+    }
+    print before-out
+    fn
+    print after-out
+  )
+1:ERR_RETURN with "&&" in function (regression test)
+>before-out
+>before-in
+
 %clean
 
   rm -f TRAPEXIT