diff --git a/clang-tools-extra/clangd/refactor/tweaks/ExtractVariable.cpp b/clang-tools-extra/clangd/refactor/tweaks/ExtractVariable.cpp
--- a/clang-tools-extra/clangd/refactor/tweaks/ExtractVariable.cpp
+++ b/clang-tools-extra/clangd/refactor/tweaks/ExtractVariable.cpp
@@ -12,8 +12,11 @@
 #include "SourceCode.h"
 #include "refactor/Tweak.h"
 #include "clang/AST/ASTContext.h"
+#include "clang/AST/Decl.h"
+#include "clang/AST/DeclCXX.h"
 #include "clang/AST/Expr.h"
 #include "clang/AST/ExprCXX.h"
+#include "clang/AST/LambdaCapture.h"
 #include "clang/AST/OperationKinds.h"
 #include "clang/AST/RecursiveASTVisitor.h"
 #include "clang/AST/Stmt.h"
@@ -74,10 +77,52 @@
   public:
     std::vector<Decl *> ReferencedDecls;
     bool VisitDeclRefExpr(DeclRefExpr *DeclRef) { // NOLINT
+      // Stop the call operator of lambdas from being marked as a referenced
+      // DeclRefExpr in immediately invoked lambdas.
+      if (const auto *const Method =
+              llvm::dyn_cast<CXXMethodDecl>(DeclRef->getDecl());
+          Method != nullptr && Method->getParent()->isLambda()) {
+        return true;
+      }
       ReferencedDecls.push_back(DeclRef->getDecl());
       return true;
     }
+
+    // Local variables declared inside of the selected lambda cannot go out of
+    // scope. The DeclRefExprs that are important are the variables captured,
+    // the DeclRefExprs inside the initializers of init-capture variables,
+    // variables mentioned in trailing return types, constraints and explicit
+    // defaulted template parameters.
+    bool TraverseLambdaExpr(LambdaExpr *LExpr) {
+      for (const auto &[Capture, Initializer] :
+           llvm::zip(LExpr->captures(), LExpr->capture_inits())) {
+        TraverseLambdaCapture(LExpr, &Capture, Initializer);
+      }
+
+      if (clang::Expr *const RequiresClause =
+              LExpr->getTrailingRequiresClause()) {
+        TraverseStmt(RequiresClause);
+      }
+
+      for (auto *const TemplateParam : LExpr->getExplicitTemplateParameters())
+        TraverseDecl(TemplateParam);
+
+      if (auto *const CallOperator = LExpr->getCallOperator()) {
+        TraverseType(CallOperator->getDeclaredReturnType());
+
+        for (auto *const Param : CallOperator->parameters()) {
+          TraverseParmVarDecl(Param);
+        }
+
+        for (auto *const Attr : CallOperator->attrs()) {
+          TraverseAttr(Attr);
+        }
+      }
+
+      return true;
+    }
   };
+
   FindDeclRefsVisitor Visitor;
   Visitor.TraverseStmt(const_cast<Stmt *>(cast<Stmt>(Expr)));
   return Visitor.ReferencedDecls;
@@ -152,10 +197,16 @@
   auto CanExtractOutside =
       [](const SelectionTree::Node *InsertionPoint) -> bool {
     if (const clang::Stmt *Stmt = InsertionPoint->ASTNode.get<clang::Stmt>()) {
-      // Allow all expressions except LambdaExpr since we don't want to extract
-      // from the captures/default arguments of a lambda
-      if (isa<clang::Expr>(Stmt))
-        return !isa<LambdaExpr>(Stmt);
+      if (isa<clang::Expr>(Stmt)) {
+        // Do not allow extraction from the initializer of a defaulted parameter
+        // to a local variable (e.g. a function-local lambda).
+        if (InsertionPoint->Parent->ASTNode.get<ParmVarDecl>() != nullptr) {
+          return false;
+        }
+
+        return true;
+      }
+
       // We don't yet allow extraction from switch/case stmt as we would need to
       // jump over the switch stmt even if there is a CompoundStmt inside the
       // switch. And there are other Stmts which we don't care about (e.g.
@@ -240,7 +291,7 @@
     SelectedOperands.clear();
 
     if (const BinaryOperator *Op =
-        llvm::dyn_cast_or_null<BinaryOperator>(N.ASTNode.get<Expr>())) {
+            llvm::dyn_cast_or_null<BinaryOperator>(N.ASTNode.get<Expr>())) {
       Kind = Op->getOpcode();
       ExprLoc = Op->getExprLoc();
       SelectedOperands = N.Children;
@@ -255,7 +306,7 @@
       Kind = BinaryOperator::getOverloadedOpcode(Op->getOperator());
       ExprLoc = Op->getExprLoc();
       // Not all children are args, there's also the callee (operator).
-      for (const auto* Child : N.Children) {
+      for (const auto *Child : N.Children) {
         const Expr *E = Child->ASTNode.get<Expr>();
         assert(E && "callee and args should be Exprs!");
         if (E == Op->getArg(0) || E == Op->getArg(1))
@@ -376,15 +427,15 @@
   if (llvm::isa<SwitchCase>(Outer))
     return true;
   // Control flow statements use condition etc, but not the body.
-  if (const auto* WS = llvm::dyn_cast<WhileStmt>(Outer))
+  if (const auto *WS = llvm::dyn_cast<WhileStmt>(Outer))
     return Inner == WS->getBody();
-  if (const auto* DS = llvm::dyn_cast<DoStmt>(Outer))
+  if (const auto *DS = llvm::dyn_cast<DoStmt>(Outer))
     return Inner == DS->getBody();
-  if (const auto* FS = llvm::dyn_cast<ForStmt>(Outer))
+  if (const auto *FS = llvm::dyn_cast<ForStmt>(Outer))
     return Inner == FS->getBody();
-  if (const auto* FS = llvm::dyn_cast<CXXForRangeStmt>(Outer))
+  if (const auto *FS = llvm::dyn_cast<CXXForRangeStmt>(Outer))
     return Inner == FS->getBody();
-  if (const auto* IS = llvm::dyn_cast<IfStmt>(Outer))
+  if (const auto *IS = llvm::dyn_cast<IfStmt>(Outer))
     return Inner == IS->getThen() || Inner == IS->getElse();
   // Assume all other cases may be actual expressions.
   // This includes the important case of subexpressions (where Outer is Expr).
diff --git a/clang-tools-extra/clangd/unittests/tweaks/ExtractVariableTests.cpp b/clang-tools-extra/clangd/unittests/tweaks/ExtractVariableTests.cpp
--- a/clang-tools-extra/clangd/unittests/tweaks/ExtractVariableTests.cpp
+++ b/clang-tools-extra/clangd/unittests/tweaks/ExtractVariableTests.cpp
@@ -98,6 +98,7 @@
       return [[t]].bar([[t]].z);
     }
     void v() { return; }
+
     // function default argument
     void f(int b = [[1]]) {
       // empty selection
@@ -131,10 +132,80 @@
       goto label;
       label:
         a = [[1]];
+
+      // lambdas: captures
+      int x = 0;
+      [ [[=]] ](){};
+      [ [[&]] ](){};
+      [ [[x]] ](){};
+      [ [[&x]] ](){};
+      [y = [[x]] ](){};
+      [ [[y = x]] ](){};
+
+      // lambdas: default args, cannot extract into function-local scope
+      [](int x = [[10]]){};
+      [](auto h = [[ [i = [](){}](){} ]]) {};
+
+      // lambdas: default args
+      // Extracting from capture initializers is usually fine,
+      // but not if the capture itself is nested inside a default argument
+      [](auto h = [i = [[ [](){} ]]](){}) {};
+      [](auto h = [i = [[ 42 ]]](){}) {};
+
+      // lambdas: scope
+      if (int a = 1)
+            if ([[ [&](){ return a + 1; } ]]() == 4)
+              a = a + 1;
+
+      for (int c = 0; [[ [&]() { return c < b; } ]](); ++c) {
+      }
+      for (int c = 0; [[ [&]() { return c < b; } () ]]; ++c) {
+      }
+
+      // lambdas: scope with structured binding
+      struct Coordinates {
+        int x{};
+        int y{};
+      };
+      Coordinates c{};
+      if (const auto [x, y] = c; x > y)
+        auto f = [[ [&]() { return x + y; } ]];
+
+      // lambdas: referencing outside variables that block extraction
+      //          in trailing return type or in a decltype used
+      //          by a parameter
+      if (int a = 1)
+        if ([[ []() -> decltype(a) { return 1; } ]] () == 4)
+          a = a + 1;
+      if (int a = 1)
+        if ([[ [](int x = decltype(a){}) { return 1; } ]] () == 4)
+          a = a + 1;
+      if (int a = 1)
+        if ([[ [](decltype(a) x) { return 1; } ]] (42) == 4)
+          a = a + 1;
     }
   )cpp";
   EXPECT_UNAVAILABLE(UnavailableCases);
 
+  ExtraArgs = {"-std=c++20"};
+  const char *UnavailableCasesCXX20 = R"cpp(
+    template <typename T>
+    concept Constraint = requires (T t) { true; };
+    void foo() {
+      // lambdas: referencing outside variables that block extraction
+      //          in requires clause or defaulted explicit template parameters
+      if (int a = 1)
+        if ([[ [](auto b) requires (Constraint<decltype(a)> && Constraint<decltype(b)>) { return true; } ]] (a))
+          a = a + 1;
+
+      if (int a = 1)
+        if ([[ []<typename T = decltype(a)>(T b) { return true; } ]] (a))
+          a = a + 1;
+    }
+  )cpp";
+  EXPECT_UNAVAILABLE(UnavailableCasesCXX20);
+  ExtraArgs.clear();
+
   // vector of pairs of input and output strings
   std::vector<std::pair<std::string, std::string>> InputOutputs = {
       // extraction from variable declaration/assignment
@@ -282,6 +353,219 @@
                  void f() {
                    auto placeholder = S(2) + S(3) + S(4); S x = S(1) + placeholder + S(5);
                  })cpp"},
+      // lambda expressions
+      {R"cpp(template <typename T> void f(T) {}
+                void f2() {
+                  f([[ [](){ return 42; }]]);
+                }
+                )cpp",
+       R"cpp(template <typename T> void f(T) {}
+                void f2() {
+                  auto placeholder = [](){ return 42; }; f( placeholder);
+                }
+                )cpp"},
+      {R"cpp(template <typename T> void f(T) {}
+                void f2() {
+                  f([x = [[40 + 2]] ](){ return 42; });
+                }
+                )cpp",
+       R"cpp(template <typename T> void f(T) {}
+                void f2() {
+                  auto placeholder = 40 + 2; f([x = placeholder ](){ return 42; });
+                }
+                )cpp"},
+      {R"cpp(auto foo(int VarA) {
+                  return [VarA]() {
+                    return [[ [VarA, VarC = 42 + VarA](int VarB) { return VarA + VarB + VarC; }]];
+                  };
+                }
+                )cpp",
+       R"cpp(auto foo(int VarA) {
+                  return [VarA]() {
+                    auto placeholder = [VarA, VarC = 42 + VarA](int VarB) { return VarA + VarB + VarC; }; return  placeholder;
+                  };
+                }
+                )cpp"},
+      {R"cpp(template <typename T> void f(T) {}
+                void f2(int var) {
+                  f([[ [&var](){ auto internal_val = 42; return var + internal_val; }]]);
+                }
+                )cpp",
+       R"cpp(template <typename T> void f(T) {}
+                void f2(int var) {
+                  auto placeholder = [&var](){ auto internal_val = 42; return var + internal_val; }; f( placeholder);
+                }
+                )cpp"},
+      {R"cpp(template <typename T> void f(T) { }
+                struct A {
+                    void f2(int& var) {
+                        auto local_var = 42;
+                        f([[ [&var, &local_var, this]() {
+                            auto internal_val = 42;
+                            return var + local_var + internal_val + member;
+                        }]]);
+                    }
+
+                    int member = 42;
+};
+                )cpp",
+       R"cpp(template <typename T> void f(T) { }
+                struct A {
+                    void f2(int& var) {
+                        auto local_var = 42;
+                        auto placeholder = [&var, &local_var, this]() {
+                            auto internal_val = 42;
+                            return var + local_var + internal_val + member;
+                        }; f( placeholder);
+                    }
+
+                    int member = 42;
+};
+                )cpp"},
+      {R"cpp(void f() { auto x = [[ [](){ return 42; }]]; })cpp",
+       R"cpp(void f() { auto placeholder = [](){ return 42; }; auto x =  placeholder; })cpp"},
+      {R"cpp(
+        template <typename T>
+        auto sink(T f) { return f(); }
+        int bar() {
+          return sink([[ []() { return 42; }]]);
+        }
+       )cpp",
+       R"cpp(
+        template <typename T>
+        auto sink(T f) { return f(); }
+        int bar() {
+          auto placeholder = []() { return 42; }; return sink( placeholder);
+        }
+       )cpp"},
+      {R"cpp(
+        int main() {
+          if (int a = 1) {
+            if ([[ [&](){ return a + 1; } ]]() == 4)
+              a = a + 1;
+          }
+        })cpp",
+       R"cpp(
+        int main() {
+          if (int a = 1) {
+            auto placeholder = [&](){ return a + 1; }; if ( placeholder () == 4)
+              a = a + 1;
+          }
+        })cpp"},
+      {R"cpp(
+        int main() {
+          if (int a = 1) {
+            if ([[ [&](){ return a + 1; }() ]] == 4)
+              a = a + 1;
+          }
+        })cpp",
+       R"cpp(
+        int main() {
+          if (int a = 1) {
+            auto placeholder = [&](){ return a + 1; }(); if ( placeholder  == 4)
+              a = a + 1;
+          }
+        })cpp"},
+      {R"cpp(
+        template <typename T>
+        auto call(T t) { return t(); }
+
+        int main() {
+          return [[ call([](){ int a = 1; return a + 1; }) ]] + 5;
+        })cpp",
+       R"cpp(
+        template <typename T>
+        auto call(T t) { return t(); }
+
+        int main() {
+          auto placeholder = call([](){ int a = 1; return a + 1; }); return  placeholder  + 5;
+        })cpp"},
+      {R"cpp(
+        class Foo {
+          int bar() {
+            return [f = [[ [this](int g) { return g + x; } ]] ]() { return 42; }();
+          }
+          int x;
+        };
+      )cpp",
+       R"cpp(
+        class Foo {
+          int bar() {
+            auto placeholder = [this](int g) { return g + x; }; return [f =  placeholder  ]() { return 42; }();
+          }
+          int x;
+        };
+      )cpp"},
+      {R"cpp(
+        int main() {
+          return [[ []() { return 42; }() ]];
+        })cpp",
+       R"cpp(
+        int main() {
+          auto placeholder = []() { return 42; }(); return  placeholder ;
+        })cpp"},
+      {R"cpp(
+        template <typename ...Ts>
+        void foo(Ts ...args) {
+          auto x = [[ [&args...]() {} ]];
+        }
+      )cpp",
+       R"cpp(
+        template <typename ...Ts>
+        void foo(Ts ...args) {
+          auto placeholder = [&args...]() {}; auto x =  placeholder ;
+        }
+      )cpp"},
+      {R"cpp(
+        struct Coordinates {
+          int x{};
+          int y{};
+        };
+
+        int main() {
+          Coordinates c = {};
+          const auto [x, y] = c;
+          auto f = [[ [&]() { return x + y; } ]];
+        }
+        )cpp",
+       R"cpp(
+        struct Coordinates {
+          int x{};
+          int y{};
+        };
+
+        int main() {
+          Coordinates c = {};
+          const auto [x, y] = c;
+          auto placeholder = [&]() { return x + y; }; auto f =  placeholder ;
+        }
+        )cpp"},
+      {R"cpp(
+        struct Coordinates {
+          int x{};
+          int y{};
+        };
+
+        int main() {
+          Coordinates c = {};
+          if (const auto [x, y] = c; x > y) {
+            auto f = [[ [&]() { return x + y; } ]];
+          }
+        }
+        )cpp",
+       R"cpp(
+        struct Coordinates {
+          int x{};
+          int y{};
+        };
+
+        int main() {
+          Coordinates c = {};
+          if (const auto [x, y] = c; x > y) {
+            auto placeholder = [&]() { return x + y; }; auto f =  placeholder ;
+          }
+        }
+        )cpp"},
       // Don't try to analyze across macro boundaries
       // FIXME: it'd be nice to do this someday (in a safe way)
       {R"cpp(#define ECHO(X) X
diff --git a/clang-tools-extra/docs/ReleaseNotes.rst b/clang-tools-extra/docs/ReleaseNotes.rst
--- a/clang-tools-extra/docs/ReleaseNotes.rst
+++ b/clang-tools-extra/docs/ReleaseNotes.rst
@@ -66,6 +66,11 @@
 Code completion
 ^^^^^^^^^^^^^^^
 
+Code actions
+^^^^^^^^^^^^
+
+- The extract variable tweak gained support for extracting lambda expressions to a variable.
+
 Signature help
 ^^^^^^^^^^^^^^