Index: clang/lib/Sema/SemaTemplateInstantiateDecl.cpp
===================================================================
--- clang/lib/Sema/SemaTemplateInstantiateDecl.cpp
+++ clang/lib/Sema/SemaTemplateInstantiateDecl.cpp
@@ -4890,10 +4890,13 @@
   // Introduce a new scope where local variable instantiations will be
   // recorded, unless we're actually a member function within a local
   // class, in which case we need to merge our results with the parent
-  // scope (of the enclosing function).
+  // scope (of the enclosing function). The exception is instantiating
+  // a function template specialization, since the template to be
+  // instantiated already has references to locals properly substituted.
   bool MergeWithParentScope = false;
   if (CXXRecordDecl *Rec = dyn_cast<CXXRecordDecl>(Function->getDeclContext()))
-    MergeWithParentScope = Rec->isLocalClass();
+    MergeWithParentScope =
+        Rec->isLocalClass() && !Function->isFunctionTemplateSpecialization();
 
   LocalInstantiationScope Scope(*this, MergeWithParentScope);
 
Index: clang/test/SemaCXX/recursive-lambda.cpp
===================================================================
--- /dev/null
+++ clang/test/SemaCXX/recursive-lambda.cpp
@@ -0,0 +1,38 @@
+// RUN: %clang_cc1 -std=c++17 -fsyntax-only -verify %s
+
+// expected-no-diagnostics
+
+// Check recursive instantiation of lambda does not cause assertion.
+// lambda function `f` in `fun1` is instantiated twice: first
+// as f(f, Number<1>), then as f(f, Number<0>). The
+// LocalInstantiationScopes of these two instantiations both contain
+// `f` and `i`. However, since they are not merged, clang should not
+// assert for that.
+
+template <unsigned v>
+struct Number
+{
+   static constexpr unsigned value = v;
+};
+
+template <unsigned IBegin = 0,
+          unsigned IEnd = 1>
+constexpr auto fun1(Number<IBegin> = Number<0>{}, Number<IEnd>  = Number<1>{})
+{
+  constexpr unsigned a = 0;
+  auto f = [&](auto fs, auto i) {
+    if constexpr(i.value > 0)
+    {
+      (void)a;
+      return fs(fs, Number<IBegin>{});
+    }
+    (void)a;
+  };
+
+  return f(f, Number<IEnd>{});
+}
+
+
+void fun2() {
+  fun1();
+}