diff --git a/py/compile.c b/py/compile.c
index 4f91ca49b9..a9b34ce5d9 100644
--- a/py/compile.c
+++ b/py/compile.c
@@ -1650,9 +1650,11 @@ STATIC void compile_try_except(compiler_t *comp, mp_parse_node_t pn_body, int n_
         if (qstr_exception_local != 0) {
             EMIT_ARG(load_const_tok, MP_TOKEN_KW_NONE);
             EMIT_ARG(label_assign, l3);
+            EMIT_ARG(adjust_stack_size, 1); // stack adjust for possible return value
             EMIT_ARG(load_const_tok, MP_TOKEN_KW_NONE);
             compile_store_id(comp, qstr_exception_local);
             compile_delete_id(comp, qstr_exception_local);
+            EMIT_ARG(adjust_stack_size, -1);
             compile_decrease_except_level(comp);
         }
 
@@ -1682,9 +1684,18 @@ STATIC void compile_try_finally(compiler_t *comp, mp_parse_node_t pn_body, int n
     } else {
         compile_try_except(comp, pn_body, n_except, pn_except, pn_else);
     }
+
+    // If the code reaches this point then the try part of the try-finally exited normally.
+    // This is indicated to the runtime by None sitting on the stack.
     EMIT_ARG(load_const_tok, MP_TOKEN_KW_NONE);
+
+    // Compile the finally block.
+    // The stack needs to be adjusted by 1 to account for the possibility that the finally is
+    // being executed as part of a return, and the return value is on the top of the stack.
     EMIT_ARG(label_assign, l_finally_block);
+    EMIT_ARG(adjust_stack_size, 1);
     compile_node(comp, pn_finally);
+    EMIT_ARG(adjust_stack_size, -1);
 
     compile_decrease_except_level(comp);
 }
diff --git a/tests/basics/try_finally_return.py b/tests/basics/try_finally_return.py
index 31a507e8d0..21e01ea21b 100644
--- a/tests/basics/try_finally_return.py
+++ b/tests/basics/try_finally_return.py
@@ -70,3 +70,13 @@ def f():
     finally:
         print('finally 1')
 print(f())
+
+# the finally block uses a lot of Python stack and then a local is accessed
+# (tests that the use of the stack doesn't clobber the local)
+def f(x):
+    try:
+        return x
+    finally:
+        print(2, 3, 4, 5, 6)
+        print(x)
+print(f(1))