diff --git a/lib/template.js b/lib/template.js
index 14f396d..482914a 100644
--- a/lib/template.js
+++ b/lib/template.js
@@ -200,18 +200,18 @@ var Hogan = {};
       var oldTags = this.options.delimiters;
 
       this.options.delimiters = tags;
-      this.b(this.ct(coerceToString(func.call(cx, text, ctx)), cx, partials));
+      this.b(this.ct(coerceToString(func.call(cx, text, ctx)), ctx, partials));
       this.options.delimiters = oldTags;
 
       return false;
     },
 
     // compile text
-    ct: function(text, cx, partials) {
+    ct: function(text, ctx, partials) {
       if (this.options.disableLambda) {
         throw new Error('Lambda features disabled.');
       }
-      return this.c.compile(text, this.options).render(cx, partials);
+      return this.c.compile(text, this.options).ri(ctx, partials);
     },
 
     // template result buffering
@@ -243,7 +243,7 @@ var Hogan = {};
       var result = func.call(cx);
 
       if (typeof result == 'function') {
-        return this.ct(coerceToString(result.call(cx)), cx, partials);
+        return this.ct(coerceToString(result.call(cx)), ctx, partials);
       }
 
       return result;
diff --git a/test/index.js b/test/index.js
index ec0777e..07683b7 100644
--- a/test/index.js
+++ b/test/index.js
@@ -499,6 +499,23 @@ test("Undefined Return Value From Lambda", function() {
   is(s, "abcdef", "deal with undefined return values from lambdas.")
 });
 
+test("Key from parent context should resolve in lambda", function() {
+  is(Hogan.compile(
+    '{{#a}}' +
+      '{{#lambda}}{{#a}}{{b}}{{/a}}{{/lambda}}' +
+    '{{/a}}'
+  ).render({
+    a: {
+      b: 'val'
+    },
+    lambda: function() {
+      return function(text) {
+        return text;
+      };
+    }
+  }), 'val');
+});
+
 test("Sections with null values are treated as key hits", function() {
   var text = "{{#obj}}{{#sub}}{{^test}}ok{{/test}}{{/sub}}{{/obj}}";
   var t = Hogan.compile(text);