diff --git a/src/cmd/gc/walk.c b/src/cmd/gc/walk.c
index 34ac32436b7..5768285b84b 100644
--- a/src/cmd/gc/walk.c
+++ b/src/cmd/gc/walk.c
@@ -2312,7 +2312,7 @@ reorder4(NodeList *ll)
  * copies of escaped parameters to the heap.
  */
 NodeList*
-paramstoheap(Type **argin)
+paramstoheap(Type **argin, int out)
 {
 	Type *t;
 	Iter savet;
@@ -2322,6 +2322,12 @@ paramstoheap(Type **argin)
 	nn = nil;
 	for(t = structfirst(&savet, argin); t != T; t = structnext(&savet)) {
 		v = t->nname;
+		if(v == N && out && hasdefer) {
+			// Defer might stop a panic and show the
+			// return values as they exist at the time of panic.
+			// Make sure to zero them on entry to the function.
+			nn = list(nn, nod(OAS, nodarg(t, 1), N));
+		}
 		if(v == N || !(v->class & PHEAP))
 			continue;
 
@@ -2366,9 +2372,9 @@ heapmoves(void)
 {
 	NodeList *nn;
 
-	nn = paramstoheap(getthis(curfn->type));
-	nn = concat(nn, paramstoheap(getinarg(curfn->type)));
-	nn = concat(nn, paramstoheap(getoutarg(curfn->type)));
+	nn = paramstoheap(getthis(curfn->type), 0);
+	nn = concat(nn, paramstoheap(getinarg(curfn->type), 0));
+	nn = concat(nn, paramstoheap(getoutarg(curfn->type), 1));
 	curfn->enter = concat(curfn->enter, nn);
 	curfn->exit = returnsfromheap(getoutarg(curfn->type));
 }
diff --git a/test/fixedbugs/bug266.go b/test/fixedbugs/bug266.go
new file mode 100644
index 00000000000..25c246f7df8
--- /dev/null
+++ b/test/fixedbugs/bug266.go
@@ -0,0 +1,26 @@
+// $G $D/$F.go && $L $F.$A && ./$A.out || echo BUG: bug266
+
+// Copyright 2010 The Go Authors.  All rights reserved.
+// Use of this source code is governed by a BSD-style
+// license that can be found in the LICENSE file.
+
+package main
+
+func f() int {
+	defer func() {
+		recover()
+	}()
+	panic("oops")
+}
+
+func g() int {	
+	return 12345
+}
+
+func main() {
+	g()	// leave 12345 on stack
+	x := f()
+	if x != 0 {
+		panic(x)
+	}
+}