diff --git a/changelog/2024-11-18T13_43_58+01_00_fix2839 b/changelog/2024-11-18T13_43_58+01_00_fix2839
new file mode 100644
index 0000000000..568318c964
--- /dev/null
+++ b/changelog/2024-11-18T13_43_58+01_00_fix2839
@@ -0,0 +1 @@
+FIXED: Clash errored saying it cannot translate a globally recursive function in code that originally only contains let-bound (local) recursion [#2839](https://github.com/clash-lang/clash-compiler/issues/2839).
diff --git a/clash-lib/src/Clash/Normalize/Transformations/Inline.hs b/clash-lib/src/Clash/Normalize/Transformations/Inline.hs
index d74a7070dd..5443307eda 100644
--- a/clash-lib/src/Clash/Normalize/Transformations/Inline.hs
+++ b/clash-lib/src/Clash/Normalize/Transformations/Inline.hs
@@ -120,7 +120,14 @@ bindConstantVar = inlineBinders test
       True -> return (i `notElemFreeVars` e)
       _    -> do
         tcm <- Lens.view tcCache
-        case isWorkFreeIsh tcm e of
+        (fn,_) <- Lens.use curFun
+        -- Don't inline things that perform work, it increases the circuit size.
+        --
+        -- Also don't inline globally recursive calls, it prevents the
+        -- recToLetRec transformation from transforming global recursion to
+        -- local recursion.
+        -- See https://github.com/clash-lang/clash-compiler/issues/2839
+        case isWorkFreeIsh tcm e && not (e == Var fn) of
           True -> Lens.view inlineConstantLimit >>= \case
             0 -> return True
             n -> return (termSize e <= n)
diff --git a/tests/Main.hs b/tests/Main.hs
index dba10fa892..e5db4706aa 100755
--- a/tests/Main.hs
+++ b/tests/Main.hs
@@ -791,6 +791,7 @@ runClashTest = defaultMain $ clashTestRoot
         , runTest "T2623CaseConFVs" def{hdlLoad=[],hdlSim=[],hdlTargets=[VHDL]}
         , runTest "T2781" def{hdlLoad=[],hdlSim=[],hdlTargets=[VHDL]}
         , runTest "T2628" def{hdlTargets=[VHDL], buildTargets=BuildSpecific ["TACacheServerStep"], hdlSim=[]}
+        , runTest "T2839" def{hdlLoad=[],hdlSim=[],hdlTargets=[VHDL]}
         ] <>
         if compiledWith == Cabal then
           -- This tests fails without environment files present, which are only
diff --git a/tests/shouldwork/Issues/T2839.hs b/tests/shouldwork/Issues/T2839.hs
new file mode 100644
index 0000000000..6a95bb1e72
--- /dev/null
+++ b/tests/shouldwork/Issues/T2839.hs
@@ -0,0 +1,12 @@
+module T2839 where
+
+import Clash.Explicit.Prelude
+import Clash.Explicit.Testbench
+
+topEntity ::
+  Signal System (Unsigned 8)
+topEntity = register clk noReset enableGen 100 0
+ where
+  cntr = register clk noReset enableGen (0 :: Unsigned 8) 0
+  done = (== 100) <$> cntr
+  clk = tbClockGen $ not <$> done