diff --git a/lib/irb/completion.rb b/lib/irb/completion.rb
index 3e9704706..a78adef8d 100644
--- a/lib/irb/completion.rb
+++ b/lib/irb/completion.rb
@@ -12,26 +12,6 @@ class BaseCompletor # :nodoc:
 
     # Set of reserved words used by Ruby, you should not use these for
     # constants or variables
-    ReservedWords = %w[
-      __ENCODING__ __LINE__ __FILE__
-      BEGIN END
-      alias and
-      begin break
-      case class
-      def defined? do
-      else elsif end ensure
-      false for
-      if in
-      module
-      next nil not
-      or
-      redo rescue retry return
-      self super
-      then true
-      undef unless until
-      when while
-      yield
-    ]
 
     HELP_COMMAND_PREPOSING = /\Ahelp\s+/
 
@@ -459,12 +439,12 @@ def retrieve_completion_data(input, bind:, doc_namespace:)
             eval("#{perfect_match_var}.class.name", bind) rescue nil
           else
             candidates = (bind.eval_methods | bind.eval_private_methods | bind.local_variables | bind.eval_instance_variables | bind.eval_class_constants).collect{|m| m.to_s}
-            candidates |= ReservedWords
+            candidates |= RubyLex::RESERVED_WORDS.map(&:to_s)
             candidates.find{ |i| i == input }
           end
         else
           candidates = (bind.eval_methods | bind.eval_private_methods | bind.local_variables | bind.eval_instance_variables | bind.eval_class_constants).collect{|m| m.to_s}
-          candidates |= ReservedWords
+          candidates |= RubyLex::RESERVED_WORDS.map(&:to_s)
           candidates.grep(/^#{Regexp.quote(input)}/).sort
         end
       end
diff --git a/lib/irb/ruby-lex.rb b/lib/irb/ruby-lex.rb
index 3abb53b4e..dd4a8d060 100644
--- a/lib/irb/ruby-lex.rb
+++ b/lib/irb/ruby-lex.rb
@@ -52,6 +52,27 @@ class RubyLex
       on_words_beg on_qwords_beg
     ]
 
+    RESERVED_WORDS = %i[
+      __ENCODING__ __LINE__ __FILE__
+      BEGIN END
+      alias and
+      begin break
+      case class
+      def defined? do
+      else elsif end ensure
+      false for
+      if in
+      module
+      next nil not
+      or
+      redo rescue retry return
+      self super
+      then true
+      undef unless until
+      when while
+      yield
+    ]
+
     class TerminateLineInput < StandardError
       def initialize
         super("Terminate Line Input")
@@ -77,6 +98,10 @@ def compile_with_errors_suppressed(code, line_no: 1)
       end
 
       def generate_local_variables_assign_code(local_variables)
+        # Some reserved words could be a local variable
+        # Example: def f(if: 1); binding.irb; end
+        # These reserved words should be removed from assignment code
+        local_variables -= RESERVED_WORDS
         "#{local_variables.join('=')}=nil;" unless local_variables.empty?
       end
 
diff --git a/test/irb/test_color.rb b/test/irb/test_color.rb
index 5529e2904..363f56977 100644
--- a/test/irb/test_color.rb
+++ b/test/irb/test_color.rb
@@ -167,8 +167,8 @@ def test_colorize_code_with_local_variables
       result_with_lvars = "a /(b +#{BLUE}#{BOLD}1#{CLEAR})/i"
 
       assert_equal_with_term(result_without_lvars, code)
-      assert_equal_with_term(result_with_lvar, code, local_variables: ['a'])
-      assert_equal_with_term(result_with_lvars, code, local_variables: ['a', 'b'])
+      assert_equal_with_term(result_with_lvar, code, local_variables: [:a])
+      assert_equal_with_term(result_with_lvars, code, local_variables: [:a, :b])
     end
 
     def test_colorize_code_complete_true
diff --git a/test/irb/test_irb.rb b/test/irb/test_irb.rb
index 617e9c961..d687ca9af 100644
--- a/test/irb/test_irb.rb
+++ b/test/irb/test_irb.rb
@@ -56,6 +56,20 @@ def test_underscore_stores_last_result
       assert_include output, "=> 12"
     end
 
+    def test_local_variable_handeld_correctly
+      write_ruby <<~'RUBY'
+        tap do |if:0, and:0, foo:100|
+          binding.irb
+        end
+      RUBY
+
+      output = run_ruby_file do
+        type 'foo /4#/ do'
+        type 'exit!'
+      end
+      assert_include output, '=> 25'
+    end
+
     def test_commands_dont_override_stored_last_result
       write_ruby <<~'RUBY'
         binding.irb
diff --git a/test/irb/test_ruby_lex.rb b/test/irb/test_ruby_lex.rb
index 9392b49fa..4e44ab44f 100644
--- a/test/irb/test_ruby_lex.rb
+++ b/test/irb/test_ruby_lex.rb
@@ -38,8 +38,16 @@ def test_local_variables_dependent_code
       lines = ["a /1#/ do", "2"]
       assert_indent_level(lines, 1)
       assert_code_block_open(lines, true)
-      assert_indent_level(lines, 0, local_variables: ['a'])
-      assert_code_block_open(lines, false, local_variables: ['a'])
+      assert_indent_level(lines, 0, local_variables: [:a])
+      assert_code_block_open(lines, false, local_variables: [:a])
+    end
+
+    def test_keyword_local_variables
+      # Assuming `def f(if: 1, and: 2, ); binding.irb; end`
+      local_variables = [:if, :and]
+      lines = ['1 + 2']
+      assert_indent_level(lines, 0, local_variables: local_variables)
+      assert_code_block_open(lines, false, local_variables: local_variables)
     end
 
     def test_literal_ends_with_space