diff --git a/ktlint-ruleset-standard/src/main/kotlin/com/pinterest/ktlint/ruleset/standard/SpacingAroundCurlyRule.kt b/ktlint-ruleset-standard/src/main/kotlin/com/pinterest/ktlint/ruleset/standard/SpacingAroundCurlyRule.kt
index 8c738f41ac..80cc288071 100644
--- a/ktlint-ruleset-standard/src/main/kotlin/com/pinterest/ktlint/ruleset/standard/SpacingAroundCurlyRule.kt
+++ b/ktlint-ruleset-standard/src/main/kotlin/com/pinterest/ktlint/ruleset/standard/SpacingAroundCurlyRule.kt
@@ -8,6 +8,7 @@ import com.pinterest.ktlint.core.ast.ElementType.COMMA
 import com.pinterest.ktlint.core.ast.ElementType.DOT
 import com.pinterest.ktlint.core.ast.ElementType.EXCLEXCL
 import com.pinterest.ktlint.core.ast.ElementType.FUN
+import com.pinterest.ktlint.core.ast.ElementType.LAMBDA_EXPRESSION
 import com.pinterest.ktlint.core.ast.ElementType.LBRACE
 import com.pinterest.ktlint.core.ast.ElementType.LBRACKET
 import com.pinterest.ktlint.core.ast.ElementType.LPAR
@@ -39,7 +40,7 @@ class SpacingAroundCurlyRule : Rule("curly-spacing") {
             val nextLeaf = node.nextLeaf()
             val spacingBefore: Boolean
             val spacingAfter: Boolean
-            if (node.textMatches("{")) {
+            if (node.elementType == LBRACE) {
                 spacingBefore =
                     prevLeaf is PsiWhiteSpace ||
                     prevLeaf?.elementType == AT ||
@@ -59,22 +60,17 @@ class SpacingAroundCurlyRule : Rule("curly-spacing") {
                         prevLeaf.node.treeParent.removeChild(prevLeaf.node)
                     }
                 }
-                if (prevLeaf is PsiWhiteSpace &&
-                    prevLeaf.textContains('\n') &&
-                    (
-                        prevLeaf.prevLeaf()?.let {
-                            it.elementType == RPAR || KtTokens.KEYWORDS.contains(it.elementType)
-                        } == true ||
-                            node.treeParent.elementType == CLASS_BODY ||
-                            prevLeaf.treeParent.elementType == FUN
-                        )
+                if (prevLeaf is PsiWhiteSpace && prevLeaf.textContains('\n') &&
+                    (prevLeaf.prevLeaf()?.let { it.elementType == RPAR || KtTokens.KEYWORDS.contains(it.elementType) } == true ||
+                        node.treeParent.elementType == CLASS_BODY ||
+                        (prevLeaf.treeParent.elementType == FUN && prevLeaf.treeNext.elementType != LAMBDA_EXPRESSION)) // allow newline for lambda return type
                 ) {
                     emit(node.startOffset, "Unexpected newline before \"${node.text}\"", true)
                     if (autoCorrect) {
                         (prevLeaf as LeafPsiElement).rawReplaceWithText(" ")
                     }
                 }
-            } else if (node.textMatches("}")) {
+            } else if (node.elementType == RBRACE) {
                 spacingBefore = prevLeaf is PsiWhiteSpace || prevLeaf?.elementType == LBRACE
                 spacingAfter = nextLeaf == null || nextLeaf is PsiWhiteSpace || shouldNotToBeSeparatedBySpace(nextLeaf)
                 if (nextLeaf is PsiWhiteSpace && !nextLeaf.textContains('\n') &&
diff --git a/ktlint-ruleset-standard/src/test/kotlin/com/pinterest/ktlint/ruleset/standard/SpacingAroundCurlyRuleTest.kt b/ktlint-ruleset-standard/src/test/kotlin/com/pinterest/ktlint/ruleset/standard/SpacingAroundCurlyRuleTest.kt
index 9db2ba6e1e..d49098cd02 100644
--- a/ktlint-ruleset-standard/src/test/kotlin/com/pinterest/ktlint/ruleset/standard/SpacingAroundCurlyRuleTest.kt
+++ b/ktlint-ruleset-standard/src/test/kotlin/com/pinterest/ktlint/ruleset/standard/SpacingAroundCurlyRuleTest.kt
@@ -187,4 +187,26 @@ class SpacingAroundCurlyRuleTest {
             """.trimIndent()
         )
     }
+
+    @Test
+    fun `lint new line after lambda return type passes`() {
+        assertThat(SpacingAroundCurlyRule().lint("""
+            fun magicNumber1(): () -> Int = { 37 }
+            fun magicNumber2(): () -> Int =
+                { 42 }
+        """.trimIndent())).isEmpty()
+    }
+
+    @Test
+    fun `format new line after lambda return type passes`() {
+        assertThat(SpacingAroundCurlyRule().format("""
+            fun magicNumber1(): () -> Int = { 37 }
+            fun magicNumber2(): () -> Int =
+                { 42 }
+        """.trimIndent())).isEqualTo("""
+            fun magicNumber1(): () -> Int = { 37 }
+            fun magicNumber2(): () -> Int =
+                { 42 }
+        """.trimIndent())
+    }
 }