diff --git a/crates/hir-def/src/body/lower.rs b/crates/hir-def/src/body/lower.rs
index 11b87f1952fb..5dc5fedd2307 100644
--- a/crates/hir-def/src/body/lower.rs
+++ b/crates/hir-def/src/body/lower.rs
@@ -1113,7 +1113,7 @@ impl ExprCollector<'_> {
                     statements.push(Statement::Expr { expr, has_semi });
                 }
             }
-            ast::Stmt::Item(_item) => (),
+            ast::Stmt::Item(_item) => statements.push(Statement::Item),
         }
     }
 
diff --git a/crates/hir-def/src/body/pretty.rs b/crates/hir-def/src/body/pretty.rs
index 773b7c575e42..7007dea638ef 100644
--- a/crates/hir-def/src/body/pretty.rs
+++ b/crates/hir-def/src/body/pretty.rs
@@ -628,6 +628,7 @@ impl Printer<'_> {
                 }
                 wln!(self);
             }
+            Statement::Item => (),
         }
     }
 
diff --git a/crates/hir-def/src/body/scope.rs b/crates/hir-def/src/body/scope.rs
index ab623250d407..69b82ae871a4 100644
--- a/crates/hir-def/src/body/scope.rs
+++ b/crates/hir-def/src/body/scope.rs
@@ -197,6 +197,7 @@ fn compute_block_scopes(
             Statement::Expr { expr, .. } => {
                 compute_expr_scopes(*expr, body, scopes, scope);
             }
+            Statement::Item => (),
         }
     }
     if let Some(expr) = tail {
diff --git a/crates/hir-def/src/hir.rs b/crates/hir-def/src/hir.rs
index f008ae761a56..bbe62f27b9a0 100644
--- a/crates/hir-def/src/hir.rs
+++ b/crates/hir-def/src/hir.rs
@@ -352,6 +352,9 @@ pub enum Statement {
         expr: ExprId,
         has_semi: bool,
     },
+    // At the moment, we only use this to figure out if a return expression
+    // is really the last statement of a block. See #16566
+    Item,
 }
 
 impl Expr {
@@ -385,6 +388,7 @@ impl Expr {
                             }
                         }
                         Statement::Expr { expr: expression, .. } => f(*expression),
+                        Statement::Item => (),
                     }
                 }
                 if let &Some(expr) = tail {
diff --git a/crates/hir-ty/src/infer/closure.rs b/crates/hir-ty/src/infer/closure.rs
index 83ad6f54d6ce..22a70f951ea7 100644
--- a/crates/hir-ty/src/infer/closure.rs
+++ b/crates/hir-ty/src/infer/closure.rs
@@ -485,6 +485,7 @@ impl InferenceContext<'_> {
                         Statement::Expr { expr, has_semi: _ } => {
                             self.consume_expr(*expr);
                         }
+                        Statement::Item => (),
                     }
                 }
                 if let Some(tail) = tail {
diff --git a/crates/hir-ty/src/infer/expr.rs b/crates/hir-ty/src/infer/expr.rs
index 30c676a240c1..428ed6748c6c 100644
--- a/crates/hir-ty/src/infer/expr.rs
+++ b/crates/hir-ty/src/infer/expr.rs
@@ -1389,6 +1389,7 @@ impl InferenceContext<'_> {
                                 );
                             }
                         }
+                        Statement::Item => (),
                     }
                 }
 
diff --git a/crates/hir-ty/src/infer/mutability.rs b/crates/hir-ty/src/infer/mutability.rs
index c9fc5bccea79..00e5eac229fb 100644
--- a/crates/hir-ty/src/infer/mutability.rs
+++ b/crates/hir-ty/src/infer/mutability.rs
@@ -65,6 +65,7 @@ impl InferenceContext<'_> {
                         Statement::Expr { expr, has_semi: _ } => {
                             self.infer_mut_expr(*expr, Mutability::Not);
                         }
+                        Statement::Item => (),
                     }
                 }
                 if let Some(tail) = tail {
diff --git a/crates/hir-ty/src/mir/lower.rs b/crates/hir-ty/src/mir/lower.rs
index dad1ed10ce58..b038900cdacb 100644
--- a/crates/hir-ty/src/mir/lower.rs
+++ b/crates/hir-ty/src/mir/lower.rs
@@ -1781,6 +1781,7 @@ impl<'ctx> MirLowerCtx<'ctx> {
                     self.push_fake_read(c, p, expr.into());
                     current = scope2.pop_and_drop(self, c, expr.into());
                 }
+                hir_def::hir::Statement::Item => (),
             }
         }
         if let Some(tail) = tail {
diff --git a/crates/ide-diagnostics/src/handlers/remove_trailing_return.rs b/crates/ide-diagnostics/src/handlers/remove_trailing_return.rs
index a0d5d742d362..b7667dc318f0 100644
--- a/crates/ide-diagnostics/src/handlers/remove_trailing_return.rs
+++ b/crates/ide-diagnostics/src/handlers/remove_trailing_return.rs
@@ -182,6 +182,18 @@ fn foo() -> u8 {
         );
     }
 
+    #[test]
+    fn no_diagnostic_if_not_last_statement2() {
+        check_diagnostics(
+            r#"
+fn foo() -> u8 {
+    return 2;
+    fn bar() {}
+}
+"#,
+        );
+    }
+
     #[test]
     fn replace_with_expr() {
         check_fix(