diff --git a/lib/crystal/parser.rb b/lib/crystal/parser.rb
index 38b442836f8a..d8b1467b8887 100644
--- a/lib/crystal/parser.rb
+++ b/lib/crystal/parser.rb
@@ -897,6 +897,8 @@ def parse_args
               var.out = true
               var.location = @token.location
               args << var
+
+              @instance_vars.add @token.value if @instance_vars
             else
               raise "expecting variable or instance variable after out"
             end
@@ -952,6 +954,8 @@ def parse_args_space_consumed(allow_plus_and_minus = false)
                 var.out = true
                 var.location = @token.location
                 args << var
+
+                @instance_vars.add @token.value if @instance_vars
               else
                 raise "expecting variable or instance variable after out"
               end
diff --git a/lib/crystal/to_s.rb b/lib/crystal/to_s.rb
index 9730ab5b5f43..9c92f88e0cf6 100644
--- a/lib/crystal/to_s.rb
+++ b/lib/crystal/to_s.rb
@@ -373,6 +373,7 @@ def visit_self_type(node)
     end
 
     def visit_instance_var(node)
+      @str << "out " if node.out
       @str << node.name
     end
 
diff --git a/lib/crystal/type_inference/call.rb b/lib/crystal/type_inference/call.rb
index c7d16c721df5..60d6f3e871b6 100644
--- a/lib/crystal/type_inference/call.rb
+++ b/lib/crystal/type_inference/call.rb
@@ -314,12 +314,15 @@ def recalculate_lib_call
 
     def check_out_args(untyped_def)
       untyped_def.args.each_with_index do |arg, i|
-        if arg.out && self.args[i]
-          unless self.args[i].out
-            self.args[i].raise "argument \##{i + 1} to #{untyped_def.owner}.#{untyped_def.name} must be passed as 'out'"
+        call_arg = self.args[i]
+        if arg.out && call_arg
+          unless call_arg.out
+            call_arg.raise "argument \##{i + 1} to #{untyped_def.owner}.#{untyped_def.name} must be passed as 'out'"
           end
-          var = parent_visitor.lookup_var_or_instance_var(self.args[i])
+          var = parent_visitor.lookup_var_or_instance_var(call_arg)
           var.bind_to arg
+        elsif !arg.out && (call_arg.is_a?(Var) || call_arg.is_a?(InstanceVar)) && call_arg.out
+          call_arg.raise "argument \##{i + 1} to #{untyped_def.owner}.#{untyped_def.name} cannot be passed as 'out'"
         end
       end
     end