diff --git a/src/declaration.d b/src/declaration.d
index f86920c0564f..5f682379c4f7 100644
--- a/src/declaration.d
+++ b/src/declaration.d
@@ -560,6 +560,28 @@ public:
         //printf("AliasDeclaration::semantic() %s\n", toChars());
         if (aliassym)
         {
+            auto fd = aliassym.isFuncLiteralDeclaration();
+            auto td = aliassym.isTemplateDeclaration();
+            if (fd || td && td.literal)
+            {
+                if (fd && fd.semanticRun >= PASSsemanticdone)
+                    return;
+
+                Expression e = new FuncExp(loc, aliassym);
+                e = e.semantic(sc);
+                if (e.op == TOKfunction)
+                {
+                    FuncExp fe = cast(FuncExp)e;
+                    aliassym = fe.td ? cast(Dsymbol)fe.td : fe.fd;
+                }
+                else
+                {
+                    aliassym = null;
+                    type = Type.terror;
+                }
+                return;
+            }
+
             if (aliassym.isTemplateInstance())
                 aliassym.semantic(sc);
             return;
diff --git a/src/parse.d b/src/parse.d
index 77f2ca46a4c0..16ed9407e38d 100644
--- a/src/parse.d
+++ b/src/parse.d
@@ -3848,16 +3848,45 @@ public:
                     if (token.value == TOKlparen)
                         tpl = parseTemplateParameterList();
                     check(TOKassign);
-                    storage_class = STCundefined;
-                    link = linkage;
-                    structalign = 0;
-                    udas = null;
-                    parseStorageClasses(storage_class, link, structalign, udas);
-                    if (udas)
-                        error("user defined attributes not allowed for %s declarations", Token.toChars(tok));
-                    t = parseType();
-                    Declaration v = new AliasDeclaration(loc, ident, t);
+
+                    Declaration v;
+                    if (token.value == TOKfunction ||
+                        token.value == TOKdelegate ||
+                        token.value == TOKlparen &&
+                            skipAttributes(peekPastParen(&token), &tk) &&
+                            (tk.value == TOKgoesto || tk.value == TOKlcurly) ||
+                        token.value == TOKlcurly ||
+                        token.value == TOKidentifier && peekNext() == TOKgoesto
+                       )
+                    {
+                        // function (parameters) { statements... }
+                        // delegate (parameters) { statements... }
+                        // (parameters) { statements... }
+                        // (parameters) => expression
+                        // { statements... }
+                        // identifier => expression
+
+                        Dsymbol s = parseFunctionLiteral();
+                        v = new AliasDeclaration(loc, ident, s);
+                    }
+                    else
+                    {
+                        // StorageClasses type
+
+                        storage_class = STCundefined;
+                        link = linkage;
+                        structalign = 0;
+                        udas = null;
+                        parseStorageClasses(storage_class, link, structalign, udas);
+
+                        if (udas)
+                            error("user defined attributes not allowed for %s declarations", Token.toChars(tok));
+
+                        t = parseType();
+                        v = new AliasDeclaration(loc, ident, t);
+                    }
                     v.storage_class = storage_class;
+
                     Dsymbol s = v;
                     if (tpl)
                     {
@@ -3873,6 +3902,7 @@ public:
                         s = new LinkDeclaration(link, a2);
                     }
                     a.push(s);
+
                     switch (token.value)
                     {
                     case TOKsemicolon:
@@ -3902,6 +3932,7 @@ public:
                 }
                 return a;
             }
+
             // alias StorageClasses type ident;
         }
         else if (token.value == TOKtypedef)
diff --git a/test/runnable/funclit.d b/test/runnable/funclit.d
index 1cdeb5e38535..b3811f014384 100644
--- a/test/runnable/funclit.d
+++ b/test/runnable/funclit.d
@@ -1069,6 +1069,60 @@ void test11774()
     f11774!int(dg);
 }
 
+/***************************************************/
+// 12421
+
+void test12421()
+{
+    void test(string decl, bool polymorphic = true)()
+    {
+        // parse AliasDeclaration in Statement
+        mixin("alias f = " ~ decl ~ ";");
+        assert(f(1) == 1);
+      static if (polymorphic)
+        assert(f("s") == "s");
+
+        // parse AliasDeclaration in DeclDefs
+        mixin("template X() { alias g = " ~ decl ~ "; }");
+        alias g = X!().g;
+        assert(g(1) == 1);
+      static if (polymorphic)
+        assert(g("s") == "s");
+    }
+
+    test!(q{      x  => x });
+    test!(q{ (    x) => x });
+    test!(q{ (int x) => x }, false);
+
+    test!(q{ (    x){ return x; } });
+    test!(q{ (int x){ return x; } }, false);
+
+    test!(q{ function     (    x) => x });
+    test!(q{ function     (int x) => x }, false);
+    test!(q{ function int (    x) => x }, false);
+    test!(q{ function int (int x) => x }, false);
+
+    test!(q{ delegate     (    x) => x });
+    test!(q{ delegate     (int x) => x }, false);
+    test!(q{ delegate int (    x) => x }, false);
+    test!(q{ delegate int (int x) => x }, false);
+
+    test!(q{ function     (    x){ return x; } });
+    test!(q{ function     (int x){ return x; } }, false);
+    test!(q{ function int (    x){ return x; } }, false);
+    test!(q{ function int (int x){ return x; } }, false);
+
+    test!(q{ delegate     (    x){ return x; } });
+    test!(q{ delegate     (int x){ return x; } }, false);
+    test!(q{ delegate int (    x){ return x; } }, false);
+    test!(q{ delegate int (int x){ return x; } }, false);
+
+    // This is problematic case, and should be disallowed in the future.
+    alias f = x => y;
+    int y = 10;
+    assert(f(1) == 10);;
+}
+
 /***************************************************/
 // 12508
 
@@ -1171,6 +1225,7 @@ int main()
     test10928();
     test11661();
     test11774();
+    test12421();
     test12508();
     test13879();