diff --git a/clang/docs/ReleaseNotes.rst b/clang/docs/ReleaseNotes.rst
index cd272396252d0..04daaab13dcfb 100644
--- a/clang/docs/ReleaseNotes.rst
+++ b/clang/docs/ReleaseNotes.rst
@@ -440,6 +440,7 @@ Bug Fixes in This Version
 - Fixed a failed assertion with empty filename arguments in ``__has_embed``. (#GH159898)
 - Fixed a failed assertion with empty filename in ``#embed`` directive. (#GH162951)
 - Fixed a crash triggered by unterminated ``__has_embed``. (#GH162953)
+- Fixed false-positive shadow diagnostics for lambdas in explicit object member functions. (#GH163731)
 
 Bug Fixes to Compiler Builtins
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
diff --git a/clang/lib/Sema/SemaDecl.cpp b/clang/lib/Sema/SemaDecl.cpp
index fc3aabf5741ca..2e9a6215a8834 100644
--- a/clang/lib/Sema/SemaDecl.cpp
+++ b/clang/lib/Sema/SemaDecl.cpp
@@ -8492,12 +8492,11 @@ void Sema::CheckShadow(NamedDecl *D, NamedDecl *ShadowedDecl,
   DeclContext *NewDC = D->getDeclContext();
 
   if (FieldDecl *FD = dyn_cast<FieldDecl>(ShadowedDecl)) {
-    if (CXXMethodDecl *MD = dyn_cast<CXXMethodDecl>(NewDC)) {
-      // Fields are not shadowed by variables in C++ static methods.
-      if (MD->isStatic())
-        return;
-
-      if (!MD->getParent()->isLambda() && MD->isExplicitObjectMemberFunction())
+    if (CXXMethodDecl *MD =
+            dyn_cast<CXXMethodDecl>(getFunctionLevelDeclContext())) {
+      // Fields aren't shadowed in C++ static members or in member functions
+      // with an explicit object parameter.
+      if (MD->isStatic() || MD->isExplicitObjectMemberFunction())
         return;
     }
     // Fields shadowed by constructor parameters are a special case. Usually
diff --git a/clang/test/SemaCXX/cxx2b-warn-shadow.cpp b/clang/test/SemaCXX/cxx2b-warn-shadow.cpp
index 76866c4269474..9ce0c5a7434f5 100644
--- a/clang/test/SemaCXX/cxx2b-warn-shadow.cpp
+++ b/clang/test/SemaCXX/cxx2b-warn-shadow.cpp
@@ -11,3 +11,29 @@ struct Foo {
   }
 };
 } // namespace GH95707
+
+namespace GH163731 {
+struct S1 {
+  int a;
+  void m(this S1 &self) {
+    auto lambda = [](int a) { return a; };
+  }
+};
+
+struct S2 {
+  int a;
+  void m(this S2 &self) {
+    int a = 1;                // expected-note {{previous declaration is here}}
+    auto lambda = [](int a) { // expected-warning {{declaration shadows a local variable}}
+      return a;
+    };
+  }
+};
+
+struct S3 {
+  int a;
+  void m(this S3 &self) {
+    auto lambda = [self](int a) { return a + self.a; };
+  }
+};
+}