diff --git a/flang/lib/Lower/Allocatable.cpp b/flang/lib/Lower/Allocatable.cpp
index 3557ea93e1384..09180518ea41d 100644
--- a/flang/lib/Lower/Allocatable.cpp
+++ b/flang/lib/Lower/Allocatable.cpp
@@ -588,13 +588,15 @@ class AllocateStmtHelper {
       TODO(loc, "coarray: allocation of a coarray object");
     // Set length of the allocate object if it has. Otherwise, get the length
     // from source for the deferred length parameter.
-    if (lenParams.empty() && box.isCharacter() &&
-        !box.hasNonDeferredLenParams())
+    const bool isDeferredLengthCharacter =
+        box.isCharacter() && !box.hasNonDeferredLenParams();
+    if (lenParams.empty() && isDeferredLengthCharacter)
       lenParams.push_back(fir::factory::readCharLen(builder, loc, exv));
     if (!isSource || alloc.type.IsPolymorphic())
       genRuntimeAllocateApplyMold(builder, loc, box, exv,
                                   alloc.getSymbol().Rank());
-    genSetDeferredLengthParameters(alloc, box);
+    if (isDeferredLengthCharacter)
+      genSetDeferredLengthParameters(alloc, box);
     genAllocateObjectBounds(alloc, box);
     mlir::Value stat;
     if (isSource)
diff --git a/flang/test/Lower/allocate-source-allocatables-2.f90 b/flang/test/Lower/allocate-source-allocatables-2.f90
new file mode 100644
index 0000000000000..39b9f04a5f67a
--- /dev/null
+++ b/flang/test/Lower/allocate-source-allocatables-2.f90
@@ -0,0 +1,49 @@
+! RUN: bbc -emit-hlfir %s -o - | FileCheck %s
+! Test lowering of extension of SOURCE allocation (non deferred length
+! of character allocate-object need not to match the SOURCE length, truncation
+! and padding are performed instead as in assignments).
+
+subroutine test()
+! CHECK-LABEL:   func.func @_QPtest() {
+! CHECK:           %[[VAL_4:.*]]:2 = hlfir.declare %{{.*}} {{.*}}Ec_deferred
+! CHECK:           %[[VAL_9:.*]]:2 = hlfir.declare %{{.*}} typeparams %[[VAL_6:.*]] {{.*}}Ec_longer
+! CHECK:           %[[VAL_14:.*]]:2 = hlfir.declare %{{.*}} typeparams %[[VAL_11:.*]] {{.*}}Ec_shorter
+! CHECK:           %[[VAL_17:.*]]:2 = hlfir.declare %{{.*}} typeparams %[[VAL_16:.*]] {{{.*}}Ec_source
+  character(5) :: c_source = "hello"
+  character(2), allocatable :: c_shorter
+  character(:), allocatable :: c_deferred
+  character(7), allocatable :: c_longer
+! CHECK:           %[[VAL_18:.*]] = arith.constant false
+! CHECK:           %[[VAL_22:.*]] = fir.embox %[[VAL_17]]#1 : (!fir.ref<!fir.char<1,5>>) -> !fir.box<!fir.char<1,5>>
+
+! CHECK:           %[[VAL_23:.*]] = fir.convert %[[VAL_14]]#1 : (!fir.ref<!fir.box<!fir.heap<!fir.char<1,2>>>>) -> !fir.ref<!fir.box<none>>
+! CHECK:           %[[VAL_24:.*]] = fir.convert %[[VAL_22]] : (!fir.box<!fir.char<1,5>>) -> !fir.box<none>
+! CHECK:           %[[VAL_26:.*]] = fir.call @_FortranAAllocatableAllocateSource(%[[VAL_23]], %[[VAL_24]], %[[VAL_18]]
+
+! CHECK:           %[[VAL_27:.*]] = fir.convert %[[VAL_4]]#1 : (!fir.ref<!fir.box<!fir.heap<!fir.char<1,?>>>>) -> !fir.ref<!fir.box<none>>
+! CHECK:           %[[VAL_28:.*]] = fir.convert %[[VAL_16]] : (index) -> i64
+! CHECK:           %[[VAL_29:.*]] = arith.constant 1 : i32
+! CHECK:           %[[VAL_30:.*]] = arith.constant 0 : i32
+! CHECK:           %[[VAL_31:.*]] = arith.constant 0 : i32
+! CHECK:           %[[VAL_32:.*]] = fir.call @_FortranAAllocatableInitCharacterForAllocate(%[[VAL_27]], %[[VAL_28]], %[[VAL_29]], %[[VAL_30]], %[[VAL_31]]
+! CHECK:           %[[VAL_33:.*]] = fir.convert %[[VAL_4]]#1 : (!fir.ref<!fir.box<!fir.heap<!fir.char<1,?>>>>) -> !fir.ref<!fir.box<none>>
+! CHECK:           %[[VAL_34:.*]] = fir.convert %[[VAL_22]] : (!fir.box<!fir.char<1,5>>) -> !fir.box<none>
+! CHECK:           %[[VAL_36:.*]] = fir.call @_FortranAAllocatableAllocateSource(%[[VAL_33]], %[[VAL_34]], %[[VAL_18]],
+
+! CHECK-NOT: AllocatableInitCharacterForAllocate
+! CHECK:           %[[VAL_37:.*]] = fir.convert %[[VAL_9]]#1 : (!fir.ref<!fir.box<!fir.heap<!fir.char<1,7>>>>) -> !fir.ref<!fir.box<none>>
+! CHECK:           %[[VAL_38:.*]] = fir.convert %[[VAL_22]] : (!fir.box<!fir.char<1,5>>) -> !fir.box<none>
+! CHECK:           %[[VAL_40:.*]] = fir.call @_FortranAAllocatableAllocateSource(%[[VAL_37]], %[[VAL_38]], %[[VAL_18]],
+  allocate(c_shorter, c_deferred, c_longer, source=c_source)
+
+! Expect at runtime:
+! ZZheZZ
+! ZZhelloZZ
+! ZZhello  ZZ
+  write(*,"('ZZ',A,'ZZ')") c_shorter
+  write(*,"('ZZ',A,'ZZ')") c_deferred
+  write(*,"('ZZ',A,'ZZ')") c_longer
+end subroutine
+
+  call test()
+end