diff --git a/compiler.rb b/compiler.rb
index f09da08..3231640 100644
--- a/compiler.rb
+++ b/compiler.rb
@@ -35,7 +35,8 @@ class Compiler
                    :assign, :while, :index, :bindex, :let, :case, :ternif,
                    :hash, :return,:sexp, :module, :rescue, :incr, :block,
                    :required, :add, :sub, :mul, :div, :eq, :ne,
-                   :lt, :le, :gt, :ge,:saveregs, :and, :or
+                   :lt, :le, :gt, :ge,:saveregs, :and, :or,
+                   :preturn, :proc, :stackframe
                   ]
 
   Keywords = @@keywords
@@ -88,6 +89,16 @@ def intern(scope,sym)
     Value.new(get_arg(scope,[:sexp,[:call,:__get_symbol, sym.to_s]]),:object)
   end
 
+  # For our limited typing we will in some cases need to do proper lookup.
+  # For now, we just want to make %s(index __env__ xxx) mostly treated as
+  # objects, in order to ensure that variables accesses that gets rewritten
+  # to indirect via __env__ gets treated as object. The exception is
+  # for now __env__[0] which contains a stackframe pointer used by
+  # :preturn.
+  def lookup_type(var, index = nil)
+    (var == :__env__ && index != 0) ? :object : nil
+  end
+
   # Returns an argument with its type identifier.
   #
   # If an Array is given, we have a subexpression, which needs to be compiled first.
@@ -420,6 +431,44 @@ def compile_lambda(scope, args=nil, body=nil)
   end
 
 
+  def compile_stackframe(scope)
+    @e.comment("Stack frame")
+    Value.new([:reg,:ebp])
+  end
+
+  # "Special" return for `proc` and bare blocks
+  # to exit past Proc#call.
+  def compile_preturn(scope, arg = nil)
+    @e.comment("preturn")
+
+    @e.save_result(compile_eval_arg(scope, arg)) if arg
+    @e.pushl(:eax)
+
+    # We load the return address pre-saved in __stackframe__ on creation of the proc.
+    # __stackframe__ is automatically added to __env__ in `rewrite_let_env`
+
+    ret = compile_eval_arg(scope,[:index,:__env__,0])
+
+    @e.movl(ret,:ebp)
+    @e.popl(:eax)
+    @e.leave
+    @e.ret
+    @e.evict_all
+    return Value.new([:subexpr])
+  end
+
+  # To compile `proc`, and anonymous blocks
+  # See also #compile_lambda
+  def compile_proc(scope, args=nil, body=nil)
+    e = @e.get_local
+    body ||= []
+    args ||= []
+
+    r = compile_defun(scope, e, [:self,:__closure__]+args,[:let,[]]+body)
+    r
+  end
+
+
   # Compiles and evaluates a given argument within a given scope.
   def compile_eval_arg(scope, arg)
     if arg.respond_to?(:position) && arg.position != nil
@@ -709,7 +758,7 @@ def compile_index(scope, arr, index)
       @e.popl(reg)
       @e.addl(@e.result_value, reg)
     end
-    return Value.new([:indirect, r])
+    return Value.new([:indirect, r], lookup_type(arr,index))
   end
 
 
diff --git a/transform.rb b/transform.rb
index 406ca30..58c4ad0 100644
--- a/transform.rb
+++ b/transform.rb
@@ -8,6 +8,29 @@
 class Compiler
   include AST
 
+  # For 'bare' blocks, or "Proc" objects created with 'proc', we 
+  # replace the standard return with ":preturn", which ensures the
+  # return is forced to exit the defining scope, instead of "just"
+  # exiting the block itself and then Proc#call.
+  #
+  # FIXME: Note that this does *not* attempt to detect an "escaped"
+  # block that is returning outside of where it should. At some point
+  # we need to add a way of handling this (e.g. MRI raises a LocalJumpError),
+  # but that is trickier to do in a sane way (one option would be
+  # to keep track of any blocks that get defined, and for any return
+  # from a scope that have defined this to mark the created "Proc"
+  # objets accordingly).
+  #
+  def rewrite_proc_return(exp)
+    exp.depth_first do |e|
+      next :skip if e[0] == :sexp
+      if e[0] == :return
+        e[0] = :preturn
+      end
+    end
+    exp
+  end
+
   # This replaces the old lambda handling with a rewrite.
   # The advantage of handling it as a rewrite phase is that it's
   # much easier to debug - it can be turned on and off to 
@@ -15,17 +38,23 @@ class Compiler
   def rewrite_lambda(exp)
     exp.depth_first do |e|
       next :skip if e[0] == :sexp
-      if e[0] == :lambda
+      if e[0] == :lambda || e[0] == :proc
         args = e[1] || E[]
         body = e[2] || nil
+
+        if e[0] == :proc && body
+          body = rewrite_proc_return(body)
+        end
+
         e.clear
         e[0] = :do
-        e[1] = E[:assign, :__tmp_proc, 
+        e[1] = E[:assign, [:index, :__env__,0], [:stackframe]]
+        e[2] = E[:assign, :__tmp_proc,
           E[:defun, @e.get_local,
             E[:self,:__closure__,:__env__]+args,
             body]
         ]
-        e[2] = E[exp.position,:sexp, E[:call, :__new_proc, E[:__tmp_proc, :__env__, :self]]]
+        e[3] = E[exp.position,:sexp, E[:call, :__new_proc, E[:__tmp_proc, :__env__, :self]]]
       end
     end
   end
@@ -131,7 +160,7 @@ def find_vars(e, scopes, env, freq, in_lambda = false, in_assign = false)
           env = env1 + env2
           vars = vars1+vars2
           vars.each {|v| push_var(scopes,env,v) if !is_special_name?(v) }
-        elsif n[0] == :lambda
+        elsif n[0] == :lambda || n[0] == :proc
           vars, env = find_vars(n[2], scopes + [Set.new],env, freq, true)
           n[2] = E[n.position,:let, vars, *n[2]] if n[2]
         else
@@ -146,6 +175,13 @@ def find_vars(e, scopes, env, freq, in_lambda = false, in_assign = false)
                 env  += env2
               end
             end
+
+            # If a block is provided, we need to find variables there too
+            if n[4]
+              vars3, env3 = find_vars([n[4]], scopes, env, freq, in_lambda)
+              vars += vars3
+              env  += env3
+            end
           else
             if n[0] == :call
               sub = n[2..-1]
@@ -212,17 +248,20 @@ def rewrite_let_env(exp)
 
       vars,env= find_vars(e[3],scopes,Set.new, freq)
 
+      # For "preturn". see Compiler#compile_preturn
+      aenv = [:__stackframe__] + env.to_a
+      env << :__stackframe__
+
       vars -= args.to_a
       if env.size > 0
         body = e[3]
 
-        rewrite_env_vars(body, env.to_a)
+        rewrite_env_vars(body, aenv)
         notargs = env - Set[*e[2]]
-        aenv = env.to_a
         extra_assigns = (env - notargs).to_a.collect do |a|
           E[e.position,:assign, E[e.position,:index, :__env__, aenv.index(a)], a]
         end
-        e[3] = [E[:sexp,E[:assign, :__env__, E[:call, :malloc,  [env.size * 4]]]]]
+        e[3] = [E[:sexp,E[:assign, :__env__, E[:call, :malloc,  [aenv.size * 4]]]]]
         e[3].concat(extra_assigns)
         e[3].concat(body)
       end