diff --git a/py/emitbc.c b/py/emitbc.c
index 8680f4959708c37a10e382de546b50b2bf055c0d..269fcdeb7e625fc78aaa34d87c5549b9c90aac20 100644
--- a/py/emitbc.c
+++ b/py/emitbc.c
@@ -242,7 +242,14 @@ STATIC void emit_bc_end_pass(emit_t *emit) {
         emit->code_base = m_new(byte, emit->code_info_size + emit->byte_code_size);
 
     } else if (emit->pass == PASS_3) {
-        rt_assign_byte_code(emit->scope->unique_code_id, emit->code_base, emit->code_info_size + emit->byte_code_size, emit->scope->num_params, emit->scope->num_locals, emit->scope->stack_size, emit->scope->scope_flags);
+        qstr *arg_names = m_new(qstr, emit->scope->num_params);
+        for (int i = 0; i < emit->scope->num_params; i++) {
+            arg_names[i] = emit->scope->id_info[i].qstr;
+        }
+        rt_assign_byte_code(emit->scope->unique_code_id, emit->code_base,
+            emit->code_info_size + emit->byte_code_size,
+            emit->scope->num_params, emit->scope->num_locals, emit->scope->stack_size,
+            emit->scope->scope_flags, arg_names);
     }
 }
 
diff --git a/py/obj.h b/py/obj.h
index 55be768730da2e717c0dceaf3513e4fecb62c457..c2b127c328cb470a3d66081c017dbf000bc2470e 100644
--- a/py/obj.h
+++ b/py/obj.h
@@ -236,7 +236,7 @@ mp_obj_t mp_obj_new_exception_msg(const mp_obj_type_t *exc_type, const char *msg
 mp_obj_t mp_obj_new_exception_msg_varg(const mp_obj_type_t *exc_type, const char *fmt, ...); // counts args by number of % symbols in fmt, excluding %%; can only handle void* sizes (ie no float/double!)
 mp_obj_t mp_obj_new_range(int start, int stop, int step);
 mp_obj_t mp_obj_new_range_iterator(int cur, int stop, int step);
-mp_obj_t mp_obj_new_fun_bc(uint scope_flags, uint n_args, mp_obj_t def_args, uint n_state, const byte *code);
+mp_obj_t mp_obj_new_fun_bc(uint scope_flags, qstr *args, uint n_args, mp_obj_t def_args, uint n_state, const byte *code);
 mp_obj_t mp_obj_new_fun_asm(uint n_args, void *fun);
 mp_obj_t mp_obj_new_gen_wrap(mp_obj_t fun);
 mp_obj_t mp_obj_new_gen_instance(const byte *bytecode, uint n_state, int n_args, const mp_obj_t *args);
diff --git a/py/objfun.c b/py/objfun.c
index b2837be5f0143eb9dd20c9ae4afbe833280400fc..354d7ff9ca220d26a1a6d501e3b3d7a39222e83b 100644
--- a/py/objfun.c
+++ b/py/objfun.c
@@ -14,6 +14,12 @@
 #include "runtime.h"
 #include "bc.h"
 
+#if 0 // print debugging info
+#define DEBUG_PRINT (1)
+#else // don't print debugging info
+#define DEBUG_printf(args...) (void)0
+#endif
+
 /******************************************************************************/
 /* native functions                                                           */
 
@@ -141,16 +147,30 @@ typedef struct _mp_obj_fun_bc_t {
     };
     uint n_state;           // total state size for the executing function (incl args, locals, stack)
     const byte *bytecode;   // bytecode for the function
+    qstr *args;             // argument names (needed to resolve positional args passed as keywords)
     mp_obj_t extra_args[];  // values of default args (if any), plus a slot at the end for var args and/or kw args (if it takes them)
 } mp_obj_fun_bc_t;
 
+void dump_args(const mp_obj_t *a, int sz) {
+#if DEBUG_PRINT
+    DEBUG_printf("%p: ", a);
+    for (int i = 0; i < sz; i++) {
+        DEBUG_printf("%p ", a[i]);
+    }
+    DEBUG_printf("\n");
+#endif
+}
+
 STATIC mp_obj_t fun_bc_call(mp_obj_t self_in, uint n_args, uint n_kw, const mp_obj_t *args) {
+    DEBUG_printf("Input: ");
+    dump_args(args, n_args);
     mp_obj_fun_bc_t *self = self_in;
 
     const mp_obj_t *kwargs = args + n_args;
     mp_obj_t *extra_args = self->extra_args + self->n_def_args;
     uint n_extra_args = 0;
 
+
     // check positional arguments
 
     if (n_args > self->n_args) {
@@ -162,31 +182,93 @@ STATIC mp_obj_t fun_bc_call(mp_obj_t self_in, uint n_args, uint n_kw, const mp_o
         *extra_args = mp_obj_new_tuple(n_args - self->n_args, args + self->n_args);
         n_extra_args = 1;
         n_args = self->n_args;
-    } else if (n_args >= self->n_args - self->n_def_args) {
-        // given enough arguments, but may need to use some default arguments
+    } else {
         if (self->takes_var_args) {
+            DEBUG_printf("passing empty tuple as *args\n");
             *extra_args = mp_const_empty_tuple;
             n_extra_args = 1;
         }
-        extra_args -= self->n_args - n_args;
-        n_extra_args += self->n_args - n_args;
-    } else {
-        goto arg_error;
+        // Apply processing and check below only if we don't have kwargs,
+        // otherwise, kw handling code below has own extensive checks.
+        if (n_kw == 0) {
+            if (n_args >= self->n_args - self->n_def_args) {
+                // given enough arguments, but may need to use some default arguments
+                extra_args -= self->n_args - n_args;
+                n_extra_args += self->n_args - n_args;
+            } else {
+                goto arg_error;
+            }
+        }
     }
 
     // check keyword arguments
 
     if (n_kw != 0) {
-        // keyword arguments given
-        if (!self->takes_kw_args) {
-            nlr_jump(mp_obj_new_exception_msg(&mp_type_TypeError, "function does not take keyword arguments"));
+        // We cannot use dynamically-sized array here, because GCC indeed
+        // deallocates it on leaving defining scope (unlike most static stack allocs).
+        // So, we have 2 choices: allocate it unconditionally at the top of function
+        // (wastes stack), or use alloca which is guaranteed to dealloc on func exit.
+        //mp_obj_t flat_args[self->n_args];
+        mp_obj_t *flat_args = alloca(self->n_args * sizeof(mp_obj_t));
+        for (int i = self->n_args - 1; i >= 0; i--) {
+            flat_args[i] = MP_OBJ_NULL;
+        }
+        memcpy(flat_args, args, sizeof(*args) * n_args);
+        DEBUG_printf("Initial args: ");
+        dump_args(flat_args, self->n_args);
+
+        mp_obj_t dict = MP_OBJ_NULL;
+        if (self->takes_kw_args) {
+            dict = mp_obj_new_dict(n_kw); // TODO: better go conservative with 0?
         }
-        mp_obj_t dict = mp_obj_new_dict(n_kw);
         for (uint i = 0; i < n_kw; i++) {
+            qstr arg_name = MP_OBJ_QSTR_VALUE(kwargs[2 * i]);
+            for (uint j = 0; j < self->n_args; j++) {
+                if (arg_name == self->args[j]) {
+                    if (flat_args[j] != MP_OBJ_NULL) {
+                        nlr_jump(mp_obj_new_exception_msg_varg(&mp_type_TypeError,
+                            "function got multiple values for argument '%s'", qstr_str(arg_name)));
+                    }
+                    flat_args[j] = kwargs[2 * i + 1];
+                    goto continue2;
+                }
+            }
+            // Didn't find name match with positional args
+            if (!self->takes_kw_args) {
+                nlr_jump(mp_obj_new_exception_msg(&mp_type_TypeError, "function does not take keyword arguments"));
+            }
             mp_obj_dict_store(dict, kwargs[2 * i], kwargs[2 * i + 1]);
+continue2:;
+        }
+        DEBUG_printf("Args with kws flattened: ");
+        dump_args(flat_args, self->n_args);
+
+        // Now fill in defaults
+        mp_obj_t *d = &flat_args[self->n_args - 1];
+        mp_obj_t *s = &self->extra_args[self->n_def_args - 1];
+        for (int i = self->n_def_args; i > 0; i--) {
+            if (*d != MP_OBJ_NULL) {
+                *d-- = *s--;
+            }
+        }
+        DEBUG_printf("Args after filling defaults: ");
+        dump_args(flat_args, self->n_args);
+
+        // Now check that all mandatory args specified
+        while (d >= flat_args) {
+            if (*d-- == MP_OBJ_NULL) {
+                nlr_jump(mp_obj_new_exception_msg_varg(&mp_type_TypeError,
+                    "function missing required positional argument #%d", d - flat_args));
+            }
+        }
+
+        args = flat_args;
+        n_args = self->n_args;
+
+        if (self->takes_kw_args) {
+            extra_args[n_extra_args] = dict;
+            n_extra_args += 1;
         }
-        extra_args[n_extra_args] = dict;
-        n_extra_args += 1;
     } else {
         // no keyword arguments given
         if (self->takes_kw_args) {
@@ -198,6 +280,9 @@ STATIC mp_obj_t fun_bc_call(mp_obj_t self_in, uint n_args, uint n_kw, const mp_o
     mp_map_t *old_globals = rt_globals_get();
     rt_globals_set(self->globals);
     mp_obj_t result;
+    DEBUG_printf("Calling: args=%p, n_args=%d, extra_args=%p, n_extra_args=%d\n", args, n_args, extra_args, n_extra_args);
+    dump_args(args, n_args);
+    dump_args(extra_args, n_extra_args);
     mp_vm_return_kind_t vm_return_kind = mp_execute_byte_code(self->bytecode, args, n_args, extra_args, n_extra_args, self->n_state, &result);
     rt_globals_set(old_globals);
 
@@ -217,7 +302,7 @@ const mp_obj_type_t fun_bc_type = {
     .call = fun_bc_call,
 };
 
-mp_obj_t mp_obj_new_fun_bc(uint scope_flags, uint n_args, mp_obj_t def_args_in, uint n_state, const byte *code) {
+mp_obj_t mp_obj_new_fun_bc(uint scope_flags, qstr *args, uint n_args, mp_obj_t def_args_in, uint n_state, const byte *code) {
     uint n_def_args = 0;
     uint n_extra_args = 0;
     mp_obj_tuple_t *def_args = def_args_in;
@@ -234,6 +319,7 @@ mp_obj_t mp_obj_new_fun_bc(uint scope_flags, uint n_args, mp_obj_t def_args_in,
     mp_obj_fun_bc_t *o = m_new_obj_var(mp_obj_fun_bc_t, mp_obj_t, n_extra_args);
     o->base.type = &fun_bc_type;
     o->globals = rt_globals_get();
+    o->args = args;
     o->n_args = n_args;
     o->n_def_args = n_def_args;
     o->takes_var_args = (scope_flags & MP_SCOPE_FLAG_VARARGS) != 0;
diff --git a/py/runtime.c b/py/runtime.c
index 9fc0b97088abe2b8ae3035f18a4b69c50577f244..b08ae3d4e78f5397b47dcc8935e4eb9c7e5b7f0e 100644
--- a/py/runtime.c
+++ b/py/runtime.c
@@ -64,6 +64,7 @@ typedef struct _mp_code_t {
             void *fun;
         } u_inline_asm;
     };
+    qstr *arg_names;
 } mp_code_t;
 
 STATIC uint next_unique_code_id;
@@ -242,7 +243,7 @@ STATIC void alloc_unique_codes(void) {
     }
 }
 
-void rt_assign_byte_code(uint unique_code_id, byte *code, uint len, int n_args, int n_locals, int n_stack, uint scope_flags) {
+void rt_assign_byte_code(uint unique_code_id, byte *code, uint len, int n_args, int n_locals, int n_stack, uint scope_flags, qstr *arg_names) {
     alloc_unique_codes();
 
     assert(1 <= unique_code_id && unique_code_id < next_unique_code_id && unique_codes[unique_code_id].kind == MP_CODE_NONE);
@@ -252,6 +253,7 @@ void rt_assign_byte_code(uint unique_code_id, byte *code, uint len, int n_args,
     unique_codes[unique_code_id].n_state = n_locals + n_stack;
     unique_codes[unique_code_id].u_byte.code = code;
     unique_codes[unique_code_id].u_byte.len = len;
+    unique_codes[unique_code_id].arg_names = arg_names;
 
     //printf("byte code: %d bytes\n", len);
 
@@ -714,7 +716,7 @@ mp_obj_t rt_make_function_from_id(int unique_code_id, mp_obj_t def_args) {
     mp_obj_t fun;
     switch (c->kind) {
         case MP_CODE_BYTE:
-            fun = mp_obj_new_fun_bc(c->scope_flags, c->n_args, def_args, c->n_state, c->u_byte.code);
+            fun = mp_obj_new_fun_bc(c->scope_flags, c->arg_names, c->n_args, def_args, c->n_state, c->u_byte.code);
             break;
         case MP_CODE_NATIVE:
             fun = rt_make_function_n(c->n_args, c->u_native.fun);
diff --git a/py/runtime0.h b/py/runtime0.h
index ca88fc13b155d6adbc13cf3a83f83507f2a71675..07fcf0705e3e408222cb53330b2a83f12706bd6d 100644
--- a/py/runtime0.h
+++ b/py/runtime0.h
@@ -97,6 +97,6 @@ extern void *const rt_fun_table[RT_F_NUMBER_OF];
 void rt_init(void);
 void rt_deinit(void);
 uint rt_get_unique_code_id(void);
-void rt_assign_byte_code(uint unique_code_id, byte *code, uint len, int n_args, int n_locals, int n_stack, uint scope_flags);
+void rt_assign_byte_code(uint unique_code_id, byte *code, uint len, int n_args, int n_locals, int n_stack, uint scope_flags, qstr *arg_names);
 void rt_assign_native_code(uint unique_code_id, void *f, uint len, int n_args);
 void rt_assign_inline_asm_code(uint unique_code_id, void *f, uint len, int n_args);
diff --git a/tests/basics/fun-kwargs.py b/tests/basics/fun-kwargs.py
new file mode 100644
index 0000000000000000000000000000000000000000..9f4f2b7d318e72a8ddf91359bcbfc9700490a03e
--- /dev/null
+++ b/tests/basics/fun-kwargs.py
@@ -0,0 +1,35 @@
+def f1(a):
+    print(a)
+
+f1(123)
+f1(a=123)
+try:
+    f1(b=123)
+except TypeError:
+    print("TypeError")
+
+def f2(a, b):
+    print(a, b)
+
+f2(1, 2)
+f2(a=3, b=4)
+f2(b=5, a=6)
+f2(7, b=8)
+try:
+    f2(9, a=10)
+except TypeError:
+    print("TypeError")
+
+def f3(a, b, *args):
+    print(a, b, args)
+
+
+f3(1, b=3)
+try:
+    f3(1, a=3)
+except TypeError:
+    print("TypeError")
+try:
+    f3(1, 2, 3, 4, a=5)
+except TypeError:
+    print("TypeError")