diff --git a/src/compile.c b/src/compile.c
index b925020a..e1780b9a 100644
--- a/src/compile.c
+++ b/src/compile.c
@@ -1306,12 +1306,18 @@ static int compile(struct bytecode* bc, block b, struct locfile* lf, jv args, jv
     bc->nsubfunctions = 0;
     bc->subfunctions = 0;
   }
+  if (errors) {
+    bc->code = 0;
+    bc->constants = jv_invalid();
+    block_free(b);
+    return errors;
+  }
   uint16_t* code = jv_mem_calloc(bc->codelen, sizeof(uint16_t));
   bc->code = code;
   pos = 0;
   jv constant_pool = jv_array();
   int maxvar = -1;
-  if (!errors) for (inst* curr = b.first; curr; curr = curr->next) {
+  for (inst* curr = b.first; curr; curr = curr->next) {
     const struct opcode_description* op = opcode_describe(curr->op);
     if (op->length == 0)
       continue;
diff --git a/tests/shtest b/tests/shtest
index cde88152..8f3e0f63 100755
--- a/tests/shtest
+++ b/tests/shtest
@@ -952,6 +952,20 @@ $JQ -nf $d/prog.jq 2> $d/out && {
 }
 diff $d/out $d/expected
 
+# Test 3: Too many function parameters in a nested function (issue #3661)
+echo "Testing function parameter limit in a nested function..."
+cat > $d/expected <<EOF
+jq: error: function has too many parameters (max 4095)
+jq: error: too many function parameters or local function definitions (max 4095)
+jq: 2 compile errors
+EOF
+$JQ -rn '"def g(\([range(4097) | "a\(.)"] | join(";"))): .; def f: g(\([range(4097)] | join(";"))); f"' > $d/prog.jq
+$JQ -nf $d/prog.jq 2> $d/out && {
+  echo "Expected compile error for too many parameters in a nested function"
+  exit 1
+}
+diff $d/out $d/expected
+
 # CVE-2026-33948: No NUL truncation in the JSON parser
 if printf '{}\x00{}' | $JQ >/dev/null 2> /dev/null; then
   printf 'Error expected but jq exited successfully\n' 1>&2