diff --git a/src/compiler/emitter.ts b/src/compiler/emitter.ts
index 38e74aa0cc6..b60ae97ceee 100644
--- a/src/compiler/emitter.ts
+++ b/src/compiler/emitter.ts
@@ -19,6 +19,8 @@ module ts {
         return isExternalModule(sourceFile) || isDeclarationFile(sourceFile);
     }
 
+    // flag enum used to request and track usages of few dedicated temp variables
+    // enum values are used to set/check bit values and thus should not have bit collisions.
     const enum TempVariableKind {
         auto = 0,
         _i = 1,
@@ -216,7 +218,7 @@ module ts {
             //     _i;
             // }
             // we should be able to detect if let _i was shadowed by some temp variable that was allocated in scope
-            function hasConflictsWithTempVariables(name: string): boolean {
+            function nameConflictsWithSomeTempVariable(name: string): boolean {
                 // temp variable names always start with '_'
                 if (name.length < 2 || name.charCodeAt(0) !== CharacterCodes._) {
                     return false;
@@ -242,7 +244,12 @@ module ts {
                 }
             }
 
+            // This function generates a name using the following pattern:
             // _a .. _h, _j ... _z, _0, _1, ...
+            // It is guaranteed that generated name will not shadow any existing user-defined names,
+            // however it can hide another name generated by this function higher in the scope.
+            // NOTE: names generated by 'makeTempVariableName' and 'makeUniqueName' will never conflict.
+            // see comment for 'makeTempVariableName' for more information.
             function makeTempVariableName(location: Node, tempVariableKind: TempVariableKind): string {
                 let tempName: string;
                 if (tempVariableKind !== TempVariableKind.auto && !(predefinedTempsInUse & tempVariableKind)) {
@@ -272,8 +279,17 @@ module ts {
                 return tempName;
             }
 
-            // unique names always end with _<number>
-            // generated unique names: name_1, name_2...
+            // Generates a name that is unique within current file and does not collide with
+            // any names in global scope.
+            // NOTE: names generated by 'makeTempVariableName' and 'makeUniqueName' will never conflict
+            // because of the way how these names are generated
+            // - makeUniqueName builds a name by picking a base name (which should not be empty string)
+            //   and appending suffix '_<number>'
+            // - makeTempVariableName creates a name using the following pattern:
+            //   _a .. _h, _j ... _z, _0, _1, ...
+            // This means that names from 'makeTempVariableName' will have only one underscore at the beginning
+            // and names from 'makeUniqieName' will have at least one underscore in the middle 
+            // so they will never collide.
             function makeUniqueName(baseName: string): string {
                 Debug.assert(!!baseName);
 
@@ -2787,8 +2803,9 @@ module ts {
                 let list = getAncestor(node, SyntaxKind.VariableDeclarationList);
                 if (list.parent.kind === SyntaxKind.VariableStatement) {
                     let isSourceFileLevelBinding = list.parent.parent.kind === SyntaxKind.SourceFile;
-                    let isModuleLevelBinding = list.parent.parent.kind === SyntaxKind.ModuleDeclaration;
-                    let isFunctionLevelBinding = isFunctionLike(list.parent.parent);
+                    let isModuleLevelBinding = list.parent.parent.kind === SyntaxKind.ModuleBlock;
+                    let isFunctionLevelBinding =
+                        list.parent.parent.kind === SyntaxKind.Block && isFunctionLike(list.parent.parent.parent);
                     if (isSourceFileLevelBinding || isModuleLevelBinding || isFunctionLevelBinding) {
                         return;
                     }
@@ -2801,7 +2818,7 @@ module ts {
 
                 var hasConflictsInEnclosingScope =
                     !resolver.isUnknownIdentifier(parent, (<Identifier>node).text) ||
-                    hasConflictsWithTempVariables((<Identifier>node).text);
+                    nameConflictsWithSomeTempVariable((<Identifier>node).text);
 
                 if (hasConflictsInEnclosingScope) {
                     let variableId = resolver.getBlockScopedVariableId(<Identifier>node);
diff --git a/tests/baselines/reference/downlevelLetConst16.js b/tests/baselines/reference/downlevelLetConst16.js
index 4f67b275e00..aefe2830adc 100644
--- a/tests/baselines/reference/downlevelLetConst16.js
+++ b/tests/baselines/reference/downlevelLetConst16.js
@@ -236,29 +236,29 @@ use(x);
 use(y);
 use(z);
 function foo1() {
-    var x_1 = 1;
-    use(x_1);
-    var y_1 = ([
+    var x = 1;
+    use(x);
+    var y = ([
         1
     ])[0];
-    use(y_1);
-    var z_1 = ({
+    use(y);
+    var z = ({
         a: 1
     }).a;
-    use(z_1);
+    use(z);
 }
 function foo2() {
     {
-        var x_2 = 1;
-        use(x_2);
-        var y_2 = ([
+        var x_1 = 1;
+        use(x_1);
+        var y_1 = ([
             1
         ])[0];
-        use(y_2);
-        var z_2 = ({
+        use(y_1);
+        var z_1 = ({
             a: 1
         }).a;
-        use(z_2);
+        use(z_1);
     }
     use(x);
 }
@@ -266,29 +266,29 @@ var A = (function () {
     function A() {
     }
     A.prototype.m1 = function () {
-        var x_3 = 1;
-        use(x_3);
-        var y_3 = ([
+        var x = 1;
+        use(x);
+        var y = ([
             1
         ])[0];
-        use(y_3);
-        var z_3 = ({
+        use(y);
+        var z = ({
             a: 1
         }).a;
-        use(z_3);
+        use(z);
     };
     A.prototype.m2 = function () {
         {
-            var x_4 = 1;
-            use(x_4);
-            var y_4 = ([
+            var x_2 = 1;
+            use(x_2);
+            var y_2 = ([
                 1
             ])[0];
-            use(y_4);
-            var z_4 = ({
+            use(y_2);
+            var z_2 = ({
                 a: 1
             }).a;
-            use(z_4);
+            use(z_2);
         }
         use(x);
     };
@@ -298,6 +298,77 @@ var B = (function () {
     function B() {
     }
     B.prototype.m1 = function () {
+        var x = 1;
+        use(x);
+        var y = ([
+            1
+        ])[0];
+        use(y);
+        var z = ({
+            a: 1
+        }).a;
+        use(z);
+    };
+    B.prototype.m2 = function () {
+        {
+            var x_3 = 1;
+            use(x_3);
+            var y_3 = ([
+                1
+            ])[0];
+            use(y_3);
+            var z_3 = ({
+                a: 1
+            }).a;
+            use(z_3);
+        }
+        use(x);
+    };
+    return B;
+})();
+function bar1() {
+    var x = 1;
+    use(x);
+    var y = ([
+        1
+    ])[0];
+    use(y);
+    var z = ({
+        a: 1
+    }).a;
+    use(z);
+}
+function bar2() {
+    {
+        var x_4 = 1;
+        use(x_4);
+        var y_4 = ([
+            1
+        ])[0];
+        use(y_4);
+        var z_4 = ({
+            a: 1
+        }).a;
+        use(z_4);
+    }
+    use(x);
+}
+var M1;
+(function (M1) {
+    var x = 1;
+    use(x);
+    var y = ([
+        1
+    ])[0];
+    use(y);
+    var z = ({
+        a: 1
+    }).a;
+    use(z);
+})(M1 || (M1 = {}));
+var M2;
+(function (M2) {
+    {
         var x_5 = 1;
         use(x_5);
         var y_5 = ([
@@ -308,190 +379,119 @@ var B = (function () {
             a: 1
         }).a;
         use(z_5);
-    };
-    B.prototype.m2 = function () {
-        {
-            var x_6 = 1;
-            use(x_6);
-            var y_6 = ([
-                1
-            ])[0];
-            use(y_6);
-            var z_6 = ({
-                a: 1
-            }).a;
-            use(z_6);
-        }
-        use(x);
-    };
-    return B;
-})();
-function bar1() {
-    var x_7 = 1;
-    use(x_7);
-    var y_7 = ([
-        1
-    ])[0];
-    use(y_7);
-    var z_7 = ({
-        a: 1
-    }).a;
-    use(z_7);
-}
-function bar2() {
-    {
-        var x_8 = 1;
-        use(x_8);
-        var y_8 = ([
-            1
-        ])[0];
-        use(y_8);
-        var z_8 = ({
-            a: 1
-        }).a;
-        use(z_8);
-    }
-    use(x);
-}
-var M1;
-(function (M1) {
-    var x_9 = 1;
-    use(x_9);
-    var y_9 = ([
-        1
-    ])[0];
-    use(y_9);
-    var z_9 = ({
-        a: 1
-    }).a;
-    use(z_9);
-})(M1 || (M1 = {}));
-var M2;
-(function (M2) {
-    {
-        var x_10 = 1;
-        use(x_10);
-        var y_10 = ([
-            1
-        ])[0];
-        use(y_10);
-        var z_10 = ({
-            a: 1
-        }).a;
-        use(z_10);
     }
     use(x);
 })(M2 || (M2 = {}));
 var M3;
 (function (M3) {
-    var x_11 = 1;
-    use(x_11);
-    var y_11 = ([
+    var x = 1;
+    use(x);
+    var y = ([
         1
     ])[0];
-    use(y_11);
-    var z_11 = ({
+    use(y);
+    var z = ({
         a: 1
     }).a;
-    use(z_11);
+    use(z);
 })(M3 || (M3 = {}));
 var M4;
 (function (M4) {
     {
-        var x_12 = 1;
-        use(x_12);
-        var y_12 = ([
+        var x_6 = 1;
+        use(x_6);
+        var y_6 = ([
             1
         ])[0];
-        use(y_12);
-        var z_12 = ({
+        use(y_6);
+        var z_6 = ({
             a: 1
         }).a;
-        use(z_12);
+        use(z_6);
     }
     use(x);
     use(y);
     use(z);
 })(M4 || (M4 = {}));
 function foo3() {
-    for (var x_13 = void 0;;) {
-        use(x_13);
+    for (var x_7 = void 0;;) {
+        use(x_7);
     }
-    for (var y_13 = ([])[0];;) {
-        use(y_13);
+    for (var y_7 = ([])[0];;) {
+        use(y_7);
     }
-    for (var z_13 = ({
+    for (var z_7 = ({
         a: 1
     }).a;;) {
-        use(z_13);
+        use(z_7);
     }
     use(x);
 }
 function foo4() {
-    for (var x_14 = 1;;) {
-        use(x_14);
+    for (var x_8 = 1;;) {
+        use(x_8);
     }
-    for (var y_14 = ([])[0];;) {
-        use(y_14);
+    for (var y_8 = ([])[0];;) {
+        use(y_8);
     }
-    for (var z_14 = ({
+    for (var z_8 = ({
         a: 1
     }).a;;) {
-        use(z_14);
+        use(z_8);
     }
     use(x);
 }
 function foo5() {
-    for (var x_15 in []) {
-        use(x_15);
+    for (var x_9 in []) {
+        use(x_9);
     }
     use(x);
 }
 function foo6() {
-    for (var x_16 in []) {
-        use(x_16);
+    for (var x_10 in []) {
+        use(x_10);
     }
     use(x);
 }
 function foo7() {
     for (var _i = 0, _a = []; _i < _a.length; _i++) {
-        var x_17 = _a[_i];
-        use(x_17);
+        var x_11 = _a[_i];
+        use(x_11);
     }
     use(x);
 }
 function foo8() {
     for (var _i = 0, _a = []; _i < _a.length; _i++) {
-        var x_18 = _a[_i][0];
-        use(x_18);
+        var x_12 = _a[_i][0];
+        use(x_12);
     }
     use(x);
 }
 function foo9() {
     for (var _i = 0, _a = []; _i < _a.length; _i++) {
-        var x_19 = _a[_i].a;
-        use(x_19);
+        var x_13 = _a[_i].a;
+        use(x_13);
     }
     use(x);
 }
 function foo10() {
     for (var _i = 0, _a = []; _i < _a.length; _i++) {
-        var x_20 = _a[_i];
-        use(x_20);
+        var x_14 = _a[_i];
+        use(x_14);
     }
     use(x);
 }
 function foo11() {
     for (var _i = 0, _a = []; _i < _a.length; _i++) {
-        var x_21 = _a[_i][0];
-        use(x_21);
+        var x_15 = _a[_i][0];
+        use(x_15);
     }
     use(x);
 }
 function foo12() {
     for (var _i = 0, _a = []; _i < _a.length; _i++) {
-        var x_22 = _a[_i].a;
-        use(x_22);
+        var x_16 = _a[_i].a;
+        use(x_16);
     }
     use(x);
 }
diff --git a/tests/baselines/reference/letConstMatchingParameterNames.js b/tests/baselines/reference/letConstMatchingParameterNames.js
index 34443aeb122..392f0e7ae94 100644
--- a/tests/baselines/reference/letConstMatchingParameterNames.js
+++ b/tests/baselines/reference/letConstMatchingParameterNames.js
@@ -19,8 +19,8 @@ function a() {
 var parent = true;
 var parent2 = true;
 function a() {
-    var parent_1 = 1;
-    var parent2_1 = 2;
+    var parent = 1;
+    var parent2 = 2;
     function b(parent, parent2) {
         use(parent);
         use(parent2);
diff --git a/tests/baselines/reference/letKeepNamesOfTopLevelItems.js b/tests/baselines/reference/letKeepNamesOfTopLevelItems.js
new file mode 100644
index 00000000000..96fd31ae536
--- /dev/null
+++ b/tests/baselines/reference/letKeepNamesOfTopLevelItems.js
@@ -0,0 +1,19 @@
+//// [letKeepNamesOfTopLevelItems.ts]
+let x;
+function foo() {
+    let x;
+}
+
+module A {
+    let x;
+}
+
+//// [letKeepNamesOfTopLevelItems.js]
+var x;
+function foo() {
+    var x;
+}
+var A;
+(function (A) {
+    var x;
+})(A || (A = {}));
diff --git a/tests/baselines/reference/letKeepNamesOfTopLevelItems.types b/tests/baselines/reference/letKeepNamesOfTopLevelItems.types
new file mode 100644
index 00000000000..952be1512a9
--- /dev/null
+++ b/tests/baselines/reference/letKeepNamesOfTopLevelItems.types
@@ -0,0 +1,17 @@
+=== tests/cases/compiler/letKeepNamesOfTopLevelItems.ts ===
+let x;
+>x : any
+
+function foo() {
+>foo : () => void
+
+    let x;
+>x : any
+}
+
+module A {
+>A : typeof A
+
+    let x;
+>x : any
+}
diff --git a/tests/baselines/reference/letShadowedByNameInNestedScope.js b/tests/baselines/reference/letShadowedByNameInNestedScope.js
index b085f755795..648fe0b8e94 100644
--- a/tests/baselines/reference/letShadowedByNameInNestedScope.js
+++ b/tests/baselines/reference/letShadowedByNameInNestedScope.js
@@ -11,9 +11,9 @@ function foo() {
 //// [letShadowedByNameInNestedScope.js]
 var x;
 function foo() {
-    var x_1 = 0;
+    var x = 0;
     (function () {
         var _x = 1;
-        console.log(x_1);
+        console.log(x);
     })();
 }
diff --git a/tests/cases/compiler/letKeepNamesOfTopLevelItems.ts b/tests/cases/compiler/letKeepNamesOfTopLevelItems.ts
new file mode 100644
index 00000000000..b5fc5fc031c
--- /dev/null
+++ b/tests/cases/compiler/letKeepNamesOfTopLevelItems.ts
@@ -0,0 +1,8 @@
+let x;
+function foo() {
+    let x;
+}
+
+module A {
+    let x;
+}
\ No newline at end of file