diff --git a/src/compiler/parser.ts b/src/compiler/parser.ts
index cfe27e7e7c3..8b44bdab60c 100644
--- a/src/compiler/parser.ts
+++ b/src/compiler/parser.ts
@@ -1274,7 +1274,18 @@ module ts {
             var typeParameters = parseTypeParameters();
             var parameters = parseParameterList(SyntaxKind.OpenParenToken, SyntaxKind.CloseParenToken);
             checkParameterList(parameters);
-            var type = parseOptional(returnToken) ? parseType() : undefined;
+
+            var type: TypeNode;
+
+            if (returnToken === SyntaxKind.EqualsGreaterThanToken) {
+                parseExpected(returnToken);
+                type = parseType();
+            }
+            else if (parseOptional(returnToken)) 
+            {
+                type = parseType();
+            }
+
             return {
                 typeParameters: typeParameters,
                 parameters: parameters,
diff --git a/tests/baselines/reference/functionTypesLackingReturnTypes.errors.txt b/tests/baselines/reference/functionTypesLackingReturnTypes.errors.txt
new file mode 100644
index 00000000000..289f5d11d43
--- /dev/null
+++ b/tests/baselines/reference/functionTypesLackingReturnTypes.errors.txt
@@ -0,0 +1,18 @@
+==== tests/cases/compiler/functionTypesLackingReturnTypes.ts (2 errors) ====
+    
+    // Error (no '=>')
+    function f(x: ()) {
+                    ~
+!!! '=>' expected.
+    }
+    
+    // Error (no '=>')
+    var g: (param);
+                  ~
+!!! '=>' expected.
+    
+    // Okay
+    var h: { () }
+    
+    // Okay
+    var i: { new () }
\ No newline at end of file
diff --git a/tests/cases/compiler/functionTypesLackingReturnTypes.ts b/tests/cases/compiler/functionTypesLackingReturnTypes.ts
new file mode 100644
index 00000000000..f1dac471287
--- /dev/null
+++ b/tests/cases/compiler/functionTypesLackingReturnTypes.ts
@@ -0,0 +1,13 @@
+
+// Error (no '=>')
+function f(x: ()) {
+}
+
+// Error (no '=>')
+var g: (param);
+
+// Okay
+var h: { () }
+
+// Okay
+var i: { new () }
\ No newline at end of file