diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index e07c0eb237e..bef431bec46 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -9000,7 +9000,12 @@ module ts {
                 checkCollisionWithRequireExportsInGeneratedCode(node, node.name);
                 checkExportsOnMergedDeclarations(node);
                 var symbol = getSymbolOfNode(node);
-                if (symbol.flags & SymbolFlags.ValueModule && symbol.declarations.length > 1 && !isInAmbientContext(node)) {
+
+                // The following checks only apply on a non-ambient instantiated module declaration.
+                if (symbol.flags & SymbolFlags.ValueModule
+                    && symbol.declarations.length > 1
+                    && !isInAmbientContext(node)
+                    && isInstantiatedModule(node, compilerOptions.preserveConstEnums)) {
                     var classOrFunc = getFirstNonAmbientClassOrFunctionDeclaration(symbol);
                     if (classOrFunc) {
                         if (getSourceFileOfNode(node) !== getSourceFileOfNode(classOrFunc)) {
@@ -9011,6 +9016,8 @@ module ts {
                         }
                     }
                 }
+
+                // Checks for ambient external modules.
                 if (node.name.kind === SyntaxKind.StringLiteral) {
                     if (!isGlobalSourceFile(node.parent)) {
                         error(node.name, Diagnostics.Ambient_external_modules_cannot_be_nested_in_other_modules);
diff --git a/src/compiler/emitter.ts b/src/compiler/emitter.ts
index f3e45a85b6a..ef9a31d5872 100644
--- a/src/compiler/emitter.ts
+++ b/src/compiler/emitter.ts
@@ -3686,8 +3686,8 @@ module ts {
             }
 
             function emitModuleDeclaration(node: ModuleDeclaration) {
-                var shouldEmit = getModuleInstanceState(node) === ModuleInstanceState.Instantiated ||
-                    (getModuleInstanceState(node) === ModuleInstanceState.ConstEnumOnly && compilerOptions.preserveConstEnums);
+                // Emit only if this module is non-ambient.
+                var shouldEmit = isInstantiatedModule(node, compilerOptions.preserveConstEnums);
 
                 if (!shouldEmit) {
                     return emitPinnedOrTripleSlashComments(node);
diff --git a/src/compiler/utilities.ts b/src/compiler/utilities.ts
index edd8bf156cf..2c2c46805f6 100644
--- a/src/compiler/utilities.ts
+++ b/src/compiler/utilities.ts
@@ -525,6 +525,12 @@ module ts {
         return false;
     }
 
+    export function isInstantiatedModule(node: ModuleDeclaration, preserveConstEnums: boolean) {
+        var moduleState = getModuleInstanceState(node)
+        return moduleState === ModuleInstanceState.Instantiated ||
+               (preserveConstEnums && moduleState === ModuleInstanceState.ConstEnumOnly);
+    }
+
     export function isExternalModuleImportDeclaration(node: Node) {
         return node.kind === SyntaxKind.ImportDeclaration && (<ImportDeclaration>node).moduleReference.kind === SyntaxKind.ExternalModuleReference;
     }
diff --git a/tests/baselines/reference/cloduleWithPriorInstantiatedModule.errors.txt b/tests/baselines/reference/cloduleWithPriorInstantiatedModule.errors.txt
new file mode 100644
index 00000000000..1b0d9cf13ca
--- /dev/null
+++ b/tests/baselines/reference/cloduleWithPriorInstantiatedModule.errors.txt
@@ -0,0 +1,22 @@
+tests/cases/compiler/cloduleWithPriorInstantiatedModule.ts(2,8): error TS2434: A module declaration cannot be located prior to a class or function with which it is merged
+
+
+==== tests/cases/compiler/cloduleWithPriorInstantiatedModule.ts (1 errors) ====
+    // Non-ambient & instantiated module.
+    module Moclodule {
+           ~~~~~~~~~
+!!! error TS2434: A module declaration cannot be located prior to a class or function with which it is merged
+        export interface Someinterface {
+            foo(): void;
+        }
+        var x = 10;
+    }
+    
+    class Moclodule {
+    }
+    
+    // Instantiated module.
+    module Moclodule {
+        export class Manager {
+        }
+    }
\ No newline at end of file
diff --git a/tests/baselines/reference/cloduleWithPriorInstantiatedModule.js b/tests/baselines/reference/cloduleWithPriorInstantiatedModule.js
new file mode 100644
index 00000000000..601ab0a7536
--- /dev/null
+++ b/tests/baselines/reference/cloduleWithPriorInstantiatedModule.js
@@ -0,0 +1,39 @@
+//// [cloduleWithPriorInstantiatedModule.ts]
+// Non-ambient & instantiated module.
+module Moclodule {
+    export interface Someinterface {
+        foo(): void;
+    }
+    var x = 10;
+}
+
+class Moclodule {
+}
+
+// Instantiated module.
+module Moclodule {
+    export class Manager {
+    }
+}
+
+//// [cloduleWithPriorInstantiatedModule.js]
+// Non-ambient & instantiated module.
+var Moclodule;
+(function (Moclodule) {
+    var x = 10;
+})(Moclodule || (Moclodule = {}));
+var Moclodule = (function () {
+    function Moclodule() {
+    }
+    return Moclodule;
+})();
+// Instantiated module.
+var Moclodule;
+(function (Moclodule) {
+    var Manager = (function () {
+        function Manager() {
+        }
+        return Manager;
+    })();
+    Moclodule.Manager = Manager;
+})(Moclodule || (Moclodule = {}));
diff --git a/tests/baselines/reference/cloduleWithPriorUninstantiatedModule.js b/tests/baselines/reference/cloduleWithPriorUninstantiatedModule.js
new file mode 100644
index 00000000000..cf06f1134fb
--- /dev/null
+++ b/tests/baselines/reference/cloduleWithPriorUninstantiatedModule.js
@@ -0,0 +1,33 @@
+//// [cloduleWithPriorUninstantiatedModule.ts]
+// Non-ambient & uninstantiated module.
+module Moclodule {
+    export interface Someinterface {
+        foo(): void;
+    }
+}
+
+class Moclodule {
+}
+
+// Instantiated module.
+module Moclodule {
+    export class Manager {
+    }
+}
+
+//// [cloduleWithPriorUninstantiatedModule.js]
+var Moclodule = (function () {
+    function Moclodule() {
+    }
+    return Moclodule;
+})();
+// Instantiated module.
+var Moclodule;
+(function (Moclodule) {
+    var Manager = (function () {
+        function Manager() {
+        }
+        return Manager;
+    })();
+    Moclodule.Manager = Manager;
+})(Moclodule || (Moclodule = {}));
diff --git a/tests/baselines/reference/cloduleWithPriorUninstantiatedModule.types b/tests/baselines/reference/cloduleWithPriorUninstantiatedModule.types
new file mode 100644
index 00000000000..8dc14646a6b
--- /dev/null
+++ b/tests/baselines/reference/cloduleWithPriorUninstantiatedModule.types
@@ -0,0 +1,25 @@
+=== tests/cases/compiler/cloduleWithPriorUninstantiatedModule.ts ===
+// Non-ambient & uninstantiated module.
+module Moclodule {
+>Moclodule : typeof Moclodule
+
+    export interface Someinterface {
+>Someinterface : Someinterface
+
+        foo(): void;
+>foo : () => void
+    }
+}
+
+class Moclodule {
+>Moclodule : Moclodule
+}
+
+// Instantiated module.
+module Moclodule {
+>Moclodule : typeof Moclodule
+
+    export class Manager {
+>Manager : Manager
+    }
+}
diff --git a/tests/cases/compiler/cloduleWithPriorInstantiatedModule.ts b/tests/cases/compiler/cloduleWithPriorInstantiatedModule.ts
new file mode 100644
index 00000000000..c6423ce41a7
--- /dev/null
+++ b/tests/cases/compiler/cloduleWithPriorInstantiatedModule.ts
@@ -0,0 +1,16 @@
+// Non-ambient & instantiated module.
+module Moclodule {
+    export interface Someinterface {
+        foo(): void;
+    }
+    var x = 10;
+}
+
+class Moclodule {
+}
+
+// Instantiated module.
+module Moclodule {
+    export class Manager {
+    }
+}
\ No newline at end of file
diff --git a/tests/cases/compiler/cloduleWithPriorUninstantiatedModule.ts b/tests/cases/compiler/cloduleWithPriorUninstantiatedModule.ts
new file mode 100644
index 00000000000..0c603b71a4d
--- /dev/null
+++ b/tests/cases/compiler/cloduleWithPriorUninstantiatedModule.ts
@@ -0,0 +1,15 @@
+// Non-ambient & uninstantiated module.
+module Moclodule {
+    export interface Someinterface {
+        foo(): void;
+    }
+}
+
+class Moclodule {
+}
+
+// Instantiated module.
+module Moclodule {
+    export class Manager {
+    }
+}
\ No newline at end of file