diff --git a/src/canonicalize/ClosureTransformer.zig b/src/canonicalize/ClosureTransformer.zig
new file mode 100644
index 0000000000..2e47f32c28
--- /dev/null
+++ b/src/canonicalize/ClosureTransformer.zig
@@ -0,0 +1,847 @@
+//! Closure Transformer
+//!
+//! Transforms closures with captures into tagged values with explicit capture records.
+//! This is the first step of lambda set specialization following the Cor approach.
+//!
+//! ## Transformation Example
+//!
+//! Input:
+//! ```roc
+//! {
+//!     x = 42
+//!     addX = |y| x + y
+//!     addX(10)
+//! }
+//! ```
+//!
+//! Output:
+//! ```roc
+//! {
+//!     x = 42
+//!     addX = #addX({ x: x })
+//!     match addX {
+//!         #addX({ x }) => {
+//!             y = 10
+//!             (x + y)
+//!         },
+//!     }
+//! }
+//! ```
+//!
+//! ## Implementation Notes
+//!
+//! - Closures become tags with capture records (using `#` prefix to avoid clashing with userspace tags)
+//! - Call sites become inline match expressions that dispatch based on the lambda set
+//! - Pure lambdas (no captures) become tags with empty records
+
+const std = @import("std");
+const base = @import("base");
+
+const ModuleEnv = @import("ModuleEnv.zig");
+const CIR = @import("CIR.zig");
+const Expr = CIR.Expr;
+const Pattern = @import("Pattern.zig").Pattern;
+const RecordField = CIR.RecordField;
+
+const Self = @This();
+
+/// Information about a transformed closure
+pub const ClosureInfo = struct {
+    /// The tag name for this closure (e.g., `addX`)
+    tag_name: base.Ident.Idx,
+    /// The lambda body expression
+    lambda_body: Expr.Idx,
+    /// The lambda arguments
+    lambda_args: CIR.Pattern.Span,
+    /// The capture names (for generating dispatch function patterns)
+    capture_names: std.ArrayList(base.Ident.Idx),
+};
+
+/// Information for generating a dispatch function
+pub const DispatchFunction = struct {
+    /// Name of the dispatch function (e.g., `call_addX`)
+    name: base.Ident.Idx,
+    /// The closures that can reach this call site
+    closures: std.ArrayList(ClosureInfo),
+};
+
+/// The allocator for intermediate allocations
+allocator: std.mem.Allocator,
+
+/// The module environment containing the CIR (mutable for adding new expressions)
+module_env: *ModuleEnv,
+
+/// Counter for generating unique closure names
+closure_counter: u32,
+
+/// Map from original closure expression to its transformation info
+closures: std.AutoHashMap(Expr.Idx, ClosureInfo),
+
+/// Map from pattern index to closure info (for tracking which variables hold closures)
+pattern_closures: std.AutoHashMap(CIR.Pattern.Idx, ClosureInfo),
+
+/// List of dispatch functions to generate
+dispatch_functions: std.ArrayList(DispatchFunction),
+
+/// Initialize the transformer
+pub fn init(allocator: std.mem.Allocator, module_env: *ModuleEnv) Self {
+    return .{
+        .allocator = allocator,
+        .module_env = module_env,
+        .closure_counter = 0,
+        .closures = std.AutoHashMap(Expr.Idx, ClosureInfo).init(allocator),
+        .pattern_closures = std.AutoHashMap(CIR.Pattern.Idx, ClosureInfo).init(allocator),
+        .dispatch_functions = std.ArrayList(DispatchFunction).empty,
+    };
+}
+
+/// Free resources
+pub fn deinit(self: *Self) void {
+    // Free capture name lists
+    var closure_iter = self.closures.valueIterator();
+    while (closure_iter.next()) |info| {
+        info.capture_names.deinit(self.allocator);
+    }
+    self.closures.deinit();
+
+    // pattern_closures shares ClosureInfo with closures, don't double-free
+    self.pattern_closures.deinit();
+
+    // Free dispatch function closure lists
+    for (self.dispatch_functions.items) |*df| {
+        df.closures.deinit(self.allocator);
+    }
+    self.dispatch_functions.deinit(self.allocator);
+}
+
+/// Generate a unique tag name for a closure
+pub fn generateClosureTagName(self: *Self, hint: ?base.Ident.Idx) !base.Ident.Idx {
+    self.closure_counter += 1;
+
+    // If we have a hint (e.g., from the variable name), use it
+    if (hint) |h| {
+        const hint_name = self.module_env.getIdent(h);
+        // Use # prefix since it's Roc's comment syntax and can't clash with userspace tags
+        // e.g., "myFunc" becomes "#myFunc"
+        const tag_name = try std.fmt.allocPrint(
+            self.allocator,
+            "#{s}",
+            .{hint_name},
+        );
+        defer self.allocator.free(tag_name);
+        return try self.module_env.insertIdent(base.Ident.for_text(tag_name));
+    }
+
+    // Otherwise generate a numeric name
+    const tag_name = try std.fmt.allocPrint(
+        self.allocator,
+        "#{d}",
+        .{self.closure_counter},
+    );
+    defer self.allocator.free(tag_name);
+    return try self.module_env.insertIdent(base.Ident.for_text(tag_name));
+}
+
+/// Generate a dispatch match expression for a closure call.
+///
+/// Transforms a call like `f(10)` where `f` is a closure into:
+/// ```roc
+/// match f {
+///     #f({ x }) => {
+///         y = 10      # Bind call arguments to lambda parameters
+///         x + y       # Original lambda body
+///     }
+/// }
+/// ```
+fn generateDispatchMatch(
+    self: *Self,
+    closure_var_expr: Expr.Idx,
+    closure_info: ClosureInfo,
+    call_args: []const Expr.Idx,
+) !Expr.Idx {
+    // Step 1: Create the capture record destructure pattern
+    // For `{ x, y }` we need a record_destructure with each field
+
+    const record_destruct_start = self.module_env.store.scratchRecordDestructTop();
+
+    for (closure_info.capture_names.items) |capture_name| {
+        // Create an assign pattern for this capture binding
+        const assign_pattern = try self.module_env.store.addPattern(
+            Pattern{ .assign = .{ .ident = capture_name } },
+            base.Region.zero(),
+        );
+
+        // Create the record destruct for this field
+        const destruct = Pattern.RecordDestruct{
+            .label = capture_name,
+            .ident = capture_name,
+            .kind = .{ .Required = assign_pattern },
+        };
+        const destruct_idx = try self.module_env.store.addRecordDestruct(destruct, base.Region.zero());
+        try self.module_env.store.addScratchRecordDestruct(destruct_idx);
+    }
+
+    const destructs_span = try self.module_env.store.recordDestructSpanFrom(record_destruct_start);
+
+    // Create the record destructure pattern
+    const record_pattern = try self.module_env.store.addPattern(
+        Pattern{ .record_destructure = .{ .destructs = destructs_span } },
+        base.Region.zero(),
+    );
+
+    // Step 2: Create the applied_tag pattern: `f({ x, y })
+    // The tag pattern takes the record pattern as its single argument
+    const pattern_args_start = self.module_env.store.scratchPatternTop();
+    try self.module_env.store.addScratchPattern(record_pattern);
+    const pattern_args_span = try self.module_env.store.patternSpanFrom(pattern_args_start);
+
+    const tag_pattern = try self.module_env.store.addPattern(
+        Pattern{ .applied_tag = .{
+            .name = closure_info.tag_name,
+            .args = pattern_args_span,
+        } },
+        base.Region.zero(),
+    );
+
+    // Step 3: Create the body - a block that binds arguments then executes lambda body
+    // We need to bind each call argument to the corresponding lambda parameter
+
+    const lambda_params = self.module_env.store.slicePatterns(closure_info.lambda_args);
+
+    // If we have arguments to bind, create a block with let bindings
+    const body_expr = if (call_args.len > 0 and lambda_params.len > 0) blk: {
+        const stmt_start = self.module_env.store.scratch.?.statements.top();
+
+        // Bind each argument to its parameter
+        const num_args = @min(call_args.len, lambda_params.len);
+        for (0..num_args) |i| {
+            const param_pattern = lambda_params[i];
+            const arg_expr = call_args[i];
+
+            const stmt = CIR.Statement{ .s_decl = .{
+                .pattern = param_pattern,
+                .expr = arg_expr,
+                .anno = null,
+            } };
+            const stmt_idx = try self.module_env.store.addStatement(stmt, base.Region.zero());
+            try self.module_env.store.scratch.?.statements.append(stmt_idx);
+        }
+
+        const stmts_span = try self.module_env.store.statementSpanFrom(stmt_start);
+
+        // Create block with bindings and lambda body as final expression
+        break :blk try self.module_env.store.addExpr(Expr{
+            .e_block = .{
+                .stmts = stmts_span,
+                .final_expr = closure_info.lambda_body,
+            },
+        }, base.Region.zero());
+    } else blk: {
+        // No arguments, just use the lambda body directly
+        break :blk closure_info.lambda_body;
+    };
+
+    // Step 4: Create the match branch
+    const branch_pattern_start = self.module_env.store.scratchMatchBranchPatternTop();
+    const branch_pattern = try self.module_env.store.addMatchBranchPattern(
+        Expr.Match.BranchPattern{
+            .pattern = tag_pattern,
+            .degenerate = false,
+        },
+        base.Region.zero(),
+    );
+    try self.module_env.store.addScratchMatchBranchPattern(branch_pattern);
+    const branch_patterns_span = try self.module_env.store.matchBranchPatternSpanFrom(branch_pattern_start);
+
+    // Create a fresh type variable for the redundant field
+    const redundant_var = try self.module_env.types.fresh();
+
+    const branch = Expr.Match.Branch{
+        .patterns = branch_patterns_span,
+        .value = body_expr,
+        .guard = null,
+        .redundant = redundant_var,
+    };
+    const branch_idx = try self.module_env.store.addMatchBranch(branch, base.Region.zero());
+
+    // Step 5: Create the match expression
+    const branch_start = self.module_env.store.scratchMatchBranchTop();
+    try self.module_env.store.addScratchMatchBranch(branch_idx);
+    const branches_span = try self.module_env.store.matchBranchSpanFrom(branch_start);
+
+    // Create a fresh type variable for exhaustiveness
+    const exhaustive_var = try self.module_env.types.fresh();
+
+    return try self.module_env.store.addExpr(Expr{
+        .e_match = .{
+            .cond = closure_var_expr,
+            .branches = branches_span,
+            .exhaustive = exhaustive_var,
+        },
+    }, base.Region.zero());
+}
+
+/// Transform a closure expression into a tag with capture record.
+/// Returns the new expression index.
+pub fn transformClosure(
+    self: *Self,
+    closure_expr_idx: Expr.Idx,
+    binding_name_hint: ?base.Ident.Idx,
+) !Expr.Idx {
+    const expr = self.module_env.store.getExpr(closure_expr_idx);
+
+    switch (expr) {
+        .e_closure => |closure| {
+            // Get the lambda body and args
+            const lambda_expr = self.module_env.store.getExpr(closure.lambda_idx);
+            const lambda = switch (lambda_expr) {
+                .e_lambda => |l| l,
+                else => return closure_expr_idx, // Not a lambda, return as-is
+            };
+
+            // Generate tag name
+            const tag_name = try self.generateClosureTagName(binding_name_hint);
+
+            // Get captures
+            const captures = self.module_env.store.sliceCaptures(closure.captures);
+
+            // Build capture record fields
+            const scratch_top = self.module_env.store.scratch.?.record_fields.top();
+
+            var capture_names = std.ArrayList(base.Ident.Idx).empty;
+
+            for (captures) |capture_idx| {
+                const capture = self.module_env.store.getCapture(capture_idx);
+
+                // Create a lookup expression for the captured variable
+                // Use store.addExpr directly to avoid region sync checks during transformation
+                const lookup_expr = try self.module_env.store.addExpr(Expr{
+                    .e_lookup_local = .{ .pattern_idx = capture.pattern_idx },
+                }, base.Region.zero());
+
+                // Create record field: { capture_name: capture_value }
+                const field = RecordField{
+                    .name = capture.name,
+                    .value = lookup_expr,
+                };
+                const field_idx = try self.module_env.store.addRecordField(field, base.Region.zero());
+                try self.module_env.store.scratch.?.record_fields.append(field_idx);
+                try capture_names.append(self.allocator, capture.name);
+            }
+
+            // Create the record expression
+            const fields_span = try self.module_env.store.recordFieldSpanFrom(scratch_top);
+
+            const record_expr = if (captures.len > 0)
+                try self.module_env.store.addExpr(Expr{
+                    .e_record = .{ .fields = fields_span, .ext = null },
+                }, base.Region.zero())
+            else
+                try self.module_env.store.addExpr(Expr{
+                    .e_empty_record = .{},
+                }, base.Region.zero());
+
+            // Create the tag expression: `tagName(captureRecord)
+            // First, add the record as an argument
+            const args_start = self.module_env.store.scratch.?.exprs.top();
+            try self.module_env.store.scratch.?.exprs.append(record_expr);
+            const args_span = try self.module_env.store.exprSpanFrom(args_start);
+
+            const tag_expr = try self.module_env.store.addExpr(Expr{
+                .e_tag = .{
+                    .name = tag_name,
+                    .args = args_span,
+                },
+            }, base.Region.zero());
+
+            // Store closure info for dispatch function generation
+            try self.closures.put(closure_expr_idx, ClosureInfo{
+                .tag_name = tag_name,
+                .lambda_body = lambda.body,
+                .lambda_args = lambda.args,
+                .capture_names = capture_names,
+            });
+
+            return tag_expr;
+        },
+        .e_lambda => |lambda| {
+            // Pure lambda (no captures) - still wrap in a tag with empty record
+            const tag_name = try self.generateClosureTagName(binding_name_hint);
+
+            const empty_record = try self.module_env.store.addExpr(Expr{
+                .e_empty_record = .{},
+            }, base.Region.zero());
+
+            const args_start = self.module_env.store.scratch.?.exprs.top();
+            try self.module_env.store.scratch.?.exprs.append(empty_record);
+            const args_span = try self.module_env.store.exprSpanFrom(args_start);
+
+            const tag_expr = try self.module_env.store.addExpr(Expr{
+                .e_tag = .{
+                    .name = tag_name,
+                    .args = args_span,
+                },
+            }, base.Region.zero());
+
+            // Store info for dispatch
+            try self.closures.put(closure_expr_idx, ClosureInfo{
+                .tag_name = tag_name,
+                .lambda_body = lambda.body,
+                .lambda_args = lambda.args,
+                .capture_names = std.ArrayList(base.Ident.Idx).empty,
+            });
+
+            return tag_expr;
+        },
+        else => return closure_expr_idx, // Not a closure, return as-is
+    }
+}
+
+/// Transform an entire expression tree, handling closures and their call sites.
+/// This is the main entry point for the transformation.
+pub fn transformExpr(self: *Self, expr_idx: Expr.Idx) !Expr.Idx {
+    const expr = self.module_env.store.getExpr(expr_idx);
+
+    switch (expr) {
+        .e_closure => {
+            // Transform closure to tag
+            return try self.transformClosure(expr_idx, null);
+        },
+        .e_lambda => {
+            // Transform pure lambda to tag
+            return try self.transformClosure(expr_idx, null);
+        },
+        .e_block => |block| {
+            // Transform block: handle statements and final expression
+            const stmts = self.module_env.store.sliceStatements(block.stmts);
+
+            // Create new statements with transformed expressions
+            const stmt_start = self.module_env.store.scratch.?.statements.top();
+
+            for (stmts) |stmt_idx| {
+                const stmt = self.module_env.store.getStatement(stmt_idx);
+                switch (stmt) {
+                    .s_decl => |decl| {
+                        // Get binding name hint from pattern
+                        const pattern = self.module_env.store.getPattern(decl.pattern);
+                        const name_hint: ?base.Ident.Idx = switch (pattern) {
+                            .assign => |a| a.ident,
+                            else => null,
+                        };
+
+                        // Check if this is a closure binding
+                        const decl_expr = self.module_env.store.getExpr(decl.expr);
+                        const new_expr = switch (decl_expr) {
+                            .e_closure, .e_lambda => blk: {
+                                const transformed = try self.transformClosure(decl.expr, name_hint);
+                                // Track this pattern as holding a closure
+                                if (self.closures.get(decl.expr)) |closure_info| {
+                                    try self.pattern_closures.put(decl.pattern, closure_info);
+                                }
+                                break :blk transformed;
+                            },
+                            else => try self.transformExpr(decl.expr),
+                        };
+
+                        // Create new statement with transformed expression
+                        const new_stmt_idx = try self.module_env.store.addStatement(
+                            CIR.Statement{ .s_decl = .{
+                                .pattern = decl.pattern,
+                                .expr = new_expr,
+                                .anno = decl.anno,
+                            } },
+                            base.Region.zero(),
+                        );
+                        try self.module_env.store.scratch.?.statements.append(new_stmt_idx);
+                    },
+                    .s_decl_gen => |decl| {
+                        const pattern = self.module_env.store.getPattern(decl.pattern);
+                        const name_hint: ?base.Ident.Idx = switch (pattern) {
+                            .assign => |a| a.ident,
+                            else => null,
+                        };
+
+                        const decl_expr = self.module_env.store.getExpr(decl.expr);
+                        const new_expr = switch (decl_expr) {
+                            .e_closure, .e_lambda => blk: {
+                                const transformed = try self.transformClosure(decl.expr, name_hint);
+                                // Track this pattern as holding a closure
+                                if (self.closures.get(decl.expr)) |closure_info| {
+                                    try self.pattern_closures.put(decl.pattern, closure_info);
+                                }
+                                break :blk transformed;
+                            },
+                            else => try self.transformExpr(decl.expr),
+                        };
+
+                        const new_stmt_idx = try self.module_env.store.addStatement(
+                            CIR.Statement{ .s_decl_gen = .{
+                                .pattern = decl.pattern,
+                                .expr = new_expr,
+                                .anno = decl.anno,
+                            } },
+                            base.Region.zero(),
+                        );
+                        try self.module_env.store.scratch.?.statements.append(new_stmt_idx);
+                    },
+                    else => {
+                        // Copy statement as-is
+                        try self.module_env.store.scratch.?.statements.append(stmt_idx);
+                    },
+                }
+            }
+
+            const new_stmts_span = try self.module_env.store.statementSpanFrom(stmt_start);
+
+            // Transform final expression
+            const new_final = try self.transformExpr(block.final_expr);
+
+            // Create new block
+            return try self.module_env.store.addExpr(Expr{
+                .e_block = .{
+                    .stmts = new_stmts_span,
+                    .final_expr = new_final,
+                },
+            }, base.Region.zero());
+        },
+        .e_call => |call| {
+            // First transform arguments recursively
+            const args = self.module_env.store.sliceExpr(call.args);
+            const args_start = self.module_env.store.scratch.?.exprs.top();
+
+            for (args) |arg_idx| {
+                const new_arg = try self.transformExpr(arg_idx);
+                try self.module_env.store.scratch.?.exprs.append(new_arg);
+            }
+
+            const new_args_span = try self.module_env.store.exprSpanFrom(args_start);
+            const transformed_args = self.module_env.store.sliceExpr(new_args_span);
+
+            // Check if the function is a local variable that holds a closure
+            const func_expr = self.module_env.store.getExpr(call.func);
+            switch (func_expr) {
+                .e_lookup_local => |lookup| {
+                    // Check if this pattern was assigned a closure
+                    if (self.pattern_closures.get(lookup.pattern_idx)) |closure_info| {
+                        // Generate a dispatch match expression
+                        return try self.generateDispatchMatch(
+                            call.func,
+                            closure_info,
+                            transformed_args,
+                        );
+                    }
+                },
+                else => {},
+            }
+
+            // Not a closure call, transform normally
+            const new_func = try self.transformExpr(call.func);
+
+            return try self.module_env.store.addExpr(Expr{
+                .e_call = .{
+                    .func = new_func,
+                    .args = new_args_span,
+                    .called_via = call.called_via,
+                },
+            }, base.Region.zero());
+        },
+        .e_if => |if_expr| {
+            const branches = self.module_env.store.sliceIfBranches(if_expr.branches);
+            const branch_start = self.module_env.store.scratch.?.if_branches.top();
+
+            for (branches) |branch_idx| {
+                const branch = self.module_env.store.getIfBranch(branch_idx);
+                const new_cond = try self.transformExpr(branch.cond);
+                const new_body = try self.transformExpr(branch.body);
+
+                const new_branch_idx = try self.module_env.store.addIfBranch(
+                    Expr.IfBranch{ .cond = new_cond, .body = new_body },
+                    base.Region.zero(),
+                );
+                try self.module_env.store.scratch.?.if_branches.append(new_branch_idx);
+            }
+
+            const new_branches_span = try self.module_env.store.ifBranchSpanFrom(branch_start);
+            const new_else = try self.transformExpr(if_expr.final_else);
+
+            return try self.module_env.store.addExpr(Expr{
+                .e_if = .{
+                    .branches = new_branches_span,
+                    .final_else = new_else,
+                },
+            }, base.Region.zero());
+        },
+        .e_binop => |binop| {
+            const new_lhs = try self.transformExpr(binop.lhs);
+            const new_rhs = try self.transformExpr(binop.rhs);
+
+            return try self.module_env.store.addExpr(Expr{
+                .e_binop = .{
+                    .op = binop.op,
+                    .lhs = new_lhs,
+                    .rhs = new_rhs,
+                },
+            }, base.Region.zero());
+        },
+        // Pass through simple expressions unchanged
+        .e_num,
+        .e_frac_f32,
+        .e_frac_f64,
+        .e_dec,
+        .e_dec_small,
+        .e_str_segment,
+        .e_str,
+        .e_lookup_local,
+        .e_lookup_external,
+        .e_empty_list,
+        .e_empty_record,
+        .e_zero_argument_tag,
+        .e_runtime_error,
+        .e_ellipsis,
+        .e_anno_only,
+        .e_lookup_required,
+        .e_type_var_dispatch,
+        .e_hosted_lambda,
+        .e_low_level_lambda,
+        => return expr_idx,
+
+        .e_list => |list| {
+            const elems = self.module_env.store.sliceExpr(list.elems);
+            const elems_start = self.module_env.store.scratch.?.exprs.top();
+
+            for (elems) |elem_idx| {
+                const new_elem = try self.transformExpr(elem_idx);
+                try self.module_env.store.scratch.?.exprs.append(new_elem);
+            }
+
+            const new_elems_span = try self.module_env.store.exprSpanFrom(elems_start);
+
+            return try self.module_env.store.addExpr(Expr{
+                .e_list = .{ .elems = new_elems_span },
+            }, base.Region.zero());
+        },
+        .e_tuple => |tuple| {
+            const elems = self.module_env.store.sliceExpr(tuple.elems);
+            const elems_start = self.module_env.store.scratch.?.exprs.top();
+
+            for (elems) |elem_idx| {
+                const new_elem = try self.transformExpr(elem_idx);
+                try self.module_env.store.scratch.?.exprs.append(new_elem);
+            }
+
+            const new_elems_span = try self.module_env.store.exprSpanFrom(elems_start);
+
+            return try self.module_env.store.addExpr(Expr{
+                .e_tuple = .{ .elems = new_elems_span },
+            }, base.Region.zero());
+        },
+        .e_record => |record| {
+            const field_indices = self.module_env.store.sliceRecordFields(record.fields);
+            const fields_start = self.module_env.store.scratch.?.record_fields.top();
+
+            for (field_indices) |field_idx| {
+                const field = self.module_env.store.getRecordField(field_idx);
+                const new_value = try self.transformExpr(field.value);
+
+                const new_field = RecordField{
+                    .name = field.name,
+                    .value = new_value,
+                };
+                const new_field_idx = try self.module_env.store.addRecordField(new_field, base.Region.zero());
+                try self.module_env.store.scratch.?.record_fields.append(new_field_idx);
+            }
+
+            const new_fields_span = try self.module_env.store.recordFieldSpanFrom(fields_start);
+
+            const new_ext = if (record.ext) |ext| try self.transformExpr(ext) else null;
+
+            return try self.module_env.store.addExpr(Expr{
+                .e_record = .{
+                    .fields = new_fields_span,
+                    .ext = new_ext,
+                },
+            }, base.Region.zero());
+        },
+        .e_tag => |tag| {
+            const args = self.module_env.store.sliceExpr(tag.args);
+            const args_start = self.module_env.store.scratch.?.exprs.top();
+
+            for (args) |arg_idx| {
+                const new_arg = try self.transformExpr(arg_idx);
+                try self.module_env.store.scratch.?.exprs.append(new_arg);
+            }
+
+            const new_args_span = try self.module_env.store.exprSpanFrom(args_start);
+
+            return try self.module_env.store.addExpr(Expr{
+                .e_tag = .{
+                    .name = tag.name,
+                    .args = new_args_span,
+                },
+            }, base.Region.zero());
+        },
+        .e_unary_minus => |unary| {
+            const new_expr = try self.transformExpr(unary.expr);
+            return try self.module_env.store.addExpr(Expr{
+                .e_unary_minus = .{ .expr = new_expr },
+            }, base.Region.zero());
+        },
+        .e_unary_not => |unary| {
+            const new_expr = try self.transformExpr(unary.expr);
+            return try self.module_env.store.addExpr(Expr{
+                .e_unary_not = .{ .expr = new_expr },
+            }, base.Region.zero());
+        },
+        .e_dot_access => |dot| {
+            const new_receiver = try self.transformExpr(dot.receiver);
+            const new_args = if (dot.args) |args_span| blk: {
+                const args = self.module_env.store.sliceExpr(args_span);
+                const args_start = self.module_env.store.scratch.?.exprs.top();
+
+                for (args) |arg_idx| {
+                    const new_arg = try self.transformExpr(arg_idx);
+                    try self.module_env.store.scratch.?.exprs.append(new_arg);
+                }
+
+                break :blk try self.module_env.store.exprSpanFrom(args_start);
+            } else null;
+
+            return try self.module_env.store.addExpr(Expr{
+                .e_dot_access = .{
+                    .receiver = new_receiver,
+                    .field_name = dot.field_name,
+                    .field_name_region = dot.field_name_region,
+                    .args = new_args,
+                },
+            }, base.Region.zero());
+        },
+        .e_crash => return expr_idx,
+        .e_dbg => |dbg| {
+            const new_expr = try self.transformExpr(dbg.expr);
+            return try self.module_env.store.addExpr(Expr{
+                .e_dbg = .{
+                    .expr = new_expr,
+                },
+            }, base.Region.zero());
+        },
+        .e_expect => |expect| {
+            const new_body = try self.transformExpr(expect.body);
+            return try self.module_env.store.addExpr(Expr{
+                .e_expect = .{
+                    .body = new_body,
+                },
+            }, base.Region.zero());
+        },
+        .e_return => |ret| {
+            const new_expr = try self.transformExpr(ret.expr);
+            return try self.module_env.store.addExpr(Expr{
+                .e_return = .{ .expr = new_expr },
+            }, base.Region.zero());
+        },
+        .e_match => |match| {
+            const new_cond = try self.transformExpr(match.cond);
+            // Note: match branches would need deeper transformation for closures in branches
+            // For now, pass through as-is
+            return try self.module_env.store.addExpr(Expr{
+                .e_match = .{
+                    .cond = new_cond,
+                    .branches = match.branches,
+                    .exhaustive = match.exhaustive,
+                },
+            }, base.Region.zero());
+        },
+        .e_nominal => |nominal| {
+            const new_backing = try self.transformExpr(nominal.backing_expr);
+            return try self.module_env.store.addExpr(Expr{
+                .e_nominal = .{
+                    .nominal_type_decl = nominal.nominal_type_decl,
+                    .backing_expr = new_backing,
+                    .backing_type = nominal.backing_type,
+                },
+            }, base.Region.zero());
+        },
+        .e_nominal_external => |nominal| {
+            const new_backing = try self.transformExpr(nominal.backing_expr);
+            return try self.module_env.store.addExpr(Expr{
+                .e_nominal_external = .{
+                    .module_idx = nominal.module_idx,
+                    .target_node_idx = nominal.target_node_idx,
+                    .backing_expr = new_backing,
+                    .backing_type = nominal.backing_type,
+                },
+            }, base.Region.zero());
+        },
+        .e_for => |for_expr| {
+            const new_expr = try self.transformExpr(for_expr.expr);
+            const new_body = try self.transformExpr(for_expr.body);
+            return try self.module_env.store.addExpr(Expr{
+                .e_for = .{
+                    .patt = for_expr.patt,
+                    .expr = new_expr,
+                    .body = new_body,
+                },
+            }, base.Region.zero());
+        },
+    }
+}
+
+// Tests
+
+const testing = std.testing;
+
+test "ClosureTransformer: init and deinit" {
+    const allocator = testing.allocator;
+
+    const module_env = try allocator.create(ModuleEnv);
+    module_env.* = try ModuleEnv.init(allocator, "test");
+    defer {
+        module_env.deinit();
+        allocator.destroy(module_env);
+    }
+
+    var transformer = Self.init(allocator, module_env);
+    defer transformer.deinit();
+
+    try testing.expectEqual(@as(u32, 0), transformer.closure_counter);
+}
+
+test "ClosureTransformer: generateClosureTagName with hint" {
+    const allocator = testing.allocator;
+
+    const module_env = try allocator.create(ModuleEnv);
+    module_env.* = try ModuleEnv.init(allocator, "test");
+    defer {
+        module_env.deinit();
+        allocator.destroy(module_env);
+    }
+
+    var transformer = Self.init(allocator, module_env);
+    defer transformer.deinit();
+
+    // Create a hint identifier
+    const hint = try module_env.insertIdent(base.Ident.for_text("addX"));
+
+    const tag_name = try transformer.generateClosureTagName(hint);
+    const tag_str = module_env.getIdent(tag_name);
+
+    try testing.expectEqualStrings("#addX", tag_str);
+}
+
+test "ClosureTransformer: generateClosureTagName without hint" {
+    const allocator = testing.allocator;
+
+    const module_env = try allocator.create(ModuleEnv);
+    module_env.* = try ModuleEnv.init(allocator, "test");
+    defer {
+        module_env.deinit();
+        allocator.destroy(module_env);
+    }
+
+    var transformer = Self.init(allocator, module_env);
+    defer transformer.deinit();
+
+    const tag_name = try transformer.generateClosureTagName(null);
+    const tag_str = module_env.getIdent(tag_name);
+
+    try testing.expectEqualStrings("#1", tag_str);
+}
diff --git a/src/canonicalize/Monomorphizer.zig b/src/canonicalize/Monomorphizer.zig
index 88b229f096..0f1af11762 100644
--- a/src/canonicalize/Monomorphizer.zig
+++ b/src/canonicalize/Monomorphizer.zig
@@ -147,20 +147,6 @@ pub fn createSpecializedName(
     return specialized_ident;
 }
 
-/// Monomorphize a module's top-level expressions
-/// Returns a new ModuleEnv with specialized functions
-pub fn monomorphize() !void {
-    // Phase 1: Just traverse and identify what needs specialization
-    // For now, this is a placeholder for the full implementation
-
-    // In a full implementation, we would:
-    // 1. Find all top-level function definitions
-    // 2. Analyze their types to find polymorphic ones
-    // 3. Find all call sites and their concrete types
-    // 4. Create specialized versions
-    // 5. Update call sites to use specialized versions
-}
-
 // Tests
 
 const testing = std.testing;
diff --git a/src/canonicalize/mod.zig b/src/canonicalize/mod.zig
index 3d8ee52784..6143a53448 100644
--- a/src/canonicalize/mod.zig
+++ b/src/canonicalize/mod.zig
@@ -18,6 +18,8 @@ pub const HostedCompiler = @import("HostedCompiler.zig");
 pub const RocEmitter = @import("RocEmitter.zig");
 /// Monomorphizer - specializes polymorphic functions to concrete types
 pub const Monomorphizer = @import("Monomorphizer.zig");
+/// Closure Transformer - transforms closures with captures into tagged values
+pub const ClosureTransformer = @import("ClosureTransformer.zig");
 
 test "compile tests" {
     std.testing.refAllDecls(@This());
@@ -54,4 +56,5 @@ test "compile tests" {
 
     // Monomorphization
     std.testing.refAllDecls(@import("Monomorphizer.zig"));
+    std.testing.refAllDecls(@import("ClosureTransformer.zig"));
 }
diff --git a/src/eval/test/mono_emit_test.zig b/src/eval/test/mono_emit_test.zig
index 8b053af12d..d812e4b997 100644
--- a/src/eval/test/mono_emit_test.zig
+++ b/src/eval/test/mono_emit_test.zig
@@ -346,3 +346,334 @@ test "roundtrip: complex arithmetic produces same result" {
     try testing.expectEqual(original_result, emitted_result);
     try testing.expectEqual(@as(i128, 16), emitted_result);
 }
+
+/// Helper to check if source code contains a closure with captures
+fn hasClosureWithCaptures(allocator: std.mem.Allocator, source: []const u8) !bool {
+    const resources = try helpers.parseAndCanonicalizeExpr(allocator, source);
+    defer helpers.cleanupParseAndCanonical(allocator, resources);
+
+    // Recursively check if any expression is a closure with captures
+    return checkForCapturesRecursive(resources.module_env, resources.expr_idx);
+}
+
+fn checkForCapturesRecursive(module_env: *can.ModuleEnv, expr_idx: can.CIR.Expr.Idx) bool {
+    const expr = module_env.store.getExpr(expr_idx);
+    switch (expr) {
+        .e_closure => |closure| {
+            if (closure.captures.span.len > 0) {
+                return true;
+            }
+            // Also check the lambda body
+            return checkForCapturesRecursive(module_env, closure.lambda_idx);
+        },
+        .e_lambda => |lambda| {
+            return checkForCapturesRecursive(module_env, lambda.body);
+        },
+        .e_block => |block| {
+            // Check statements
+            const stmts = module_env.store.sliceStatements(block.stmts);
+            for (stmts) |stmt_idx| {
+                const stmt = module_env.store.getStatement(stmt_idx);
+                switch (stmt) {
+                    .s_decl => |decl| {
+                        if (checkForCapturesRecursive(module_env, decl.expr)) {
+                            return true;
+                        }
+                    },
+                    .s_decl_gen => |decl| {
+                        if (checkForCapturesRecursive(module_env, decl.expr)) {
+                            return true;
+                        }
+                    },
+                    else => {},
+                }
+            }
+            // Check final expression
+            return checkForCapturesRecursive(module_env, block.final_expr);
+        },
+        .e_call => |call| {
+            if (checkForCapturesRecursive(module_env, call.func)) {
+                return true;
+            }
+            const args = module_env.store.sliceExpr(call.args);
+            for (args) |arg_idx| {
+                if (checkForCapturesRecursive(module_env, arg_idx)) {
+                    return true;
+                }
+            }
+            return false;
+        },
+        .e_if => |if_expr| {
+            const branches = module_env.store.sliceIfBranches(if_expr.branches);
+            for (branches) |branch_idx| {
+                const branch = module_env.store.getIfBranch(branch_idx);
+                if (checkForCapturesRecursive(module_env, branch.cond) or
+                    checkForCapturesRecursive(module_env, branch.body))
+                {
+                    return true;
+                }
+            }
+            return checkForCapturesRecursive(module_env, if_expr.final_else);
+        },
+        .e_binop => |binop| {
+            return checkForCapturesRecursive(module_env, binop.lhs) or
+                checkForCapturesRecursive(module_env, binop.rhs);
+        },
+        else => return false,
+    }
+}
+
+test "detect closure with single capture" {
+    const source =
+        \\{
+        \\    x = 42
+        \\    f = |y| x + y
+        \\    f(10)
+        \\}
+    ;
+
+    const has_captures = try hasClosureWithCaptures(test_allocator, source);
+    try testing.expect(has_captures);
+}
+
+test "detect closure with multiple captures" {
+    const source =
+        \\{
+        \\    a = 1
+        \\    b = 2
+        \\    f = |x| a + b + x
+        \\    f(3)
+        \\}
+    ;
+
+    const has_captures = try hasClosureWithCaptures(test_allocator, source);
+    try testing.expect(has_captures);
+}
+
+test "detect pure lambda (no captures)" {
+    const source =
+        \\{
+        \\    f = |x| x + 1
+        \\    f(41)
+        \\}
+    ;
+
+    const has_captures = try hasClosureWithCaptures(test_allocator, source);
+    try testing.expect(!has_captures);
+}
+
+/// Helper to transform a single closure expression directly (not in a block)
+fn transformClosureExpr(allocator: std.mem.Allocator, source: []const u8) ![]const u8 {
+    const resources = try helpers.parseAndCanonicalizeExpr(allocator, source);
+    defer helpers.cleanupParseAndCanonical(allocator, resources);
+
+    // Create transformer
+    var transformer = can.ClosureTransformer.init(allocator, resources.module_env);
+    defer transformer.deinit();
+
+    // Transform just the expression (not the block around it)
+    const transformed_idx = try transformer.transformClosure(resources.expr_idx, null);
+
+    // Emit the transformed expression
+    var emitter = Emitter.init(allocator, resources.module_env);
+    defer emitter.deinit();
+
+    try emitter.emitExpr(transformed_idx);
+
+    return try allocator.dupe(u8, emitter.getOutput());
+}
+
+test "transform pure lambda to tag" {
+    // Test a pure lambda (no captures) - parsed directly without a block
+    const source = "|x| x + 1";
+
+    const output = try transformClosureExpr(test_allocator, source);
+    defer test_allocator.free(output);
+
+    // Pure lambda should be transformed to a # tag with empty record
+    try testing.expect(std.mem.indexOf(u8, output, "#") != null);
+    try testing.expect(std.mem.indexOf(u8, output, "{}") != null);
+}
+
+/// Helper to transform closures in a block and emit the result
+fn transformBlockAndEmit(allocator: std.mem.Allocator, source: []const u8) ![]const u8 {
+    const resources = try helpers.parseAndCanonicalizeExpr(allocator, source);
+    defer helpers.cleanupParseAndCanonical(allocator, resources);
+
+    // Create transformer
+    var transformer = can.ClosureTransformer.init(allocator, resources.module_env);
+    defer transformer.deinit();
+
+    // Transform the entire expression tree
+    const transformed_idx = try transformer.transformExpr(resources.expr_idx);
+
+    // Emit the transformed expression
+    var emitter = Emitter.init(allocator, resources.module_env);
+    defer emitter.deinit();
+
+    try emitter.emitExpr(transformed_idx);
+
+    return try allocator.dupe(u8, emitter.getOutput());
+}
+
+test "transform closure with single capture to tag" {
+    const source =
+        \\{
+        \\    x = 42
+        \\    f = |y| x + y
+        \\    f(10)
+        \\}
+    ;
+
+    const output = try transformBlockAndEmit(test_allocator, source);
+    defer test_allocator.free(output);
+
+    // The closure should have been transformed to a # tag
+    try testing.expect(std.mem.indexOf(u8, output, "#") != null);
+
+    // The capture 'x' should appear in the tag's record argument
+    try testing.expect(std.mem.indexOf(u8, output, "x:") != null or
+        std.mem.indexOf(u8, output, "{x") != null);
+
+    // The call should have been transformed to a match expression
+    try testing.expect(std.mem.indexOf(u8, output, "match") != null);
+}
+
+test "transform closure with multiple captures" {
+    const source =
+        \\{
+        \\    a = 1
+        \\    b = 2
+        \\    f = |x| a + b + x
+        \\    f(3)
+        \\}
+    ;
+
+    const output = try transformBlockAndEmit(test_allocator, source);
+    defer test_allocator.free(output);
+
+    // The closure should have been transformed to a # tag
+    try testing.expect(std.mem.indexOf(u8, output, "#") != null);
+
+    // Both captures 'a' and 'b' should appear in the tag's record
+    try testing.expect(std.mem.indexOf(u8, output, "a:") != null or
+        std.mem.indexOf(u8, output, "{a") != null);
+    try testing.expect(std.mem.indexOf(u8, output, "b:") != null or
+        std.mem.indexOf(u8, output, ", b") != null);
+
+    // The call should have been transformed to a match expression
+    try testing.expect(std.mem.indexOf(u8, output, "match") != null);
+}
+
+test "verify: closure with single capture transforms correctly" {
+    const source =
+        \\{
+        \\    x = 42
+        \\    f = |y| x + y
+        \\    f(10)
+        \\}
+    ;
+
+    // Transform the code
+    const transformed = try transformBlockAndEmit(test_allocator, source);
+    defer test_allocator.free(transformed);
+
+    // Verify transformation structure:
+    // - Should have a # tag (internal closure tag)
+    // - Should have a match expression for the call site
+    // - Should reference the captured variable x
+    try testing.expect(std.mem.indexOf(u8, transformed, "#") != null);
+    try testing.expect(std.mem.indexOf(u8, transformed, "match") != null);
+}
+
+test "verify: closure with multiple captures transforms correctly" {
+    const source =
+        \\{
+        \\    a = 1
+        \\    b = 2
+        \\    f = |x| a + b + x
+        \\    f(3)
+        \\}
+    ;
+
+    // Transform the code
+    const transformed = try transformBlockAndEmit(test_allocator, source);
+    defer test_allocator.free(transformed);
+
+    // Verify transformation structure:
+    // - Should have a # tag (internal closure tag)
+    // - Should have a match expression for the call site
+    try testing.expect(std.mem.indexOf(u8, transformed, "#") != null);
+    try testing.expect(std.mem.indexOf(u8, transformed, "match") != null);
+}
+
+test "verify: pure lambda (no captures) transforms correctly" {
+    const source =
+        \\{
+        \\    f = |x| x + 1
+        \\    f(41)
+        \\}
+    ;
+
+    // Transform the code
+    const transformed = try transformBlockAndEmit(test_allocator, source);
+    defer test_allocator.free(transformed);
+
+    // Verify transformation structure:
+    // - Should have a # tag (internal closure tag)
+    // - Should have a match expression for the call site
+    // - Pure lambdas should have empty record {}
+    try testing.expect(std.mem.indexOf(u8, transformed, "#") != null);
+    try testing.expect(std.mem.indexOf(u8, transformed, "match") != null);
+    try testing.expect(std.mem.indexOf(u8, transformed, "{}") != null);
+}
+
+test "verify: nested closures with captures transforms correctly" {
+    // A closure that returns another closure, both with captures
+    const source =
+        \\{
+        \\    x = 10
+        \\    makeAdder = |y| |z| x + y + z
+        \\    addFive = makeAdder(5)
+        \\    addFive(3)
+        \\}
+    ;
+
+    // Transform the code
+    const transformed = try transformBlockAndEmit(test_allocator, source);
+    defer test_allocator.free(transformed);
+
+    // Verify transformation structure:
+    // - Should have # tags (internal closure tags)
+    // - Should have match expressions for the call sites
+    try testing.expect(std.mem.indexOf(u8, transformed, "#") != null);
+    try testing.expect(std.mem.indexOf(u8, transformed, "match") != null);
+}
+
+test "ClosureTransformer: can generate tag names" {
+    // Test that the transformer can generate unique tag names
+    const allocator = test_allocator;
+
+    const module_env = try allocator.create(can.ModuleEnv);
+    module_env.* = try can.ModuleEnv.init(allocator, "test");
+    defer {
+        module_env.deinit();
+        allocator.destroy(module_env);
+    }
+
+    var transformer = can.ClosureTransformer.init(allocator, module_env);
+    defer transformer.deinit();
+
+    // Generate a tag name with a hint
+    const hint = try module_env.insertIdent(base.Ident.for_text("myFunc"));
+    const tag_name1 = try transformer.generateClosureTagName(hint);
+    const tag_str1 = module_env.getIdent(tag_name1);
+
+    try testing.expectEqualStrings("#myFunc", tag_str1);
+
+    // Generate another tag name without hint
+    const tag_name2 = try transformer.generateClosureTagName(null);
+    const tag_str2 = module_env.getIdent(tag_name2);
+
+    try testing.expectEqualStrings("#2", tag_str2);
+}