diff --git a/gcc/c/ChangeLog b/gcc/c/ChangeLog
index fbd94f5607c9..5ee4b66c5136 100644
--- a/gcc/c/ChangeLog
+++ b/gcc/c/ChangeLog
@@ -1,3 +1,12 @@
+2019-01-07  Joseph Myers  <joseph@codesourcery.com>
+
+	PR c/88720
+	PR c/88726
+	* c-decl.c (pop_scope): Use TREE_PUBLIC and b->nested to determine
+	whether a function is nested, not DECL_EXTERNAL.  Diagnose inline
+	functions declared but never defined only for external scope, not
+	for other scopes.
+
 2019-01-07  Jakub Jelinek  <jakub@redhat.com>
 
 	PR c++/85052
diff --git a/gcc/c/c-decl.c b/gcc/c/c-decl.c
index d7726fa08348..5c7232f3657a 100644
--- a/gcc/c/c-decl.c
+++ b/gcc/c/c-decl.c
@@ -1251,8 +1251,9 @@ pop_scope (void)
 	      && DECL_ABSTRACT_ORIGIN (p) != NULL_TREE
 	      && DECL_ABSTRACT_ORIGIN (p) != p)
 	    TREE_ADDRESSABLE (DECL_ABSTRACT_ORIGIN (p)) = 1;
-	  if (!DECL_EXTERNAL (p)
+	  if (!TREE_PUBLIC (p)
 	      && !DECL_INITIAL (p)
+	      && !b->nested
 	      && scope != file_scope
 	      && scope != external_scope)
 	    {
@@ -1268,7 +1269,7 @@ pop_scope (void)
 		 in the same translation unit."  */
 	      if (!flag_gnu89_inline
 		  && !lookup_attribute ("gnu_inline", DECL_ATTRIBUTES (p))
-		  && scope != external_scope)
+		  && scope == external_scope)
 		pedwarn (input_location, 0,
 			 "inline function %q+D declared but never defined", p);
 	      DECL_EXTERNAL (p) = 1;
diff --git a/gcc/testsuite/ChangeLog b/gcc/testsuite/ChangeLog
index 29b3b835accc..ebc96a331bc4 100644
--- a/gcc/testsuite/ChangeLog
+++ b/gcc/testsuite/ChangeLog
@@ -1,3 +1,9 @@
+2019-01-07  Joseph Myers  <joseph@codesourcery.com>
+
+	PR c/88720
+	PR c/88726
+	* gcc.dg/inline-40.c, gcc.dg/inline-41.c: New tests.
+
 2019-01-07  Paolo Carlini  <paolo.carlini@oracle.com>
 
 	* g++.dg/diagnostic/constexpr1.C: New.
diff --git a/gcc/testsuite/gcc.dg/inline-40.c b/gcc/testsuite/gcc.dg/inline-40.c
new file mode 100644
index 000000000000..d0fdaeef34a3
--- /dev/null
+++ b/gcc/testsuite/gcc.dg/inline-40.c
@@ -0,0 +1,49 @@
+/* Test inline functions declared in inner scopes.  Bugs 88720 and 88726.  */
+/* { dg-do compile } */
+/* { dg-options "" } */
+
+void
+inline_1 (void)
+{
+}
+
+void
+inline_2 (void)
+{
+}
+
+static void
+inline_static_1 (void)
+{
+}
+
+static void
+inline_static_2 (void)
+{
+}
+
+static void inline_static_3 (void);
+static void inline_static_4 (void);
+
+static void
+test (void)
+{
+  inline void inline_1 (void);
+  extern inline void inline_2 (void);
+  inline void inline_3 (void);
+  extern inline void inline_4 (void);
+  inline void inline_static_1 (void);
+  extern inline void inline_static_2 (void);
+  inline void inline_static_3 (void);
+  extern inline void inline_static_4 (void);
+}
+
+void
+inline_3 (void)
+{
+}
+
+void
+inline_4 (void)
+{
+}
diff --git a/gcc/testsuite/gcc.dg/inline-41.c b/gcc/testsuite/gcc.dg/inline-41.c
new file mode 100644
index 000000000000..1511aeebd582
--- /dev/null
+++ b/gcc/testsuite/gcc.dg/inline-41.c
@@ -0,0 +1,49 @@
+/* Test inline functions declared in inner scopes.  Bugs 88720 and 88726.  */
+/* { dg-do compile } */
+/* { dg-options "-fgnu89-inline" } */
+
+void
+inline_1 (void)
+{
+}
+
+void
+inline_2 (void)
+{
+}
+
+static void
+inline_static_1 (void)
+{
+}
+
+static void
+inline_static_2 (void)
+{
+}
+
+static void inline_static_3 (void);
+static void inline_static_4 (void);
+
+static void
+test (void)
+{
+  inline void inline_1 (void);
+  extern inline void inline_2 (void);
+  inline void inline_3 (void);
+  extern inline void inline_4 (void);
+  inline void inline_static_1 (void);
+  extern inline void inline_static_2 (void);
+  inline void inline_static_3 (void);
+  extern inline void inline_static_4 (void);
+}
+
+void
+inline_3 (void)
+{
+}
+
+void
+inline_4 (void)
+{
+}