diff --git a/toolchain/parse/handle_lambda.cpp b/toolchain/parse/handle_lambda.cpp
index d761e6762112..225b56577407 100644
--- a/toolchain/parse/handle_lambda.cpp
+++ b/toolchain/parse/handle_lambda.cpp
@@ -62,8 +62,17 @@ auto HandleLambdaAfterParams(Context& context) -> void {
     CARBON_DIAGNOSTIC(ExpectedLambdaBody, Error,
                       "expected `->`, `=>`, or `{{`");
     context.emitter().Emit(*context.position(), ExpectedLambdaBody);
+
+    // Add a dummy node for the missing body without consuming the current
+    // token, then bundle everything into a complete lambda node. This keeps the
+    // lambda a valid expression for error recovery -- otherwise the orphaned
+    // `LambdaIntroducer` would be left where an expression is required, for
+    // example in `(fn)`.
+    context.AddLeafNode(NodeKind::InvalidParse, *context.position(),
+                        /*has_error=*/true);
+
     state.has_error = true;
-    context.ReturnErrorOnState();
+    context.PushState(state, StateKind::LambdaBodyFinish);
   }
 }
 
diff --git a/toolchain/parse/testdata/lambda/lambda.carbon b/toolchain/parse/testdata/lambda/lambda.carbon
index 1032df9bae64..40ac309b3f46 100644
--- a/toolchain/parse/testdata/lambda/lambda.carbon
+++ b/toolchain/parse/testdata/lambda/lambda.carbon
@@ -155,9 +155,11 @@ fn G() {
 // CHECK:STDOUT:           {kind: 'VarBindingPattern', text: ':', subtree_size: 3},
 // CHECK:STDOUT:         {kind: 'VariablePattern', text: 'var', subtree_size: 4},
 // CHECK:STDOUT:         {kind: 'VariableInitializer', text: '='},
-// CHECK:STDOUT:         {kind: 'LambdaIntroducer', text: 'fn'},
-// CHECK:STDOUT:       {kind: 'VariableDecl', text: ';', has_error: yes, subtree_size: 8},
-// CHECK:STDOUT:     {kind: 'FunctionDefinition', text: '}', subtree_size: 14},
+// CHECK:STDOUT:           {kind: 'LambdaIntroducer', text: 'fn'},
+// CHECK:STDOUT:           {kind: 'InvalidParse', text: ';', has_error: yes},
+// CHECK:STDOUT:         {kind: 'Lambda', text: 'fn', has_error: yes, subtree_size: 3},
+// CHECK:STDOUT:       {kind: 'VariableDecl', text: ';', subtree_size: 10},
+// CHECK:STDOUT:     {kind: 'FunctionDefinition', text: '}', subtree_size: 16},
 // CHECK:STDOUT:     {kind: 'FileEnd', text: ''},
 // CHECK:STDOUT:   ]
 // CHECK:STDOUT: - filename: fail_expected_body_after_return_type.carbon
diff --git a/toolchain/parse/tree_test.cpp b/toolchain/parse/tree_test.cpp
index b44aaa5ef665..b354ee69677f 100644
--- a/toolchain/parse/tree_test.cpp
+++ b/toolchain/parse/tree_test.cpp
@@ -178,5 +178,21 @@ TEST_F(TreeTest, HighRecursion) {
   EXPECT_FALSE(tree.has_errors());
 }
 
+TEST_F(TreeTest, IncompleteLambdaRecovers) {
+  // An incomplete lambda -- a `fn` introducer with no body, here `(fn)` -- must
+  // still parse to a structurally valid tree (a `Lambda` node with a
+  // placeholder body) rather than leaving an orphaned introducer where an
+  // expression is required, which would fail the parser's own tree
+  // verification.
+  Lex::TokenizedBuffer& tokens =
+      compile_helper_.GetTokenizedBuffer("var x: auto = (fn);");
+  ASSERT_FALSE(tokens.has_errors());
+  ::testing::NiceMock<Testing::MockDiagnosticConsumer> consumer;
+  Parse::ParseOptions options;
+  options.consumer = &consumer;
+  Tree tree = Parse(tokens, options);
+  EXPECT_TRUE(tree.has_errors());
+}
+
 }  // namespace
 }  // namespace Carbon::Parse