diff --git a/test/.excludes/TestVariable.rb b/test/.excludes/TestVariable.rb
deleted file mode 100644
index ecfbb0e3b8..0000000000
--- a/test/.excludes/TestVariable.rb
+++ /dev/null
@@ -1,3 +0,0 @@
-if RUBY_DESCRIPTION.include?("+PRISM")
-  exclude(:test_local_variables_encoding, "[Bug #20992]")
-end
diff --git a/vm_eval.c b/vm_eval.c
index eaf59f41a3..a8c12707ec 100644
--- a/vm_eval.c
+++ b/vm_eval.c
@@ -1690,6 +1690,8 @@ pm_eval_make_iseq(VALUE src, VALUE fname, int line,
     // scopes array refer to root nodes on the tree, and higher indexes are the
     // leaf nodes.
     iseq = parent;
+    rb_encoding *encoding = rb_enc_get(src);
+
     for (int scopes_index = 0; scopes_index < scopes_count; scopes_index++) {
         VALUE iseq_value = (VALUE)iseq;
         int locals_count = ISEQ_BODY(iseq)->local_table_size;
@@ -1711,6 +1713,14 @@ pm_eval_make_iseq(VALUE src, VALUE fname, int line,
                     continue;
                 }
 
+                // Check here if this local can be represented validly in the
+                // encoding of the source string. If it _cannot_, then it should
+                // not be added to the constant pool as it would not be able to
+                // be referenced anyway.
+                if (rb_enc_str_coderange_scan(name_obj, encoding) == ENC_CODERANGE_BROKEN) {
+                    continue;
+                }
+
                 /* We need to duplicate the string because the Ruby string may
                  * be embedded so compaction could move the string and the pointer
                  * will change. */