diff --git a/gopls/internal/golang/extract.go b/gopls/internal/golang/extract.go
index d1092d85409..6ea011e220e 100644
--- a/gopls/internal/golang/extract.go
+++ b/gopls/internal/golang/extract.go
@@ -246,6 +246,10 @@ func extractFunctionMethod(fset *token.FileSet, start, end token.Pos, src []byte
 		if n.Pos() < start || n.End() > end {
 			return n.Pos() <= end
 		}
+		// exclude return statements in function literals because they don't affect the refactor.
+		if _, ok := n.(*ast.FuncLit); ok {
+			return false
+		}
 		ret, ok := n.(*ast.ReturnStmt)
 		if !ok {
 			return true
diff --git a/gopls/internal/test/marker/testdata/codeaction/functionextraction.txt b/gopls/internal/test/marker/testdata/codeaction/functionextraction.txt
index 1c65fcd2329..1b9f487c49d 100644
--- a/gopls/internal/test/marker/testdata/codeaction/functionextraction.txt
+++ b/gopls/internal/test/marker/testdata/codeaction/functionextraction.txt
@@ -581,3 +581,36 @@ func newFunction() (int, error) {
 	return u, err
 }
 
+-- anonymousfunc.go --
+package extract
+import "cmp"
+import "slices"
+
+// issue go#64821
+func _() {
+	var s []string //@codeaction("var", anonEnd, "refactor.extract.function", anon1)
+	slices.SortFunc(s, func(a, b string) int {
+		return cmp.Compare(a, b)
+	})
+	println(s) //@loc(anonEnd, ")")
+}
+
+-- @anon1/anonymousfunc.go --
+package extract
+import "cmp"
+import "slices"
+
+// issue go#64821
+func _() {
+	//@codeaction("var", anonEnd, "refactor.extract.function", anon1)
+	newFunction() //@loc(anonEnd, ")")
+}
+
+func newFunction() {
+	var s []string
+	slices.SortFunc(s, func(a, b string) int {
+		return cmp.Compare(a, b)
+	})
+	println(s)
+}
+