diff --git a/pkl-core/src/main/java/org/pkl/core/runtime/VmDynamic.java b/pkl-core/src/main/java/org/pkl/core/runtime/VmDynamic.java
index c8915f18..a3dbb6be 100644
--- a/pkl-core/src/main/java/org/pkl/core/runtime/VmDynamic.java
+++ b/pkl-core/src/main/java/org/pkl/core/runtime/VmDynamic.java
@@ -158,8 +158,12 @@ public final class VmDynamic extends VmObject {
   }
 
   private boolean isHiddenOrLocalProperty(Object key) {
-    return key instanceof ObjectMember member && member.isLocal()
-        || key instanceof Identifier identifier
-            && (key == Identifier.DEFAULT || identifier.isLocalProp());
+    // only local members have the entire `ObjectMember` stored as a key in cachedValues
+    if (key instanceof ObjectMember member) {
+      assert member.isLocal();
+      return true;
+    }
+    return key instanceof Identifier identifier
+        && (key == Identifier.DEFAULT || identifier.isLocalProp());
   }
 }
diff --git a/pkl-core/src/test/files/LanguageSnippetTests/input/pklbinary/localMembers.msgpack.yaml.pkl b/pkl-core/src/test/files/LanguageSnippetTests/input/pklbinary/localMembers.msgpack.yaml.pkl
new file mode 100644
index 00000000..947d3af7
--- /dev/null
+++ b/pkl-core/src/test/files/LanguageSnippetTests/input/pklbinary/localMembers.msgpack.yaml.pkl
@@ -0,0 +1,27 @@
+extends ".../pklbinaryTest.pkl"
+
+dynamic: Dynamic = new {
+  local foo = new Test {}
+  bar = foo
+}
+
+listing: Listing = new {
+  local foo = new Test {}
+  foo
+}
+
+mapping: Mapping = new {
+  local foo = new Test {}
+  ["bar"] = foo
+}
+
+`class`: MyClass = new {
+  local foo = new Test {}
+  bar = foo
+}
+
+class MyClass {
+  bar: Test
+}
+
+class Test
diff --git a/pkl-core/src/test/files/LanguageSnippetTests/output/pklbinary/localMembers.msgpack.yaml b/pkl-core/src/test/files/LanguageSnippetTests/output/pklbinary/localMembers.msgpack.yaml
new file mode 100644
index 00000000..7a57e1f8
--- /dev/null
+++ b/pkl-core/src/test/files/LanguageSnippetTests/output/pklbinary/localMembers.msgpack.yaml
@@ -0,0 +1,58 @@
+- 1
+- 'localMembers.msgpack.yaml'
+- 'file:///$snippetsDir/input/pklbinary/localMembers.msgpack.yaml.pkl'
+- 
+  - 
+    - 16
+    - 'dynamic'
+    - 
+      - 1
+      - 'Dynamic'
+      - 'pkl:base'
+      - 
+        - 
+          - 16
+          - 'bar'
+          - 
+            - 1
+            - 'localMembers.msgpack.yaml#Test'
+            - 'file:///$snippetsDir/input/pklbinary/localMembers.msgpack.yaml.pkl'
+            - []
+  - 
+    - 16
+    - 'listing'
+    - 
+      - 5
+      - 
+        - 
+          - 1
+          - 'localMembers.msgpack.yaml#Test'
+          - 'file:///$snippetsDir/input/pklbinary/localMembers.msgpack.yaml.pkl'
+          - []
+  - 
+    - 16
+    - 'mapping'
+    - 
+      - 3
+      - 
+        'bar': 
+          - 1
+          - 'localMembers.msgpack.yaml#Test'
+          - 'file:///$snippetsDir/input/pklbinary/localMembers.msgpack.yaml.pkl'
+          - []
+  - 
+    - 16
+    - 'class'
+    - 
+      - 1
+      - 'localMembers.msgpack.yaml#MyClass'
+      - 'file:///$snippetsDir/input/pklbinary/localMembers.msgpack.yaml.pkl'
+      - 
+        - 
+          - 16
+          - 'bar'
+          - 
+            - 1
+            - 'localMembers.msgpack.yaml#Test'
+            - 'file:///$snippetsDir/input/pklbinary/localMembers.msgpack.yaml.pkl'
+            - []
\ No newline at end of file
diff --git a/pkl-core/src/test/kotlin/org/pkl/core/EvaluatorTest.kt b/pkl-core/src/test/kotlin/org/pkl/core/EvaluatorTest.kt
index 733eed6c..cf0bee38 100644
--- a/pkl-core/src/test/kotlin/org/pkl/core/EvaluatorTest.kt
+++ b/pkl-core/src/test/kotlin/org/pkl/core/EvaluatorTest.kt
@@ -696,48 +696,6 @@ class EvaluatorTest {
     }
   }
 
-  @Test
-  fun `objects with object locals are encoded correctly`() {
-    val data =
-      evaluator.evaluateOutputBytes(
-        text(
-          """
-          import "pkl:pklbinary"
-
-          dynamic: Dynamic = new {
-            local foo = new Test {}
-            bar = foo
-          }
-          listing: Listing = new {
-            local foo = new Test {}
-            foo
-          }
-          mapping: Mapping = new {
-            local foo = new Test {}
-            ["bar"] = foo
-          }
-          `class`: MyClass = new {
-            local foo = new Test {}
-            bar = foo
-          }
-
-          class MyClass {
-            bar: Test
-          }
-
-          class Test
-
-          output {
-            renderer = new pklbinary.Renderer {}
-          }
-          """
-            .trimIndent()
-        )
-      )
-
-    assertThatCode { PklBinaryDecoder.decode(data) }.doesNotThrowAnyException()
-  }
-
   @Test
   fun `power assertions work with test facts with unavailable source section`() {
     val evaluator =