diff --git a/mypyc/lib-rt/function_wrapper.c b/mypyc/lib-rt/function_wrapper.c
index 16b1b5930348..dfea6aed1d1c 100644
--- a/mypyc/lib-rt/function_wrapper.c
+++ b/mypyc/lib-rt/function_wrapper.c
@@ -196,6 +196,7 @@ static PyObject* CPyFunction_Vectorcall(PyObject *func, PyObject *const *args, s
 }
 
 
+// Steals ml, name, and code. Borrows module.
 static CPyFunction* CPyFunction_Init(CPyFunction *op, PyMethodDef *ml, PyObject* name,
                                      PyObject *module, PyObject* code, bool set_self) {
     PyCFunctionObject *cf = (PyCFunctionObject *)op;
@@ -206,12 +207,10 @@ static CPyFunction* CPyFunction_Init(CPyFunction *op, PyMethodDef *ml, PyObject*
     Py_XINCREF(module);
     cf->m_module = module;
 
-    Py_INCREF(name);
     op->func_name = name;
 
     ((PyCMethodObject *)op)->mm_class = NULL;
 
-    Py_XINCREF(code);
     op->func_code = code;
 
     CPyFunction_func_vectorcall(op) = CPyFunction_Vectorcall;
@@ -243,7 +242,7 @@ PyObject* CPyFunction_New(PyObject *module, const char *filename, const char *fu
                           PyCFunction func, int func_flags, const char *func_doc,
                           int first_line, int code_flags, bool has_self_arg) {
     PyMethodDef *method = NULL;
-    PyObject *code = NULL, *op = NULL;
+    PyObject *code = NULL, *name = NULL, *op = NULL;
     bool set_self = false;
 
 #ifdef Py_GIL_DISABLED
@@ -280,18 +279,24 @@ PyObject* CPyFunction_New(PyObject *module, const char *filename, const char *fu
     if (unlikely(!code)) {
         goto err;
     }
+    name = PyUnicode_FromString(funcname);
+    if (unlikely(!name)) {
+        goto err;
+    }
 
     // Set m_self inside the function wrapper only if the wrapped function has no self arg
     // to pass m_self as the self arg when the function is called.
     // When the function has a self arg, it will come in the args vector passed to the
     // vectorcall handler.
     set_self = !has_self_arg;
-    op = (PyObject *)CPyFunction_Init(PyObject_GC_New(CPyFunction, CPyFunctionType),
-                                      method, PyUnicode_FromString(funcname), module,
-                                      code, set_self);
-    if (unlikely(!op)) {
+    CPyFunction *raw = PyObject_GC_New(CPyFunction, CPyFunctionType);
+    if (unlikely(!raw)) {
         goto err;
     }
+    op = (PyObject *)CPyFunction_Init(raw, method, name, module, code, set_self);
+    method = NULL;
+    name = NULL;
+    code = NULL;
     PyObject_GC_Track(op);
     return op;
 
@@ -300,5 +305,7 @@ PyObject* CPyFunction_New(PyObject *module, const char *filename, const char *fu
     if (method) {
         PyMem_Free(method);
     }
+    Py_XDECREF(name);
+    Py_XDECREF(code);
     return NULL;
 }
diff --git a/mypyc/test-data/run-async.test b/mypyc/test-data/run-async.test
index 2733a31f3af2..cf9b54368c27 100644
--- a/mypyc/test-data/run-async.test
+++ b/mypyc/test-data/run-async.test
@@ -1416,6 +1416,7 @@ def run(x: object) -> object: ...
 
 [case testAsyncIntrospection]
 import asyncio
+import gc
 import inspect
 import sys
 import weakref
@@ -1423,6 +1424,8 @@ import weakref
 from functools import wraps
 from typing import Any, Callable, TypeVar, cast
 
+from testutil import is_gil_disabled
+
 def identity(val: int) -> int:
     return val
 
@@ -1589,6 +1592,37 @@ def test_nested() -> None:
     assert is_coroutine(nested_wrapped_async)
     assert asyncio.run(nested_wrapped_async()) == 4
 
+def test_async_function_wrapper_code_refcount() -> None:
+    if is_gil_disabled():
+        # On free-threaded builds the code object might be immortal, so the ref count test doesn't work.
+        return
+    code = getattr(identity_async, "__code__")
+    getrefcount = getattr(sys, "getrefcount")
+    # getrefcount sees the local code variable plus the wrapper-owned reference.
+    assert getrefcount(code) == 2, getrefcount(code)
+
+def test_nested_async_function_wrapper_code_refcount() -> None:
+    if is_gil_disabled():
+        # On free-threaded builds the code object might be immortal, so the ref count test doesn't work.
+        return
+    def make_nested() -> Any:
+        async def nested_refcounted() -> int:
+            return 1
+
+        return nested_refcounted
+
+    getrefcount = getattr(sys, "getrefcount")
+    fn = make_nested()
+    code = getattr(fn, "__code__")
+    before = getrefcount(code)
+    assert asyncio.run(fn()) == 1
+
+    del fn
+    gc.collect()
+    after = getrefcount(code)
+    assert before == after + 1, (before, after)
+    assert after == 1, after
+
 [file asyncio/__init__.pyi]
 def run(x: object) -> object: ...