We describe an algorithm for automatic inline expansion across module
boundaries that works in the presence of higher-order functions and
free variables; it rearranges bindings and scopes as necessary to move
nonexpansive code from one module to an- other. We describe -- and
implement -- the algorithm as transformations on Lambda-calculus. Our
inliner interacts well with separate compilation and is efficient,
robust, and practical enough for everyday use in the SML/NJ
compiler. Inlining improves performance by 4-8% on existing code, and
makes it possible to use much more data abstraction by consistently
eliminating penalties for modularity.