diff --git a/pkg/compiler/analysis.go b/pkg/compiler/analysis.go
index 0dcc3d262..66bbfcda0 100644
--- a/pkg/compiler/analysis.go
+++ b/pkg/compiler/analysis.go
@@ -37,20 +37,24 @@ func (c *codegen) getIdentName(pkg string, name string) string {
 }
 
 // traverseGlobals visits and initializes global variables.
-// and returns number of variables initialized and
-// true if any init functions were encountered.
-func (c *codegen) traverseGlobals() (int, bool) {
+// and returns number of variables initialized.
+// Second return value is -1 if no `init()` functions were encountered
+// and number of maximum amount of locals in any of init functions otherwise.
+func (c *codegen) traverseGlobals() (int, int) {
 	var hasDefer bool
 	var n int
-	var hasInit bool
+	initLocals := -1
 	c.ForEachFile(func(f *ast.File, _ *types.Package) {
 		n += countGlobals(f)
-		if !hasInit || !hasDefer {
+		if initLocals == -1 || !hasDefer {
 			ast.Inspect(f, func(node ast.Node) bool {
 				switch n := node.(type) {
 				case *ast.FuncDecl:
 					if isInitFunc(n) {
-						hasInit = true
+						c, _ := countLocals(n)
+						if c > initLocals {
+							initLocals = c
+						}
 					}
 					return !hasDefer
 				case *ast.DeferStmt:
@@ -64,14 +68,18 @@ func (c *codegen) traverseGlobals() (int, bool) {
 	if hasDefer {
 		n++
 	}
-	if n != 0 || hasInit {
+	if n != 0 || initLocals > -1 {
 		if n > 255 {
 			c.prog.BinWriter.Err = errors.New("too many global variables")
-			return 0, hasInit
+			return 0, initLocals
 		}
 		if n != 0 {
 			emit.Instruction(c.prog.BinWriter, opcode.INITSSLOT, []byte{byte(n)})
 		}
+		if initLocals > 0 {
+			emit.Instruction(c.prog.BinWriter, opcode.INITSLOT, []byte{byte(initLocals), 0})
+		}
+		seenBefore := false
 		c.ForEachPackage(func(pkg *loader.PackageInfo) {
 			if n > 0 {
 				for _, f := range pkg.Files {
@@ -79,10 +87,10 @@ func (c *codegen) traverseGlobals() (int, bool) {
 					c.convertGlobals(f, pkg.Pkg)
 				}
 			}
-			if hasInit {
+			if initLocals > -1 {
 				for _, f := range pkg.Files {
 					c.fillImportMap(f, pkg.Pkg)
-					c.convertInitFuncs(f, pkg.Pkg)
+					seenBefore = c.convertInitFuncs(f, pkg.Pkg, seenBefore) || seenBefore
 				}
 			}
 			// because we reuse `convertFuncDecl` for init funcs,
@@ -96,7 +104,7 @@ func (c *codegen) traverseGlobals() (int, bool) {
 			c.globals["<exception>"] = c.exceptionIndex
 		}
 	}
-	return n, hasInit
+	return n, initLocals
 }
 
 // countGlobals counts the global variables in the program to add
diff --git a/pkg/compiler/codegen.go b/pkg/compiler/codegen.go
index 7152aa171..da2f971b1 100644
--- a/pkg/compiler/codegen.go
+++ b/pkg/compiler/codegen.go
@@ -301,11 +301,23 @@ func isInitFunc(decl *ast.FuncDecl) bool {
 		decl.Type.Results.NumFields() == 0
 }
 
-func (c *codegen) convertInitFuncs(f *ast.File, pkg *types.Package) {
+func (c *codegen) clearSlots(n int) {
+	for i := 0; i < n; i++ {
+		emit.Opcodes(c.prog.BinWriter, opcode.PUSHNULL)
+		c.emitStoreByIndex(varLocal, i)
+	}
+}
+
+func (c *codegen) convertInitFuncs(f *ast.File, pkg *types.Package, seenBefore bool) bool {
 	ast.Inspect(f, func(node ast.Node) bool {
 		switch n := node.(type) {
 		case *ast.FuncDecl:
 			if isInitFunc(n) {
+				if seenBefore {
+					cnt, _ := countLocals(n)
+					c.clearSlots(cnt)
+					seenBefore = true
+				}
 				c.convertFuncDecl(f, n, pkg)
 			}
 		case *ast.GenDecl:
@@ -313,6 +325,7 @@ func (c *codegen) convertInitFuncs(f *ast.File, pkg *types.Package) {
 		}
 		return true
 	})
+	return seenBefore
 }
 
 func (c *codegen) convertFuncDecl(file ast.Node, decl *ast.FuncDecl, pkg *types.Package) {
@@ -345,16 +358,18 @@ func (c *codegen) convertFuncDecl(file ast.Node, decl *ast.FuncDecl, pkg *types.
 
 	// All globals copied into the scope of the function need to be added
 	// to the stack size of the function.
-	sizeLoc := f.countLocals()
-	if sizeLoc > 255 {
-		c.prog.Err = errors.New("maximum of 255 local variables is allowed")
-	}
-	sizeArg := f.countArgs()
-	if sizeArg > 255 {
-		c.prog.Err = errors.New("maximum of 255 local variables is allowed")
-	}
-	if sizeLoc != 0 || sizeArg != 0 {
-		emit.Instruction(c.prog.BinWriter, opcode.INITSLOT, []byte{byte(sizeLoc), byte(sizeArg)})
+	if !isInit {
+		sizeLoc := f.countLocals()
+		if sizeLoc > 255 {
+			c.prog.Err = errors.New("maximum of 255 local variables is allowed")
+		}
+		sizeArg := f.countArgs()
+		if sizeArg > 255 {
+			c.prog.Err = errors.New("maximum of 255 local variables is allowed")
+		}
+		if sizeLoc != 0 || sizeArg != 0 {
+			emit.Instruction(c.prog.BinWriter, opcode.INITSLOT, []byte{byte(sizeLoc), byte(sizeArg)})
+		}
 	}
 
 	f.vars.newScope()
@@ -1777,7 +1792,8 @@ func (c *codegen) compile(info *buildInfo, pkg *loader.PackageInfo) error {
 	// Bring all imported functions into scope.
 	c.ForEachFile(c.resolveFuncDecls)
 
-	n, hasInit := c.traverseGlobals()
+	n, initLocals := c.traverseGlobals()
+	hasInit := initLocals > -1
 	if n > 0 || hasInit {
 		emit.Opcodes(c.prog.BinWriter, opcode.RET)
 		c.initEndOffset = c.prog.Len()
diff --git a/pkg/compiler/func_scope.go b/pkg/compiler/func_scope.go
index 41f3db76c..3e977c42e 100644
--- a/pkg/compiler/func_scope.go
+++ b/pkg/compiler/func_scope.go
@@ -152,10 +152,10 @@ func (c *funcScope) analyzeVoidCalls(node ast.Node) bool {
 	return true
 }
 
-func (c *funcScope) countLocals() int {
+func countLocals(decl *ast.FuncDecl) (int, bool) {
 	size := 0
 	hasDefer := false
-	ast.Inspect(c.decl, func(n ast.Node) bool {
+	ast.Inspect(decl, func(n ast.Node) bool {
 		switch n := n.(type) {
 		case *ast.FuncType:
 			num := n.Results.NumFields()
@@ -186,6 +186,11 @@ func (c *funcScope) countLocals() int {
 		}
 		return true
 	})
+	return size, hasDefer
+}
+
+func (c *funcScope) countLocals() int {
+	size, hasDefer := countLocals(c.decl)
 	if hasDefer {
 		c.finallyProcessedIndex = size
 		size++
diff --git a/pkg/compiler/init_test.go b/pkg/compiler/init_test.go
index 696e119f2..45e1ad68c 100644
--- a/pkg/compiler/init_test.go
+++ b/pkg/compiler/init_test.go
@@ -24,11 +24,13 @@ func TestInit(t *testing.T) {
 		var m = map[int]int{}
 		var a = 2
 		func init() {
-			m[1] = 11
+			b := 11
+			m[1] = b
 		}
 		func init() {
 			a = 1
-			m[3] = 30
+			var b int
+			m[3] = 30 + b
 		}
 		func Main() int {
 			return m[1] + m[3] + a