diff --git a/src/parse_util.cpp b/src/parse_util.cpp
index 6d4d3f5a7..aa909b1ce 100644
--- a/src/parse_util.cpp
+++ b/src/parse_util.cpp
@@ -1195,9 +1195,10 @@ static bool detect_errors_in_plain_statement(const wcstring &buff_src,
 
         // Check that we don't do an invalid builtin (issue #1252).
         if (!errored && decoration == parse_statement_decoration_builtin &&
-            !builtin_exists(command)) {
+            expand_one(*unexp_command, 0, null_environment_t{}, parse_errors) &&
+            !builtin_exists(*unexp_command)) {
             errored = append_syntax_error(parse_errors, source_start, UNKNOWN_BUILTIN_ERR_MSG,
-                                          command.c_str());
+                                          unexp_command->c_str());
         }
     }
     return errored;
diff --git a/tests/vars_as_commands.in b/tests/vars_as_commands.in
index 93d299454..3b73c9f00 100644
--- a/tests/vars_as_commands.in
+++ b/tests/vars_as_commands.in
@@ -9,6 +9,9 @@ $CMD1
 set CMD2 echo '(' not expanded again
 $CMD2
 
+# Test using variables with the builtin decorator
+builtin $CMD1
+
 # Test implicit cd
 set CMD3 /usr/bin
 $CMD3 && echo $PWD
diff --git a/tests/vars_as_commands.out b/tests/vars_as_commands.out
index 6f59b82a7..64e4976b7 100644
--- a/tests/vars_as_commands.out
+++ b/tests/vars_as_commands.out
@@ -1,3 +1,4 @@
 basic command as variable
 ( not expanded again
+basic command as variable
 /usr/bin