diff --git a/packages/create-instance/create-instance.js b/packages/create-instance/create-instance.js
index 7b2a8f761..a3b23fdf6 100644
--- a/packages/create-instance/create-instance.js
+++ b/packages/create-instance/create-instance.js
@@ -4,6 +4,7 @@ import { createSlotVNodes } from './create-slot-vnodes'
 import addMocks from './add-mocks'
 import { addEventLogger } from './log-events'
 import { addStubs } from './add-stubs'
+import { patchRender } from './patch-render'
 import { throwError, vueVersion } from 'shared/util'
 import {
   compileTemplate,
@@ -60,6 +61,7 @@ export default function createInstance (
   addEventLogger(_Vue)
   addMocks(options.mocks, _Vue)
   addStubs(component, options.stubs, _Vue, options.shouldProxy)
+  patchRender(_Vue)
 
   if (
     (component.options && component.options.functional) ||
@@ -104,11 +106,12 @@ export default function createInstance (
     component.options._base = _Vue
   }
 
+  const componentOptions = typeof component === 'function'
+    ? component.options
+    : component
   // extend component from _Vue to add properties and mixins
   // extend does not work correctly for sub class components in Vue < 2.2
-  const Constructor = typeof component === 'function'
-    ? _Vue.extend(component.options).extend(instanceOptions)
-    : _Vue.extend(component).extend(instanceOptions)
+  const Constructor = _Vue.extend(componentOptions).extend(instanceOptions)
 
   // used to identify extended component using constructor
   Constructor.options.$_vueTestUtils_original = component
diff --git a/packages/create-instance/patch-render.js b/packages/create-instance/patch-render.js
new file mode 100644
index 000000000..e0a69ada6
--- /dev/null
+++ b/packages/create-instance/patch-render.js
@@ -0,0 +1,20 @@
+import { addHook } from './add-hook'
+
+// This is used to extend component constructors
+// used directly in a render function
+// see https://github.com/vuejs/vue-test-utils/issues/994
+export function patchRender (_Vue) {
+  addHook(_Vue.options, 'beforeCreate', function () {
+    const createElementSave = this.$createElement
+    this.$createElement = function (el, ...args) {
+      if (
+        typeof el === 'function' &&
+          el.super !== _Vue &&
+          !el.options.$_vueTestUtils_original
+      ) {
+        el = _Vue.extend(el.options)
+      }
+      return createElementSave(el, ...args)
+    }
+  })
+}
diff --git a/test/specs/mounting-options/localVue.spec.js b/test/specs/mounting-options/localVue.spec.js
index ab2b343c5..bc92cdf37 100644
--- a/test/specs/mounting-options/localVue.spec.js
+++ b/test/specs/mounting-options/localVue.spec.js
@@ -155,6 +155,23 @@ describeWithMountingMethods('options.localVue', mountingMethod => {
     })
   })
 
+  it('is applied to inline constructor functions', () => {
+    const ChildComponent = Vue.extend({
+      render (h) {
+        h('p', this.$route.params)
+      }
+    })
+    const TestComponent = {
+      render: h => h(ChildComponent)
+    }
+    const localVue = createLocalVue()
+    localVue.prototype.$route = {}
+    const wrapper = mountingMethod(TestComponent, {
+      localVue
+    })
+    expect(wrapper.findAll(ChildComponent).length).to.equal(1)
+  })
+
   itRunIf(
     vueVersion < 2.3,
     'throws an error if used with an extended component in Vue 2.3', () => {