diff --git a/examples/passing/3187-UnusedNameClash.purs b/examples/passing/3187-UnusedNameClash.purs
new file mode 100644
index 0000000000..bd84f095b8
--- /dev/null
+++ b/examples/passing/3187-UnusedNameClash.purs
@@ -0,0 +1,12 @@
+module Main (main) where
+
+import Prelude ((+))
+import Control.Monad.Eff.Console (log)
+
+-- the __unused parameter used to get optimized away
+abuseUnused :: forall a. a -> a
+abuseUnused __unused = __unused
+
+main = do
+  let explode = abuseUnused 0 + abuseUnused 0
+  log "Done"
diff --git a/src/Language/PureScript/Constants.hs b/src/Language/PureScript/Constants.hs
index 3703e07bf1..f48998afa2 100644
--- a/src/Language/PureScript/Constants.hs
+++ b/src/Language/PureScript/Constants.hs
@@ -421,7 +421,7 @@ symbol = "Symbol"
 -- Code Generation
 
 __unused :: forall a. (IsString a) => a
-__unused = "__unused"
+__unused = "$unused" -- $ avoids name clashing
 
 -- Modules