diff --git a/compiler/src/dotty/tools/dotc/parsing/Parsers.scala b/compiler/src/dotty/tools/dotc/parsing/Parsers.scala
index 4de9b5230f8d..3fcaec91e737 100644
--- a/compiler/src/dotty/tools/dotc/parsing/Parsers.scala
+++ b/compiler/src/dotty/tools/dotc/parsing/Parsers.scala
@@ -348,6 +348,7 @@ object Parsers {
       if in.isNewLine then in.nextToken() else accept(SEMI)
 
     def acceptStatSepUnlessAtEnd(altEnd: Token = EOF): Unit =
+      in.observeOutdented()
       if (!isStatSeqEnd)
         in.token match {
           case EOF =>
diff --git a/compiler/src/dotty/tools/dotc/parsing/Scanners.scala b/compiler/src/dotty/tools/dotc/parsing/Scanners.scala
index a7513b8a722b..b426cdcfa201 100644
--- a/compiler/src/dotty/tools/dotc/parsing/Scanners.scala
+++ b/compiler/src/dotty/tools/dotc/parsing/Scanners.scala
@@ -555,6 +555,13 @@ object Scanners {
           token = INDENT
     end observeIndented
 
+    /** Insert an <outdent> token if next token closes an indentation region */
+    def observeOutdented(): Unit = currentRegion match
+      case r: Indented if !r.isOutermost && closingRegionTokens.contains(token) =>
+        currentRegion = r.enclosing
+        insert(OUTDENT, offset)
+      case _ =>
+
     /** - Join CASE + CLASS => CASECLASS, CASE + OBJECT => CASEOBJECT, SEMI + ELSE => ELSE, COLON + <EOL> => COLONEOL
      *  - Insert missing OUTDENTs at EOF
      */
diff --git a/docs/docs/reference/other-new-features/indentation-new.md b/docs/docs/reference/other-new-features/indentation-new.md
index 4d30850fa6a8..700bb973609a 100644
--- a/docs/docs/reference/other-new-features/indentation-new.md
+++ b/docs/docs/reference/other-new-features/indentation-new.md
@@ -77,6 +77,8 @@ There are two rules:
      If the indentation width of the token on the next line is still less than the new current indentation width, step (2) repeats. Therefore, several `<outdent>` tokens
      may be inserted in a row.
 
+    An `<outdent>` is also inserted if the next statement following a statement sequence starting with an `<indent>` closes an indentation region, i.e. is one of `then`, `else`, `do`, `catch`, `finally`, `yield`, `}` or `case`.
+
 It is an error if the indentation width of the token following an `<outdent>` does not
 match the indentation of some previous line in the enclosing indentation region. For instance, the following would be rejected.
 ```scala
diff --git a/tests/neg/spaces-vs-tabs.check b/tests/neg/spaces-vs-tabs.check
index 3827221ff95c..51c2689f57bc 100644
--- a/tests/neg/spaces-vs-tabs.check
+++ b/tests/neg/spaces-vs-tabs.check
@@ -17,15 +17,11 @@
   |	  Previous indent : 2 tabs
   |	  Latest indent   : 1 tab, 2 spaces
 -- Error: tests/neg/spaces-vs-tabs.scala:8:1 ---------------------------------------------------------------------------
-8 | else ()         // error // error
+8 | else ()         // error
   | ^
   | Incompatible combinations of tabs and spaces in indentation prefixes.
   | Previous indent : 2 tabs
   | Latest indent   : 1 space
--- [E040] Syntax Error: tests/neg/spaces-vs-tabs.scala:8:6 -------------------------------------------------------------
-8 | else ()         // error // error
-  |      ^
-  |      ';' expected, but '(' found
 -- Error: tests/neg/spaces-vs-tabs.scala:14:2 --------------------------------------------------------------------------
 14 |	  else 2 // error // error
    |	  ^
diff --git a/tests/neg/spaces-vs-tabs.scala b/tests/neg/spaces-vs-tabs.scala
index cf24f8290904..d30d44c827fe 100644
--- a/tests/neg/spaces-vs-tabs.scala
+++ b/tests/neg/spaces-vs-tabs.scala
@@ -5,7 +5,7 @@ object Test
     println(2)   // error
   	println(3)   // error
 	  println(4)   // error
- else ()         // error // error
+ else ()         // error
 
 	object Test2
 
diff --git a/tests/pos/i7421.scala b/tests/pos/i7421.scala
new file mode 100644
index 000000000000..247285bdc9b6
--- /dev/null
+++ b/tests/pos/i7421.scala
@@ -0,0 +1,17 @@
+object Main {
+
+  def main(args: Array[String]): Unit = {
+    if (args.length > 0) then
+      {
+        println(args)
+      } else {
+      println("Hello world!")
+    }
+    if (args.length > 0)
+      {
+        println(args)
+      } else {
+      println("Hello world!")
+    }
+  }
+}
\ No newline at end of file