diff --git a/src/analysis/occurrence-analysis.jl b/src/analysis/occurrence-analysis.jl
index 51244079..6f0fb30d 100644
--- a/src/analysis/occurrence-analysis.jl
+++ b/src/analysis/occurrence-analysis.jl
@@ -97,22 +97,21 @@ function compute_binding_occurrences(
 
     for (i, binfo) = enumerate(ctx3.bindings.info)
         binfo.is_internal && continue
-        if binfo.kind === :argument
-            push!(get!(Vector{Int}, same_arg_bindings, Symbol(binfo.name)), i)
-            if is_generated
-                # In `@generated` functions, type parameters become actual
-                # arguments. Include them in location-based merging so they
-                # get unified with their `:static_parameter` counterparts.
-                lockey = (Symbol(binfo.name), JS.source_location(JL.binding_ex(ctx3, binfo.id))...)
-                push!(get!(Vector{Int}, same_location_bindings, lockey), i)
+        if binfo.kind === :global
+            include_global_bindings || continue
+        else
+            if binfo.kind === :argument
+                push!(get!(Vector{Int}, same_arg_bindings, Symbol(binfo.name)), i)
             end
-        elseif binfo.kind === :static_parameter || binfo.kind === :local
+            # Include arguments in location-based merging to unify them with
+            # `:local` bindings at the same location. This is needed for:
+            # - `@generated` functions: type parameters become actual arguments
+            #   that must be unified with their `:static_parameter` counterparts.
+            # - Keyword arguments with dependent defaults: JuliaLowering's
+            #   `scope_nest` creates `:local` bindings in `let` blocks that
+            #   must be unified with the `:argument` binding in the body method.
             lockey = (Symbol(binfo.name), JS.source_location(JL.binding_ex(ctx3, binfo.id))...)
             push!(get!(Vector{Int}, same_location_bindings, lockey), i)
-        elseif binfo.kind === :global
-            include_global_bindings || continue
-        else
-            error(lazy"Unknown binding kind: $(binfo.kind)")
         end
         occurrences[binfo] = Set{BindingOccurrence{Tree3}}()
     end
@@ -157,14 +156,11 @@ function compute_binding_occurrences(
     # ```julia
     # hasmatch(x::RegexMatch, y::Bool=isempty(x.matches)) = y
     # ```
-    # N.B. This needs to be done separately from `same_location_bindings`.
-    # This is because if argument lists were also aggregated by "name & location" key,
-    # then even when `x` is truly unused, the usage in methods that fill default parameters
-    # and call the full-argument list method would be aggregated, causing us to miss reports
-    # in such cases, e.g.
-    # ```julia
-    # hasmatch(x::RegexMatch, y::Bool=false) = nothing
-    # ```
+    # Note: argument bindings are included in `same_location_bindings` above to bridge
+    # `:argument` and `:local` bindings for keyword arguments with dependent defaults.
+    # This is safe because `compute_binding_occurrences!` skips both `:argument` and
+    # `:local` bindings in self/kwsorter calls, preventing internal call machinery from
+    # being counted as usage.
     for (_, idxs) in same_arg_bindings
         length(idxs) == 1 && continue
         newoccurrences = union!((occurrences[ctx3.bindings.info[idx]] for idx in idxs)...)
@@ -316,8 +312,14 @@ function compute_binding_occurrences!(
             if skip_arguments
                 for i = nc:-1:2 # reversed since we use `pop!`
                     argⱼ = st[i]
-                    if JS.kind(argⱼ) === JS.K"BindingId" && JL.get_binding(ctx3, argⱼ).kind === :argument
-                        continue # skip this argument
+                    if JS.kind(argⱼ) === JS.K"BindingId"
+                        bkind = JL.get_binding(ctx3, argⱼ).kind
+                        # Skip both `:argument` and `:local` bindings.
+                        # `:local` bindings appear in kwsorter calls when
+                        # `scope_nest` is used for dependent keyword defaults.
+                        if bkind === :argument || bkind === :local
+                            continue
+                        end
                     end
                     push!(stack, st[i])
                 end
diff --git a/src/diagnostic.jl b/src/diagnostic.jl
index 296dff55..3e56573a 100644
--- a/src/diagnostic.jl
+++ b/src/diagnostic.jl
@@ -634,6 +634,21 @@ function is_kwarg_constraining_used_sparam(
     return false
 end
 
+function has_matching_argument_binding(
+        binding_occurrences::Dict{JL.BindingInfo,Set{BindingOccurrence{Tree3}}},
+        name::String, range::Range,
+        fi::FileInfo, ctx3::JL.VariableAnalysisContext
+    ) where Tree3<:JS.SyntaxTree
+    for (binfo2, _) in binding_occurrences
+        binfo2.kind === :argument || continue
+        binfo2.name == name || continue
+        provs2 = JS.flattened_provenance(JL.binding_ex(ctx3, binfo2.id))
+        is_from_user_ast(provs2) || continue
+        jsobj_to_range(last(provs2), fi) == range && return true
+    end
+    return false
+end
+
 function analyze_unused_bindings!(
         diagnostics::Vector{Diagnostic}, fi::FileInfo, st0::JS.SyntaxTree, ctx3::JL.VariableAnalysisContext,
         binding_occurrences::Dict{JL.BindingInfo,Set{BindingOccurrence{Tree3}}},
@@ -666,6 +681,12 @@ function analyze_unused_bindings!(
         range = jsobj_to_range(prov, fi)
         key = LoweringDiagnosticKey(range, bk, bn)
         key in reported ? continue : push!(reported, key)
+        if bk === :local && has_matching_argument_binding(binding_occurrences, bn, range, fi, ctx3)
+            # When `:argument` and `:local` bindings are merged at the same
+            # location (keyword dependent defaults), only the `:argument`
+            # diagnostic should be reported.
+            continue
+        end
         if bk === :argument
             message = "Unused argument `$bn`"
             code = LOWERING_UNUSED_ARGUMENT_CODE
diff --git a/test/test_lowering_diagnostic.jl b/test/test_lowering_diagnostic.jl
index c05f90bd..3982de8c 100644
--- a/test/test_lowering_diagnostic.jl
+++ b/test/test_lowering_diagnostic.jl
@@ -412,6 +412,25 @@ length_utf16(s::AbstractString) = sum(c::Char -> codepoint(c) < 0x10000 ? 1 : 2,
             """)
             @test isempty(diagnostics)
         end
+
+        # aviatesk/JETLS.jl#592
+        let diagnostics = get_lowered_diagnostics("""
+            function group(
+                by,
+                f,
+                itr;
+                T::Type = eltype(itr),
+                By::Type = only(Base.return_types(by, (T,))),
+                F::Type = only(Base.return_types(f, (T,))),
+            )::Dict{By, Vector{F}}
+                return foldl(itr; init = Dict{By, Vector{F}}()) do acc, x
+                    push!(get!(acc, by(x), F[]), f(x))
+                    return acc
+                end
+            end
+            """)
+            @test isempty(diagnostics)
+        end
     end
 
     @testset "module splitter" begin