diff --git a/src/backend/optimizer/prep/prepjointree.c b/src/backend/optimizer/prep/prepjointree.c
index 01239c0cb0..ef0115a773 100644
--- a/src/backend/optimizer/prep/prepjointree.c
+++ b/src/backend/optimizer/prep/prepjointree.c
@@ -282,6 +282,45 @@ transform_MERGE_to_join(Query *parse)
 							   bms_make_singleton(parse->mergeTargetRelation),
 							   bms_make_singleton(joinrti));
 
+	/*
+	 * If the source relation is on the outer side of the join, mark any
+	 * source relation Vars in the join condition, actions, and RETURNING list
+	 * as nullable by the join.  These Vars will be added to the targetlist by
+	 * preprocess_targetlist(), so it's important to mark them correctly here.
+	 *
+	 * It might seem that this is not necessary for Vars in the join
+	 * condition, since it is inside the join, but it is also needed above the
+	 * join (in the ModifyTable node) to distinguish between the MATCHED and
+	 * NOT MATCHED BY SOURCE cases -- see ExecMergeMatched().  Note that this
+	 * creates a modified copy of the join condition, for use above the join,
+	 * without modifying the the original join condition, inside the join.
+	 */
+	if (jointype == JOIN_LEFT || jointype == JOIN_FULL)
+	{
+		parse->mergeJoinCondition =
+			add_nulling_relids(parse->mergeJoinCondition,
+							   bms_make_singleton(sourcerti),
+							   bms_make_singleton(joinrti));
+
+		foreach_node(MergeAction, action, parse->mergeActionList)
+		{
+			action->qual =
+				add_nulling_relids(action->qual,
+								   bms_make_singleton(sourcerti),
+								   bms_make_singleton(joinrti));
+
+			action->targetList = (List *)
+				add_nulling_relids((Node *) action->targetList,
+								   bms_make_singleton(sourcerti),
+								   bms_make_singleton(joinrti));
+		}
+
+		parse->returningList = (List *)
+			add_nulling_relids((Node *) parse->returningList,
+							   bms_make_singleton(sourcerti),
+							   bms_make_singleton(joinrti));
+	}
+
 	/*
 	 * If there are any WHEN NOT MATCHED BY SOURCE actions, the executor will
 	 * use the join condition to distinguish between MATCHED and NOT MATCHED
diff --git a/src/test/regress/expected/merge.out b/src/test/regress/expected/merge.out
index 0e59bae1a7..c236f155c0 100644
--- a/src/test/regress/expected/merge.out
+++ b/src/test/regress/expected/merge.out
@@ -2711,6 +2711,35 @@ SELECT * FROM tgt;
 (0 rows)
 
 DROP TABLE src, tgt;
+ 
+--
+-- test for bug #18634 (wrong varnullingrels error)
+--
+CREATE TABLE bug18634t (a int, b int, c text);
+INSERT INTO bug18634t VALUES(1, 10, 'tgt1'), (2, 20, 'tgt2');
+CREATE VIEW bug18634v AS
+  SELECT * FROM bug18634t WHERE EXISTS (SELECT 1 FROM bug18634t);
+CREATE TABLE bug18634s (a int, b int, c text);
+INSERT INTO bug18634s VALUES (1, 2, 'src1');
+MERGE INTO bug18634v t USING bug18634s s ON s.a = t.a
+  WHEN MATCHED THEN UPDATE SET b = s.b
+  WHEN NOT MATCHED BY SOURCE THEN DELETE
+  RETURNING merge_action(), s.c, t.*;
+ merge_action |  c   | a | b  |  c   
+--------------+------+---+----+------
+ UPDATE       | src1 | 1 |  2 | tgt1
+ DELETE       |      | 2 | 20 | tgt2
+(2 rows)
+
+SELECT * FROM bug18634t;
+ a | b |  c   
+---+---+------
+ 1 | 2 | tgt1
+(1 row)
+
+DROP TABLE bug18634t CASCADE;
+NOTICE:  drop cascades to view bug18634v
+DROP TABLE bug18634s;
 -- prepare
 RESET SESSION AUTHORIZATION;
 -- try a system catalog
diff --git a/src/test/regress/sql/merge.sql b/src/test/regress/sql/merge.sql
index 2a7753c65b..ce9981d70b 100644
--- a/src/test/regress/sql/merge.sql
+++ b/src/test/regress/sql/merge.sql
@@ -1727,6 +1727,27 @@ MERGE INTO tgt USING src ON tgt.a IS NOT DISTINCT FROM src.a
 SELECT * FROM tgt;
 
 DROP TABLE src, tgt;
+ 
+--
+-- test for bug #18634 (wrong varnullingrels error)
+--
+CREATE TABLE bug18634t (a int, b int, c text);
+INSERT INTO bug18634t VALUES(1, 10, 'tgt1'), (2, 20, 'tgt2');
+CREATE VIEW bug18634v AS
+  SELECT * FROM bug18634t WHERE EXISTS (SELECT 1 FROM bug18634t);
+
+CREATE TABLE bug18634s (a int, b int, c text);
+INSERT INTO bug18634s VALUES (1, 2, 'src1');
+
+MERGE INTO bug18634v t USING bug18634s s ON s.a = t.a
+  WHEN MATCHED THEN UPDATE SET b = s.b
+  WHEN NOT MATCHED BY SOURCE THEN DELETE
+  RETURNING merge_action(), s.c, t.*;
+
+SELECT * FROM bug18634t;
+
+DROP TABLE bug18634t CASCADE;
+DROP TABLE bug18634s;
 
 -- prepare