diff --git a/crates/wasmparser/src/readers/component/types.rs b/crates/wasmparser/src/readers/component/types.rs
index c33feaa954..a1c2372ad7 100644
--- a/crates/wasmparser/src/readers/component/types.rs
+++ b/crates/wasmparser/src/readers/component/types.rs
@@ -186,7 +186,7 @@ impl PrimitiveValType {
         })
     }
 
-    pub(crate) fn requires_realloc(&self) -> bool {
+    pub(crate) fn contains_ptr(&self) -> bool {
         matches!(self, Self::String)
     }
 
diff --git a/crates/wasmparser/src/validator/types.rs b/crates/wasmparser/src/validator/types.rs
index 222172f08d..84bf5de34b 100644
--- a/crates/wasmparser/src/validator/types.rs
+++ b/crates/wasmparser/src/validator/types.rs
@@ -322,10 +322,10 @@ pub enum ComponentValType {
 }
 
 impl ComponentValType {
-    pub(crate) fn requires_realloc(&self, types: &TypeList) -> bool {
+    pub(crate) fn contains_ptr(&self, types: &TypeList) -> bool {
         match self {
-            ComponentValType::Primitive(ty) => ty.requires_realloc(),
-            ComponentValType::Type(ty) => types[*ty].unwrap_defined().requires_realloc(types),
+            ComponentValType::Primitive(ty) => ty.contains_ptr(),
+            ComponentValType::Type(ty) => types[*ty].unwrap_defined().contains_ptr(types),
         }
     }
 
@@ -660,14 +660,24 @@ pub struct ComponentFuncType {
 impl ComponentFuncType {
     /// Lowers the component function type to core parameter and result types for the
     /// canonical ABI.
-    pub(crate) fn lower(&self, types: &TypeList, import: bool) -> LoweringInfo {
+    pub(crate) fn lower(&self, types: &TypeList, is_lower: bool) -> LoweringInfo {
         let mut info = LoweringInfo::default();
 
         for (_, ty) in self.params.iter() {
-            // When `import` is false, it means we're lifting a core function,
-            // check if the parameters needs realloc
-            if !import && !info.requires_realloc {
-                info.requires_realloc = ty.requires_realloc(types);
+            // Check to see if `ty` has a pointer somewhere in it, needed for
+            // any type that transitively contains either a string or a list.
+            // In this situation lowered functions must specify `memory`, and
+            // lifted functions must specify `realloc` as well. Lifted functions
+            // gain their memory requirement through the final clause of this
+            // function.
+            if is_lower {
+                if !info.requires_memory {
+                    info.requires_memory = ty.contains_ptr(types);
+                }
+            } else {
+                if !info.requires_realloc {
+                    info.requires_realloc = ty.contains_ptr(types);
+                }
             }
 
             if !ty.push_wasm_types(types, &mut info.params) {
@@ -679,7 +689,7 @@ impl ComponentFuncType {
                 info.requires_memory = true;
 
                 // We need realloc as well when lifting a function
-                if !import {
+                if !is_lower {
                     info.requires_realloc = true;
                 }
                 break;
@@ -687,17 +697,19 @@ impl ComponentFuncType {
         }
 
         for (_, ty) in self.results.iter() {
-            // When `import` is true, it means we're lowering a component function,
-            // check if the result needs realloc
-            if import && !info.requires_realloc {
-                info.requires_realloc = ty.requires_realloc(types);
+            // Results of lowered functions that contains pointers must be
+            // allocated by the callee meaning that realloc is required.
+            // Results of lifted function are allocated by the guest which
+            // means that no realloc option is necessary.
+            if is_lower && !info.requires_realloc {
+                info.requires_realloc = ty.contains_ptr(types);
             }
 
             if !ty.push_wasm_types(types, &mut info.results) {
                 // Too many results to return directly, either a retptr parameter will be used (import)
                 // or a single pointer will be returned (export)
                 info.results.clear();
-                if import {
+                if is_lower {
                     info.params.max = MAX_LOWERED_TYPES;
                     assert!(info.params.push(ValType::I32));
                 } else {
@@ -795,23 +807,22 @@ pub enum ComponentDefinedType {
 }
 
 impl ComponentDefinedType {
-    pub(crate) fn requires_realloc(&self, types: &TypeList) -> bool {
+    pub(crate) fn contains_ptr(&self, types: &TypeList) -> bool {
         match self {
-            Self::Primitive(ty) => ty.requires_realloc(),
-            Self::Record(r) => r.fields.values().any(|ty| ty.requires_realloc(types)),
-            Self::Variant(v) => v.cases.values().any(|case| {
-                case.ty
-                    .map(|ty| ty.requires_realloc(types))
-                    .unwrap_or(false)
-            }),
+            Self::Primitive(ty) => ty.contains_ptr(),
+            Self::Record(r) => r.fields.values().any(|ty| ty.contains_ptr(types)),
+            Self::Variant(v) => v
+                .cases
+                .values()
+                .any(|case| case.ty.map(|ty| ty.contains_ptr(types)).unwrap_or(false)),
             Self::List(_) => true,
-            Self::Tuple(t) => t.types.iter().any(|ty| ty.requires_realloc(types)),
-            Self::Union(u) => u.types.iter().any(|ty| ty.requires_realloc(types)),
+            Self::Tuple(t) => t.types.iter().any(|ty| ty.contains_ptr(types)),
+            Self::Union(u) => u.types.iter().any(|ty| ty.contains_ptr(types)),
             Self::Flags(_) | Self::Enum(_) | Self::Own(_) | Self::Borrow(_) => false,
-            Self::Option(ty) => ty.requires_realloc(types),
+            Self::Option(ty) => ty.contains_ptr(types),
             Self::Result { ok, err } => {
-                ok.map(|ty| ty.requires_realloc(types)).unwrap_or(false)
-                    || err.map(|ty| ty.requires_realloc(types)).unwrap_or(false)
+                ok.map(|ty| ty.contains_ptr(types)).unwrap_or(false)
+                    || err.map(|ty| ty.contains_ptr(types)).unwrap_or(false)
             }
         }
     }
diff --git a/tests/local/component-model/lower.wast b/tests/local/component-model/lower.wast
new file mode 100644
index 0000000000..827645d3e0
--- /dev/null
+++ b/tests/local/component-model/lower.wast
@@ -0,0 +1,15 @@
+(assert_invalid
+  (component
+    (import "f" (func $f (param "x" (list u8))))
+    (core func $f (canon lower (func $f)
+    ))
+  )
+  "canonical option `memory` is required")
+
+(assert_invalid
+  (component
+    (import "f" (func $f (result (list u8))))
+    (core func $f (canon lower (func $f)
+    ))
+  )
+  "canonical option `memory` is required")