diff --git a/src/main/clojure/clara/rules/compiler.clj b/src/main/clojure/clara/rules/compiler.clj
index f88a61ce..e2f8619a 100644
--- a/src/main/clojure/clara/rules/compiler.clj
+++ b/src/main/clojure/clara/rules/compiler.clj
@@ -983,16 +983,38 @@
                              "__"
                              (gensym))
 
+          ;; Insert the bindings from ancestors that are used in the negation
+          ;; in the NegationResult fact so that the [:not [NegationResult...]]
+          ;; condition can assert that the facts matching the negation
+          ;; have the necessary bindings. 
+          ;; See https://github.com/cerner/clara-rules/issues/304 for more details
+          ;; and a case that behaves incorrectly without this check.
+          ancestor-bindings-in-negation-expr (set/intersection
+                                              (variables-as-keywords negation-expr)
+                                              ancestor-bindings)
+
+          ancestor-bindings-insertion-form (into {}
+                                                 (map (fn [binding]
+                                                        [binding (-> binding
+                                                                     name
+                                                                     symbol)]))
+                                                 ancestor-bindings-in-negation-expr)
+
+          ancestor-binding->restriction-form (fn [b]
+                                               (list '= (-> b name symbol)
+                                                     (list b 'ancestor-bindings)))
+
           modified-expression `[:not {:type ~(if (compiling-cljs?)
                                                'clara.rules.engine/NegationResult
                                                'clara.rules.engine.NegationResult)
-                                      :constraints [(~'= ~gen-rule-name ~'gen-rule-name)]}]
-
-
+                                      :constraints [(~'= ~gen-rule-name ~'gen-rule-name)
+                                                    ~@(map ancestor-binding->restriction-form
+                                                           ancestor-bindings-in-negation-expr)]}]
 
           generated-rule (cond-> {:name gen-rule-name
                                   :lhs (concat previous-expressions [negation-expr])
-                                  :rhs `(clara.rules/insert! (eng/->NegationResult ~gen-rule-name))}
+                                  :rhs `(clara.rules/insert! (eng/->NegationResult ~gen-rule-name
+                                                                                   ~ancestor-bindings-insertion-form))}
 
                            ;; Propagate properties like salience to the generated production.
                            (:props production) (assoc :props (:props production))
diff --git a/src/main/clojure/clara/rules/engine.cljc b/src/main/clojure/clara/rules/engine.cljc
index 436979fd..cb7d68c2 100644
--- a/src/main/clojure/clara/rules/engine.cljc
+++ b/src/main/clojure/clara/rules/engine.cljc
@@ -43,12 +43,12 @@
     (do
       ;; A marker interface to identify internal facts.
       (definterface ISystemFact)
-      (defrecord NegationResult [gen-rule-name]
+      (defrecord NegationResult [gen-rule-name ancestor-bindings]
         ISystemFact))
 
     :cljs
     (do
-      (defrecord NegationResult [gen-rule-name])
+      (defrecord NegationResult [gen-rule-name ancestor-bindings])
       ;; Make NegationResult a "system type" so that NegationResult
       ;; facts are special-cased when matching productions. This serves
       ;; the same purpose as implementing the ISystemFact Java interface
diff --git a/src/test/clojure/clara/test_rules.clj b/src/test/clojure/clara/test_rules.clj
index 6a20dfe7..46247440 100644
--- a/src/test/clojure/clara/test_rules.clj
+++ b/src/test/clojure/clara/test_rules.clj
@@ -475,6 +475,21 @@
                           (fire-rules))]
       (is (= [{:?l "MCI"}]
              (query end-session nested-negation-with-prior-bindings)))
+      (is (no-system-types? end-session)))
+
+    ;; Match the nested negation for location ORD but not for MCI.
+    ;; See https://github.com/cerner/clara-rules/issues/304
+    (let [end-session (-> s-with-nested
+                          (insert
+                           (->WindSpeed 10 "MCI")
+                           (->Temperature 10 "MCI")
+                           (->Cold 20)
+                           (->WindSpeed 20 "ORD")
+                           (->Temperature 20 "ORD"))
+                          (fire-rules))]
+
+      (is (= [{:?l "ORD"}]
+             (query end-session nested-negation-with-prior-bindings)))
       (is (no-system-types? end-session)))))
 
 (deftest test-complex-negation-custom-type
@@ -2169,6 +2184,7 @@
                                            (insert (->Cold 10) (->Hot 10))
                                            (fire-rules)
                                            (query q)))]
+
     (is (= (session->results (mk-session [r q]))
            ;; Validate that equal salience is handled correctly by
            ;; the activation-group-sort-fn when the user provides