diff --git a/next/language/fundamentals.md b/next/language/fundamentals.md
index 5bc10301..d9741bfe 100644
--- a/next/language/fundamentals.md
+++ b/next/language/fundamentals.md
@@ -1096,6 +1096,23 @@ you can leave a type alias `typealias T = @pkgB.T` in `@pkgA`, and **incremental
 The type alias can be removed after all uses of `@pkgA.T` is migrated to `@pkgB.T`.
 ```
 
+### Local types
+
+Moonbit supports declaring structs/enums/newtypes at the top of a toplevel
+function, which are only visible within the current toplevel function. These
+local types can use the generic parameters of the toplevel function but cannot
+introduce additional generic parameters themselves. Local types can derive
+methods using derive, but no additional methods can be defined manually. For 
+example:
+
+```{literalinclude} /sources/language/src/data/top.mbt
+:language: moonbit
+:start-after: start local-type 1
+:end-before: end local-type 1
+```
+
+Currently, local types do not support being declared as error types. 
+
 ## Pattern Matching
 
 Pattern matching allows us to match on specific pattern and bind data from data structures.
diff --git a/next/sources/language/src/data/top.mbt b/next/sources/language/src/data/top.mbt
index ffdcfa55..4c35096d 100644
--- a/next/sources/language/src/data/top.mbt
+++ b/next/sources/language/src/data/top.mbt
@@ -303,3 +303,17 @@ pub typealias Index = Int
 // type alias are private by default
 typealias MapString[X] = Map[String, X]
 // end typealias 1
+
+// start local-type 1
+fn toplevel[T: Show](x: T) -> Unit {
+  enum LocalEnum {
+    A(T)
+    B(Int)
+  } derive(Show)
+  struct LocalStruct {
+    a: (String, T)
+  } derive(Show)
+  type LocalNewtype T derive(Show)
+  ...
+}
+// end local-type 1
\ No newline at end of file