diff --git a/server/plpgsql/statements.go b/server/plpgsql/statements.go
index 5ee6700e92..62cec4eede 100644
--- a/server/plpgsql/statements.go
+++ b/server/plpgsql/statements.go
@@ -16,7 +16,8 @@ package plpgsql
 
 import (
 	"fmt"
-	"strings"
+
+	pg_query "github.com/pganalyze/pg_query_go/v6"
 )
 
 // Statement represents a PL/pgSQL statement.
@@ -43,15 +44,12 @@ func (Assignment) OperationSize() int32 {
 
 // AppendOperations implements the interface Statement.
 func (stmt Assignment) AppendOperations(ops *[]InterpreterOperation, stack *InterpreterStack) {
-	// TODO: figure out how I'm supposed to actually do this, rather than a search and replace
-	expression := stmt.Expression
-	var referencedVariables []string
-	for varName := range stack.ListVariables() {
-		if strings.Contains(expression, varName) {
-			referencedVariables = append(referencedVariables, varName)
-		}
-		expression = strings.Replace(expression, varName, fmt.Sprintf("$%d", len(referencedVariables)), 1)
+	expression, referencedVariables, err := substituteVariableReferences(stmt.Expression, stack)
+	if err != nil {
+		// TODO: add an error return param instead of panicing
+		panic(err)
 	}
+
 	*ops = append(*ops, InterpreterOperation{
 		OpCode:        OpCode_Assign,
 		PrimaryData:   "SELECT " + expression + ";",
@@ -143,14 +141,12 @@ func (If) OperationSize() int32 {
 
 // AppendOperations implements the interface Statement.
 func (stmt If) AppendOperations(ops *[]InterpreterOperation, stack *InterpreterStack) {
-	condition := stmt.Condition
-	var referencedVariables []string
-	for varName := range stack.ListVariables() {
-		if strings.Contains(condition, varName) {
-			referencedVariables = append(referencedVariables, varName)
-		}
-		condition = strings.Replace(condition, varName, fmt.Sprintf("$%d", len(referencedVariables)), 1)
+	condition, referencedVariables, err := substituteVariableReferences(stmt.Condition, stack)
+	if err != nil {
+		// TODO: add an error return param instead of panicing
+		panic(err)
 	}
+
 	*ops = append(*ops, InterpreterOperation{
 		OpCode:        OpCode_If,
 		PrimaryData:   "SELECT " + condition + ";",
@@ -173,15 +169,12 @@ func (Return) OperationSize() int32 {
 
 // AppendOperations implements the interface Statement.
 func (stmt Return) AppendOperations(ops *[]InterpreterOperation, stack *InterpreterStack) {
-	// TODO: figure out how I'm supposed to actually do this, rather than a search and replace
-	expression := stmt.Expression
-	var referencedVariables []string
-	for varName := range stack.ListVariables() {
-		if strings.Contains(expression, varName) {
-			referencedVariables = append(referencedVariables, varName)
-		}
-		expression = strings.Replace(expression, varName, fmt.Sprintf("$%d", len(referencedVariables)), 1)
+	expression, referencedVariables, err := substituteVariableReferences(stmt.Expression, stack)
+	if err != nil {
+		// TODO: add an error return param instead of panicing
+		panic(err)
 	}
+
 	*ops = append(*ops, InterpreterOperation{
 		OpCode:        OpCode_Return,
 		PrimaryData:   "SELECT " + expression + ";",
@@ -204,3 +197,29 @@ func OperationSizeForStatements(stmts []Statement) int32 {
 	}
 	return total
 }
+
+// substituteVariableReferences parses the specified |expression| and replaces
+// any token that matches a variable name in the |stack| with "$N", where N
+// indicates which variable in the returned |referenceVars| slice is used.
+func substituteVariableReferences(expression string, stack *InterpreterStack) (newExpression string, referencedVars []string, err error) {
+	scanResult, err := pg_query.Scan(expression)
+	if err != nil {
+		return "", nil, err
+	}
+
+	varMap := stack.ListVariables()
+	for _, token := range scanResult.Tokens {
+		substring := expression[token.Start:token.End]
+		if _, ok := varMap[substring]; ok {
+			// TODO: There's another bug here where the same variable could
+			//       be referenced multiple times in the expression and the
+			//       length of the slice won't be the correct index.
+			referencedVars = append(referencedVars, substring)
+			newExpression += fmt.Sprintf("$%d ", len(referencedVars))
+		} else {
+			newExpression += substring + " "
+		}
+	}
+
+	return newExpression, referencedVars, nil
+}
diff --git a/testing/go/create_function_test.go b/testing/go/create_function_test.go
index 4976065709..bf773a782d 100644
--- a/testing/go/create_function_test.go
+++ b/testing/go/create_function_test.go
@@ -70,8 +70,7 @@ $$ LANGUAGE plpgsql;`},
 		},
 		{
 			Name: "Interpreter Alias Example",
-			// TODO: need to use a Doltgres function provider, and need to implement the
-			//       OpCode conversion for parsed ALIAS statements.
+			// TODO: Implement OpCode conversion for parsed ALIAS statements.
 			Skip: true,
 			SetUpScript: []string{
 				`CREATE FUNCTION interpreted_alias(input TEXT)
@@ -99,5 +98,30 @@ $$ LANGUAGE plpgsql;`},
 				},
 			},
 		},
+		{
+			// Tests that variable names are correctly substituted with references
+			// to the variables when the function is parsed.
+			Name: "Variable reference substitution",
+			SetUpScript: []string{`
+CREATE FUNCTION test1(input TEXT) RETURNS TEXT AS $$
+DECLARE
+    var1 TEXT;
+BEGIN
+    var1 := 'input' || input;
+    IF var1 = 'input' || input THEN
+		RETURN var1 || 'var1';
+	ELSE
+		RETURN '!!!';
+	END IF;
+END;
+$$ LANGUAGE plpgsql;`,
+			},
+			Assertions: []ScriptTestAssertion{
+				{
+					Query:    "SELECT test1('Hello');",
+					Expected: []sql.Row{{"inputHellovar1"}},
+				},
+			},
+		},
 	})
 }