diff --git a/src/V3DfgPasses.cpp b/src/V3DfgPasses.cpp
index b5ef851ee..355a85a4f 100644
--- a/src/V3DfgPasses.cpp
+++ b/src/V3DfgPasses.cpp
@@ -169,13 +169,7 @@ void V3DfgPasses::inlineVars(DfgGraph& dfg) {
                     if (astVarp->isForceable()) continue;
                 }
 
-                varp->forEachSinkEdge([=](DfgEdge& edge) {
-                    // If sink is a SystemC variable, don't inline that sink
-                    if (DfgVertexVar* const sinkVarp = edge.sinkp()->cast<DfgVarPacked>()) {
-                        if (sinkVarp->varp()->isSc()) return;
-                    }
-                    edge.relinkSource(driverp);
-                });
+                varp->forEachSinkEdge([=](DfgEdge& edge) { edge.relinkSource(driverp); });
             }
         }
     }
diff --git a/src/V3DfgRegularize.cpp b/src/V3DfgRegularize.cpp
index a4875ef5c..7ab1529d6 100644
--- a/src/V3DfgRegularize.cpp
+++ b/src/V3DfgRegularize.cpp
@@ -45,11 +45,15 @@ class DfgRegularize final {
 
     // Return canonical variable that can be used to hold the value of this vertex
     DfgVarPacked* getCanonicalVariable(DfgVertex& vtx) {
-        // First gather all existing variables fully written by this vertex
+        // First gather all existing variables fully written by this vertex. Ignore SystemC
+        // variables, those cannot act as canonical variables, as they cannot participate in
+        // expressions or be assigned rvalues.
         std::vector<DfgVarPacked*> varVtxps;
         vtx.forEachSink([&](DfgVertex& sink) {
             if (DfgVarPacked* const varVtxp = sink.cast<DfgVarPacked>()) {
-                if (varVtxp->isDrivenFullyByDfg()) varVtxps.push_back(varVtxp);
+                if (varVtxp->isDrivenFullyByDfg() && !varVtxp->varp()->isSc()) {
+                    varVtxps.push_back(varVtxp);
+                }
             }
         });
 
@@ -95,10 +99,22 @@ class DfgRegularize final {
 
         // Ensure intermediate values used multiple times are written to variables
         for (DfgVertex& vtx : m_dfg.opVertices()) {
-            // Operations without multiple sinks need no variables
-            if (!vtx.hasMultipleSinks()) continue;
-            // Array selects need no variables, they are just memory references
-            if (vtx.is<DfgArraySel>()) continue;
+            const bool needsIntermediateVariable = [&]() {
+                // Anything that drives an SC variable needs an intermediate,
+                // as we can only assign simple variables to SC variables at runtime.
+                const bool hasScSink = vtx.findSink<DfgVertexVar>([](const DfgVertexVar& var) {  //
+                    return var.varp()->isSc();
+                });
+                if (hasScSink) return true;
+                // Operations without multiple sinks need no variables
+                if (!vtx.hasMultipleSinks()) return false;
+                // Array selects need no variables, they are just memory references
+                if (vtx.is<DfgArraySel>()) return false;
+                // Otherwise needs an intermediate variable
+                return true;
+            }();
+
+            if (!needsIntermediateVariable) continue;
 
             // This is an op which has multiple sinks. Ensure it is assigned to a variable.
             DfgVarPacked* const varp = getCanonicalVariable(vtx);
diff --git a/test_regress/t/t_dfg_regularize_driver_of_sc_var.pl b/test_regress/t/t_dfg_regularize_driver_of_sc_var.pl
new file mode 100755
index 000000000..9158675cc
--- /dev/null
+++ b/test_regress/t/t_dfg_regularize_driver_of_sc_var.pl
@@ -0,0 +1,18 @@
+#!/usr/bin/env perl
+if (!$::Driver) { use FindBin; exec("$FindBin::Bin/bootstrap.pl", @ARGV, $0); die; }
+# DESCRIPTION: Verilator: Verilog Test driver/expect definition
+#
+# Copyright 2024 by Wilson Snyder. This program is free software; you
+# can redistribute it and/or modify it under the terms of either the GNU
+# Lesser General Public License Version 3 or the Perl Artistic License
+# Version 2.0.
+# SPDX-License-Identifier: LGPL-3.0-only OR Artistic-2.0
+
+scenarios(vlt => 1);
+
+compile(
+    verilator_flags2 => ["--sc"]
+    );
+
+ok(1);
+1;
diff --git a/test_regress/t/t_dfg_regularize_driver_of_sc_var.v b/test_regress/t/t_dfg_regularize_driver_of_sc_var.v
new file mode 100644
index 000000000..507d9adf1
--- /dev/null
+++ b/test_regress/t/t_dfg_regularize_driver_of_sc_var.v
@@ -0,0 +1,14 @@
+// DESCRIPTION: Verilator: Verilog Test module
+//
+// This file ONLY is placed under the Creative Commons Public Domain, for
+// any use, without warranty, 2024 by Wilson Snyder.
+// SPDX-License-Identifier: CC0-1.0
+
+module sub(input in, output out);
+  assign out = in;
+endmodule
+
+module top(input clk, output out);
+  logic one = '1;
+  sub sub_inst(.in(one), .out(out));
+endmodule