diff --git a/mypyc/lib-rt/dict_ops.c b/mypyc/lib-rt/dict_ops.c
index c4dbe8d31c32..2de5f4a9e7a4 100644
--- a/mypyc/lib-rt/dict_ops.c
+++ b/mypyc/lib-rt/dict_ops.c
@@ -69,7 +69,9 @@ PyObject *CPyDict_GetWithNone(PyObject *dict, PyObject *key) {
 
 PyObject *CPyDict_SetDefault(PyObject *dict, PyObject *key, PyObject *value) {
     if (PyDict_CheckExact(dict)){
-        return PyDict_SetDefault(dict, key, value);
+        PyObject* ret = PyDict_SetDefault(dict, key, value);
+        Py_XINCREF(ret);
+        return ret;
     }
     return PyObject_CallMethod(dict, "setdefault", "(OO)", key, value);
 }
diff --git a/mypyc/primitives/dict_ops.py b/mypyc/primitives/dict_ops.py
index 267f9d79179d..e176ffcac316 100644
--- a/mypyc/primitives/dict_ops.py
+++ b/mypyc/primitives/dict_ops.py
@@ -124,7 +124,6 @@
     arg_types=[dict_rprimitive, object_rprimitive, object_rprimitive],
     return_type=object_rprimitive,
     c_function_name='CPyDict_SetDefault',
-    is_borrowed=True,
     error_kind=ERR_MAGIC)
 
 # dict.setdefault(key)