diff --git a/src/main/kotlin/net/fabricmc/loom/kotlin/remapping/KotlinClassRemapper.kt b/src/main/kotlin/net/fabricmc/loom/kotlin/remapping/KotlinClassRemapper.kt
index 57aa3800..4a5924f1 100644
--- a/src/main/kotlin/net/fabricmc/loom/kotlin/remapping/KotlinClassRemapper.kt
+++ b/src/main/kotlin/net/fabricmc/loom/kotlin/remapping/KotlinClassRemapper.kt
@@ -88,7 +88,15 @@ class KotlinClassRemapper(
 
     private fun remap(name: ClassName): ClassName {
         val local = name.isLocalClassName()
-        val remapped = remapper.map(name.toJvmInternalName()).replace('$', '.')
+
+        // Ensure that none inner classes with names containing $ are persisted.
+        // See: https://github.com/FabricMC/fabric-loom/issues/1363 fix suggested by fan87
+        val normalizedName = name.replace('$', '\n')
+        val remapped =
+            remapper
+                .map(normalizedName.toJvmInternalName())
+                .replace('$', '.')
+                .replace('\n', '$')
 
         if (local) {
             return ".$remapped"