diff --git a/.changeset/stale-bees-collect.md b/.changeset/stale-bees-collect.md
new file mode 100644
index 000000000..ac71c2671
--- /dev/null
+++ b/.changeset/stale-bees-collect.md
@@ -0,0 +1,7 @@
+---
+'@linaria/babel-preset': patch
+'@linaria/shaker': patch
+'@linaria/utils': patch
+---
+
+Fix function usage in string literals. Fixes #1047.
diff --git a/packages/babel/src/utils/collectTemplateDependencies.ts b/packages/babel/src/utils/collectTemplateDependencies.ts
index 7c302a87c..60f648664 100644
--- a/packages/babel/src/utils/collectTemplateDependencies.ts
+++ b/packages/babel/src/utils/collectTemplateDependencies.ts
@@ -139,7 +139,7 @@ function hoistIdentifier(idPath: NodePath<Identifier>): void {
     return;
   }
 
-  if (!['var', 'let', 'const'].includes(binding.kind)) {
+  if (!['var', 'let', 'const', 'hoisted'].includes(binding.kind)) {
     // This is not a variable, we can't hoist it
     throw unsupported(binding.path, 'is a function parameter');
   }