diff --git a/src/Compilers/CSharp/Portable/Lowering/DiagnosticsPass_Warnings.cs b/src/Compilers/CSharp/Portable/Lowering/DiagnosticsPass_Warnings.cs
index a4a438bf8d4bec1ad9305f590175b9414e161dee..5d697aef15bf70e157036f3080da11f0b584b272 100644
--- a/src/Compilers/CSharp/Portable/Lowering/DiagnosticsPass_Warnings.cs
+++ b/src/Compilers/CSharp/Portable/Lowering/DiagnosticsPass_Warnings.cs
@@ -238,7 +238,16 @@ private void CheckBinaryOperator(BoundBinaryOperator node)
 
         private void CheckCompoundAssignmentOperator(BoundCompoundAssignmentOperator node)
         {
-            CheckForBitwiseOrSignExtend(node, node.Operator.Kind, node.Left, node.Right);
+            BoundExpression left = node.Left;
+
+            if (!node.Operator.Kind.IsDynamic() && !node.LeftConversion.IsIdentity && node.LeftConversion.Exists)
+            {
+                // Need to represent the implicit conversion as a node in order to be able to produce correct diagnostics.
+                left = new BoundConversion(left.Syntax, left, node.LeftConversion, node.Operator.Kind.IsChecked(),
+                                           explicitCastInCode: false, constantValueOpt: null, type: node.Operator.LeftType);
+            }
+
+            CheckForBitwiseOrSignExtend(node, node.Operator.Kind, left, node.Right);
             CheckLiftedCompoundAssignment(node);
 
             if (_inExpressionLambda)
diff --git a/src/Compilers/CSharp/Test/Semantic/Semantics/OperatorTests.cs b/src/Compilers/CSharp/Test/Semantic/Semantics/OperatorTests.cs
index 1af7d96bc178e1f42cedc2d1c49b558773cab407..27d6b222b643edf8ae2c639444bf0cbac149e6cb 100644
--- a/src/Compilers/CSharp/Test/Semantic/Semantics/OperatorTests.cs
+++ b/src/Compilers/CSharp/Test/Semantic/Semantics/OperatorTests.cs
@@ -8728,5 +8728,26 @@ operator int (IntHolder ih)
 operator IntHolder(int i)
 'y' is 5");
         }
+
+        [Fact, WorkItem(4027, "https://github.com/dotnet/roslyn/issues/4027")]
+        public void NotSignExtendedOperand()
+        {
+            string source = @"
+class MainClass
+{
+    public static void Main ()
+    {
+        short a = 0;
+        int b = 0;
+        a |= (short)b;
+        a = (short)(a | (short)b);
+    }
+}
+";
+
+            var compilation = CreateCompilationWithMscorlib(source, options: TestOptions.DebugDll);
+
+            compilation.VerifyDiagnostics();
+        }
     }
 }