diff --git a/fixtures/set-tag-identifier/compiled.js b/fixtures/set-tag-identifier/compiled.js
index 91ce72d..3bef27c 100644
--- a/fixtures/set-tag-identifier/compiled.js
+++ b/fixtures/set-tag-identifier/compiled.js
@@ -1,13 +1,11 @@
-return (function (template, ctx) {
 let out = "";
-ctx.$lineNumber = 1;
-ctx.$filename = "{{__dirname}}index.edge";
+let $lineNumber = 1;
+let $filename = "{{__dirname}}index.edge";
 try {
-ctx.set("username", ctx.resolve('username').split("")[0], false);
-ctx.$lineNumber = 2;
-out += `${ctx.escape(ctx.resolve('username'))}`;
+let username = state.username.split("")[0];
+$lineNumber = 2;
+out += `${ctx.escape(username)}`;
 } catch (error) {
-ctx.reThrow(error);
+ctx.reThrow(error, $filename, $lineNumber);
 }
-return out;
-})(template, ctx)
\ No newline at end of file
+return out;
\ No newline at end of file
diff --git a/fixtures/set-tag-update-value/compiled.js b/fixtures/set-tag-update-value/compiled.js
new file mode 100644
index 0000000..864f5f8
--- /dev/null
+++ b/fixtures/set-tag-update-value/compiled.js
@@ -0,0 +1,13 @@
+let out = "";
+let $lineNumber = 1;
+let $filename = "{{__dirname}}index.edge";
+try {
+let username = "nikk";
+$lineNumber = 2;
+username = "virk";
+$lineNumber = 3;
+out += `${ctx.escape(username)}`;
+} catch (error) {
+ctx.reThrow(error, $filename, $lineNumber);
+}
+return out;
\ No newline at end of file
diff --git a/fixtures/set-tag-update-value/index.edge b/fixtures/set-tag-update-value/index.edge
new file mode 100644
index 0000000..798115b
--- /dev/null
+++ b/fixtures/set-tag-update-value/index.edge
@@ -0,0 +1,3 @@
+@set("username", "nikk")
+@set("username", "virk")
+{{ username }}
\ No newline at end of file
diff --git a/fixtures/set-tag-update-value/index.json b/fixtures/set-tag-update-value/index.json
new file mode 100644
index 0000000..d5f5540
--- /dev/null
+++ b/fixtures/set-tag-update-value/index.json
@@ -0,0 +1,3 @@
+{
+  "username": "virk"
+}
\ No newline at end of file
diff --git a/fixtures/set-tag-update-value/index.txt b/fixtures/set-tag-update-value/index.txt
new file mode 100644
index 0000000..b7acc9a
--- /dev/null
+++ b/fixtures/set-tag-update-value/index.txt
@@ -0,0 +1 @@
+virk
\ No newline at end of file
diff --git a/fixtures/set-tag/compiled.js b/fixtures/set-tag/compiled.js
index f266228..dcf7897 100644
--- a/fixtures/set-tag/compiled.js
+++ b/fixtures/set-tag/compiled.js
@@ -1,13 +1,11 @@
-return (function (template, ctx) {
 let out = "";
-ctx.$lineNumber = 1;
-ctx.$filename = "{{__dirname}}index.edge";
+let $lineNumber = 1;
+let $filename = "{{__dirname}}index.edge";
 try {
-ctx.set("username", "nikk", false);
-ctx.$lineNumber = 2;
-out += `${ctx.escape(ctx.resolve('username'))}`;
+let username = "nikk";
+$lineNumber = 2;
+out += `${ctx.escape(username)}`;
 } catch (error) {
-ctx.reThrow(error);
+ctx.reThrow(error, $filename, $lineNumber);
 }
-return out;
-})(template, ctx)
\ No newline at end of file
+return out;
\ No newline at end of file
diff --git a/src/Tags/Set.ts b/src/Tags/Set.ts
index 8803b9a..7b6a6e3 100644
--- a/src/Tags/Set.ts
+++ b/src/Tags/Set.ts
@@ -11,7 +11,7 @@ import { EdgeError } from 'edge-error'
 import { expressions } from 'edge-parser'
 
 import { TagContract } from '../Contracts'
-import { isSubsetOf, unallowedExpression } from '../utils'
+import { isSubsetOf, unallowedExpression, parseJsArg } from '../utils'
 
 /**
  * The set tag is used to set runtime values within the template. The value
@@ -40,10 +40,7 @@ export const setTag: TagContract = {
    * Compiles else block node to Javascript else statement
    */
   compile (parser, buffer, token) {
-    const parsed = parser.utils.transformAst(
-      parser.utils.generateAST(token.properties.jsArg, token.loc, token.filename),
-      token.filename,
-    )
+    const parsed = parseJsArg(parser, token)
 
     /**
      * The set tag only accepts a sequence expression.
@@ -63,15 +60,15 @@ export const setTag: TagContract = {
     /**
      * Disallow more than 2 values for the sequence expression
      */
-    if (parsed.expressions.length > 3) {
-      throw new EdgeError('maximum of 3 arguments are allowed for the @set tag', 'E_MAX_ARGUMENTS', {
+    if (parsed.expressions.length > 2) {
+      throw new EdgeError('maximum of 2 arguments are allowed for the @set tag', 'E_MAX_ARGUMENTS', {
         line: parsed.loc.start.line,
         col: parsed.loc.start.column,
         filename: token.filename,
       })
     }
 
-    const [key, value, isolated] = parsed.expressions
+    const [key, value] = parsed.expressions
 
     /**
      * The key has to be a literal value
@@ -82,19 +79,23 @@ export const setTag: TagContract = {
       () => {
         throw unallowedExpression(
           'The first argument for @set tag must be a string literal',
-          parsed,
+          key,
           token.filename,
         )
       },
     )
 
     /**
-     * Write statement to mutate the key
+     * Write statement to mutate the key. If the variable has already been
+     * defined, then just update it's value.
+     *
+     * We do not allow re-declaring a variable as of now
      */
-    buffer.writeExpression(
-      `ctx.set(${key.raw}, ${parser.utils.stringify(value)}, ${!!isolated})`,
-      token.filename,
-      token.loc.start.line,
-    )
+    const expression = parser.stack.has(key.value)
+      ? `${key.value} = ${parser.utils.stringify(value)}`
+      : `let ${key.value} = ${parser.utils.stringify(value)}`
+
+    buffer.writeExpression(expression, token.filename, token.loc.start.line)
+    parser.stack.defineVariable(key.value)
   },
 }