Most patterns of word formation convey more than one meaning. Although multifunctionality is such a widespread phenomenon, only a limited number of topics, such as the polysemy of diminutives, action nouns and agent nouns, have received special attention in the theoretical literature. The present article focuses on instrument and place nouns, which are expressed by means of one and the same derivational pattern in more than half of the languages expressing these two concepts morphologically. The empirical assessment of this syncretism provides the starting point for an in-depth discussion of multifunctionality in word formation. After a review of the literature on monosemy, polysemy and homonymy, diachronic pathways leading to syncretism of instrument and place nouns are described in detail. It turns out that the syncretism is not due to a particular semantic affinity of the concepts 'instrument' and 'place', as sometimes assumed in the literature, including the recent semantic-maps approach. Instead, five different processes can be discerned which lead to the multifunctionality of the respective markers: reanalysis, concretization of action nouns, ellipsis, homonymization, and borrowing.