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**from BOL : Table Valued Parameters** **Benefits** Table-valued parameters offer more flexibility and in some cases better performance than temporary tables or other ways to pass a list of parameters. Table-valued parameters offer the following benefits: - Do not acquire locks for the initial -population of data from a client. -Provide a simple programming model. - Enable you to include complex -business logic in a single routine. -Reduce round trips to the server. - Can have a table structure of different - cardinality. Are strongly typed. -Enable the client to specify sort - order and unique keys. **Restrictions** Table-valued parameters have the following restrictions: - SQL Server does not maintain statistics on columns of table-valued parameters. - Table-valued parameters must be passed as input READONLY parameters to Transact-SQL routines. - You cannot perform DML operations such as UPDATE, DELETE, or INSERT on a table-valued parameter in the body of a routine. - You cannot use a table-valued parameter as target of a SELECT INTO or INSERT EXEC statement. A table-valued parameter can be in the FROM clause of SELECT INTO or in the INSERT EXEC string or stored-procedure. **Scope** A table-valued parameter is scoped to the stored procedure, function or dynamic Transact-SQL text, exactly like other parameters. Similarly, a variable of table type has scope like any other local variable that is created by using a DECLARE statement. You can declare table-valued variables within dynamic Transact-SQL statements and pass these variables as table-valued parameters to stored procedures and functions I advise that you also take a look at table valued functions in BOL :ms-help://MS.SQLCC.v10/MS.SQLSVR.v10.en/s10de_1devconc/html/277f03c0-d27b-4654-b357-bdee1875d11c.htm

The two big points are that user defined functions don't allow data definition language, and if we're talking about multi-statement table valued user defined functions, they don't statistics. If you're talking about creating a table, even a temporary table, you're violating the first rule. If you're trying to create a temporary table in the multi-statement udf, then you're violating the second. That's why they won't be allowed within a function.