diff --git a/python/src/com/jetbrains/python/refactoring/introduce/parameter/PyIntroduceParameterHandler.java b/python/src/com/jetbrains/python/refactoring/introduce/parameter/PyIntroduceParameterHandler.java
index 0148426ac4d3..e72aca56ec5c 100644
--- a/python/src/com/jetbrains/python/refactoring/introduce/parameter/PyIntroduceParameterHandler.java
+++ b/python/src/com/jetbrains/python/refactoring/introduce/parameter/PyIntroduceParameterHandler.java
@@ -2,6 +2,7 @@ package com.jetbrains.python.refactoring.introduce.parameter;
 
 import com.intellij.codeInsight.CodeInsightUtilBase;
 import com.intellij.psi.PsiElement;
+import com.intellij.psi.PsiNamedElement;
 import com.intellij.psi.PsiReference;
 import com.intellij.psi.util.PsiTreeUtil;
 import com.intellij.refactoring.introduce.inplace.InplaceVariableIntroducer;
@@ -61,32 +62,55 @@ public class PyIntroduceParameterHandler extends IntroduceHandler {
 
   protected boolean isValidIntroduceContext(PsiElement element) {
     if (element != null) {
-      final PyFunction function = PsiTreeUtil.getParentOfType(element, PyFunction.class);
-      final ScopeOwner scopeOwner =  ScopeUtil.getScopeOwner(element);
-      final boolean[] isValid = {true};
-      if (scopeOwner != null) {
-        new PyRecursiveElementVisitor() {
-          @Override
-          public void visitPyReferenceExpression(PyReferenceExpression node) {
-            super.visitPyReferenceExpression(node);
-            if (ControlFlowCache.getScope(scopeOwner).containsDeclaration(node.getName())) {
-              isValid[0] = false;
-            }
-          }
-        }.visitElement(element);
-      }
-      final PyStatement nonlocalStatement =
-        PsiTreeUtil.getParentOfType(element, PyNonlocalStatement.class, PyGlobalStatement.class);
-      final PyStatementList statementList =
-        PsiTreeUtil.getParentOfType(element, PyStatementList.class);
-      PyImportStatement importStatement = PsiTreeUtil.getParentOfType(element, PyImportStatement.class);
-      return function != null && !isResolvedToParameter(element) && isValid[0] && nonlocalStatement == null &&
-        statementList != null && importStatement == null;
+      if (!isValidPlace(element)) return false;
+
+      return isNotDeclared(element);
     }
     return false;
   }
 
-  private boolean isResolvedToParameter(PsiElement element) {
+  private static boolean isNotDeclared(PsiElement element) {
+    final ScopeOwner scopeOwner =  ScopeUtil.getScopeOwner(element);
+    final boolean[] isValid = {true};
+
+    if (scopeOwner != null) {
+      final String name = element instanceof PsiNamedElement? ((PsiNamedElement)element).getName() : element.getText();
+      if (name != null && ControlFlowCache.getScope(scopeOwner).containsDeclaration(name)) {
+        return false;
+      }
+      new PyRecursiveElementVisitor() {
+        @Override
+        public void visitPyReferenceExpression(PyReferenceExpression node) {
+          super.visitPyReferenceExpression(node);
+
+          final String name = node.getName();
+          if (name != null && ControlFlowCache.getScope(scopeOwner).containsDeclaration(name)) {
+            isValid[0] = false;
+          }
+        }
+      }.visitElement(element);
+    }
+    return !isResolvedToParameter(element) && isValid[0];
+  }
+
+  private static boolean isValidPlace(PsiElement element) {
+    final PyFunction function = PsiTreeUtil.getParentOfType(element, PyFunction.class);
+    final PyForPart forPart = PsiTreeUtil.getParentOfType(element, PyForPart.class);
+    if (forPart != null) {
+      final PyExpression target = forPart.getTarget();
+      if (target instanceof PyTargetExpression && element.getText().equals(target.getName()))
+        return false;
+    }
+    final PyStatement nonlocalStatement =
+      PsiTreeUtil.getParentOfType(element, PyNonlocalStatement.class, PyGlobalStatement.class);
+    final PyStatementList statementList =
+      PsiTreeUtil.getParentOfType(element, PyStatementList.class);
+    PyImportStatement importStatement = PsiTreeUtil.getParentOfType(element, PyImportStatement.class);
+    return nonlocalStatement == null && importStatement == null &&
+           statementList != null && function != null;
+  }
+
+  private static boolean isResolvedToParameter(PsiElement element) {
     while (element instanceof PyReferenceExpression) {
       final PsiReference reference = element.getReference();
       if (reference != null && reference.resolve() instanceof PyNamedParameter)
diff --git a/python/testData/refactoring/introduceParameter/functionDef.py b/python/testData/refactoring/introduceParameter/functionDef.py
new file mode 100644
index 000000000000..61262d42427b
--- /dev/null
+++ b/python/testData/refactoring/introduceParameter/functionDef.py
@@ -0,0 +1,2 @@
+def f(b=<caret>"myValue"):
+  pass
\ No newline at end of file
diff --git a/python/testData/refactoring/introduceParameter/global.py b/python/testData/refactoring/introduceParameter/global.py
new file mode 100644
index 000000000000..ac3caa0898a8
--- /dev/null
+++ b/python/testData/refactoring/introduceParameter/global.py
@@ -0,0 +1,4 @@
+def f2():
+  param = 1
+  def f():
+    global <selection>param</selection>
\ No newline at end of file
diff --git a/python/testData/refactoring/introduceParameter/localVariable1.py b/python/testData/refactoring/introduceParameter/localVariable1.py
new file mode 100644
index 000000000000..a1c0d883a1af
--- /dev/null
+++ b/python/testData/refactoring/introduceParameter/localVariable1.py
@@ -0,0 +1,3 @@
+def f():
+  a = 1
+  print <caret>a + 3
\ No newline at end of file
diff --git a/python/testData/refactoring/introduceParameter/localVariableInFor.py b/python/testData/refactoring/introduceParameter/localVariableInFor.py
new file mode 100644
index 000000000000..4b92eea3da06
--- /dev/null
+++ b/python/testData/refactoring/introduceParameter/localVariableInFor.py
@@ -0,0 +1,2 @@
+for <caret>item in range(100):
+  pass
\ No newline at end of file
diff --git a/python/testData/refactoring/introduceParameter/localVariableParam.py b/python/testData/refactoring/introduceParameter/localVariableParam.py
new file mode 100644
index 000000000000..67011a83d668
--- /dev/null
+++ b/python/testData/refactoring/introduceParameter/localVariableParam.py
@@ -0,0 +1,2 @@
+def f(b=1):
+  return <caret>b + 1
\ No newline at end of file
diff --git a/python/testData/refactoring/introduceParameter/nonLocal.py b/python/testData/refactoring/introduceParameter/nonLocal.py
new file mode 100644
index 000000000000..1f42e3c56360
--- /dev/null
+++ b/python/testData/refactoring/introduceParameter/nonLocal.py
@@ -0,0 +1,4 @@
+def f2():
+  param = 1
+  def f():
+    nonlocal <selection>param</selection>
\ No newline at end of file
diff --git a/python/testSrc/com/jetbrains/python/refactoring/PyIntroduceParameterTest.java b/python/testSrc/com/jetbrains/python/refactoring/PyIntroduceParameterTest.java
index 19047fc12fea..b31b0fb87048 100644
--- a/python/testSrc/com/jetbrains/python/refactoring/PyIntroduceParameterTest.java
+++ b/python/testSrc/com/jetbrains/python/refactoring/PyIntroduceParameterTest.java
@@ -3,6 +3,7 @@ package com.jetbrains.python.refactoring;
 import com.intellij.refactoring.util.CommonRefactoringUtil;
 import com.intellij.testFramework.TestDataPath;
 import com.jetbrains.python.PyBundle;
+import com.jetbrains.python.psi.LanguageLevel;
 import com.jetbrains.python.refactoring.introduce.IntroduceHandler;
 import com.jetbrains.python.refactoring.introduce.parameter.PyIntroduceParameterHandler;
 
@@ -35,6 +36,27 @@ public class PyIntroduceParameterTest extends PyIntroduceTestCase {
     doTestCannotPerform(PyBundle.message("refactoring.introduce.selection.error"));
   }
 
+  public void testLocalVariable1() {
+    doTestCannotPerform(PyBundle.message("refactoring.introduce.selection.error"));
+  }
+
+  public void testLocalVariableParam() {
+    doTestCannotPerform(PyBundle.message("refactoring.introduce.selection.error"));
+  }
+
+  public void testNonLocal() {
+    doTestCannotPerform(PyBundle.message("refactoring.introduce.selection.error"), LanguageLevel.PYTHON32);
+  }
+
+  public void testGlobal() {
+    doTestCannotPerform(PyBundle.message("refactoring.introduce.selection.error"));
+  }
+
+  public void testFunctionDef() {
+    doTestCannotPerform(PyBundle.message("refactoring.introduce.selection.error"));
+  }
+
+
   @Override
   protected String getTestDataPath() {
     return super.getTestDataPath() + "/refactoring/introduceParameter";
@@ -52,4 +74,14 @@ public class PyIntroduceParameterTest extends PyIntroduceTestCase {
       assertEquals(expected, e.getMessage());
     }
   }
+
+  private void doTestCannotPerform(String expected, LanguageLevel languageLevel) {
+    setLanguageLevel(languageLevel);
+    try {
+      doTestCannotPerform(expected);
+    }
+    finally {
+      setLanguageLevel(null);
+    }
+  }
 }