diff --git a/python/src/com/jetbrains/python/psi/PyArgumentList.java b/python/src/com/jetbrains/python/psi/PyArgumentList.java
index fb7e3a9e62e5..c0effc354ad4 100644
--- a/python/src/com/jetbrains/python/psi/PyArgumentList.java
+++ b/python/src/com/jetbrains/python/psi/PyArgumentList.java
@@ -30,6 +30,7 @@ public interface PyArgumentList extends PyElement {
    * Tries to map the argument list to callee's idea of parameters.
    * @return a result object with mappings and diagnostic flags.
    */
+  @NotNull
   AnalysisResult analyzeCall();
 
   /**
diff --git a/python/src/com/jetbrains/python/psi/impl/PyArgumentListImpl.java b/python/src/com/jetbrains/python/psi/impl/PyArgumentListImpl.java
index 8de9a2bcfef2..144d652a5595 100644
--- a/python/src/com/jetbrains/python/psi/impl/PyArgumentListImpl.java
+++ b/python/src/com/jetbrains/python/psi/impl/PyArgumentListImpl.java
@@ -221,6 +221,7 @@ public class PyArgumentListImpl extends PyElementImpl implements PyArgumentList
     super.deleteChildInternal(node);
   }
 
+  @NotNull
   public AnalysisResult analyzeCall() {
     final PyCallExpressionHelper.AnalysisResultImpl ret = new PyCallExpressionHelper.AnalysisResultImpl(this);
     PyExpression[] arguments = getArguments();
diff --git a/python/src/com/jetbrains/python/refactoring/NameSuggestorUtil.java b/python/src/com/jetbrains/python/refactoring/NameSuggestorUtil.java
index c9aa4e40e96d..25f25a9c1d6d 100644
--- a/python/src/com/jetbrains/python/refactoring/NameSuggestorUtil.java
+++ b/python/src/com/jetbrains/python/refactoring/NameSuggestorUtil.java
@@ -9,10 +9,7 @@ import java.util.regex.Matcher;
 import java.util.regex.Pattern;
 
 /**
- * Created by IntelliJ IDEA.
- * User: Alexey.Ivanov
- * Date: Aug 24, 2009
- * Time: 6:49:13 PM
+ * @author Alexey.Ivanov
  */
 public class NameSuggestorUtil {
   private NameSuggestorUtil() {
diff --git a/python/src/com/jetbrains/python/refactoring/introduce/IntroduceHandler.java b/python/src/com/jetbrains/python/refactoring/introduce/IntroduceHandler.java
index 29d58d0d2d83..a3d6033c6878 100644
--- a/python/src/com/jetbrains/python/refactoring/introduce/IntroduceHandler.java
+++ b/python/src/com/jetbrains/python/refactoring/introduce/IntroduceHandler.java
@@ -18,9 +18,7 @@ import com.intellij.psi.util.PsiTreeUtil;
 import com.intellij.refactoring.IntroduceTargetChooser;
 import com.intellij.refactoring.RefactoringActionHandler;
 import com.intellij.refactoring.util.CommonRefactoringUtil;
-import com.intellij.util.ArrayUtil;
 import com.intellij.util.Function;
-import com.intellij.util.containers.HashSet;
 import com.jetbrains.python.PyBundle;
 import com.jetbrains.python.psi.*;
 import com.jetbrains.python.psi.impl.PyPsiUtils;
@@ -31,10 +29,7 @@ import com.jetbrains.python.refactoring.PyRefactoringUtil;
 import org.jetbrains.annotations.NotNull;
 import org.jetbrains.annotations.Nullable;
 
-import java.util.ArrayList;
-import java.util.Collection;
-import java.util.Collections;
-import java.util.List;
+import java.util.*;
 
 /**
  * @author Alexey.Ivanov
@@ -72,28 +67,42 @@ abstract public class IntroduceHandler implements RefactoringActionHandler {
   public void invoke(@NotNull Project project, @NotNull PsiElement[] elements, DataContext dataContext) {
   }
 
-  protected String[] getSuggestedNames(@NotNull final PyExpression expression) {
-    Collection<String> res = new HashSet<String>();
+  public Collection<String> getSuggestedNames(@NotNull final PyExpression expression) {
+    Collection<String> candidates = new HashSet<String>();
     String text = expression.getText();
     if (text != null) {
-      for (String name : NameSuggestorUtil.generateNames(text)) {
-        if (myValidator.checkPossibleName(name, expression)) {
-          res.add(name);
-        }
-      }
+      candidates.addAll(NameSuggestorUtil.generateNames(text));
     }
     PyType type = expression.getType(TypeEvalContext.fast());
     if (type != null) {
       final String typeName = type.getName();
       if (typeName != null) {
-        for (String name : NameSuggestorUtil.generateNamesByType(typeName)) {
-          if (myValidator.checkPossibleName(name, expression)) {
-            res.add(name);
-          }
+        candidates.addAll(NameSuggestorUtil.generateNamesByType(typeName));
+      }
+    }
+    final PyKeywordArgument kwArg = PsiTreeUtil.getParentOfType(expression, PyKeywordArgument.class);
+    if (kwArg != null && kwArg.getValueExpression() == expression) {
+      candidates.add(kwArg.getKeyword());
+    }
+
+    final PyArgumentList argList = PsiTreeUtil.getParentOfType(expression, PyArgumentList.class);
+    if (argList != null) {
+      final PyArgumentList.AnalysisResult result = argList.analyzeCall();
+      if (result.getMarkedCallee() != null && !result.isImplicitlyResolved()) {
+        final PyNamedParameter namedParameter = result.getPlainMappedParams().get(expression);
+        if (namedParameter != null) {
+          candidates.add(namedParameter.getName());
         }
       }
     }
-    return ArrayUtil.toStringArray(res);
+    
+    Collection<String> res = new HashSet<String>();
+    for (String name : candidates) {
+      if (myValidator.checkPossibleName(name, expression)) {
+        res.add(name);
+      }
+    }
+    return res;
   }
 
   public void performAction(@NotNull final Project project, Editor editor, PsiFile file, String name, boolean replaceAll, boolean hasConstructor, boolean isTestClass) {
@@ -202,7 +211,7 @@ abstract public class IntroduceHandler implements RefactoringActionHandler {
     else {
       occurrences = Collections.emptyList();
     }
-    String[] possibleNames = getSuggestedNames(expression);
+    Collection<String> possibleNames = getSuggestedNames(expression);
     replaceAll &= occurrences.size() > 0;
     InitPlace initInConstructor = InitPlace.SAME_METHOD;
     if (name == null) {
diff --git a/python/src/com/jetbrains/python/refactoring/introduce/PyIntroduceDialog.java b/python/src/com/jetbrains/python/refactoring/introduce/PyIntroduceDialog.java
index 4f80c4aae8dd..f9276fd47f6c 100644
--- a/python/src/com/jetbrains/python/refactoring/introduce/PyIntroduceDialog.java
+++ b/python/src/com/jetbrains/python/refactoring/introduce/PyIntroduceDialog.java
@@ -17,6 +17,7 @@ import org.jetbrains.annotations.Nullable;
 
 import javax.swing.*;
 import java.awt.event.*;
+import java.util.Collection;
 
 /**
  * Created by IntelliJ IDEA.
@@ -45,7 +46,7 @@ public class PyIntroduceDialog extends DialogWrapper implements PyIntroduceSetti
                            @NotNull final String caption,
                            @NotNull final IntroduceValidator validator,
                            final int occurrencesCount,
-                           final String[] possibleNames,
+                           final Collection<String> possibleNames,
                            final String helpId,
                            boolean hasConstructor,
                            boolean isTestClass) {
@@ -69,7 +70,7 @@ public class PyIntroduceDialog extends DialogWrapper implements PyIntroduceSetti
     return myHelpId;
   }
 
-  private void setUpNameComboBox(String[] possibleNames) {
+  private void setUpNameComboBox(Collection<String> possibleNames) {
     final EditorComboBoxEditor comboEditor = new StringComboboxEditor(myProject, PythonFileType.INSTANCE, myNameComboBox);
 
     myNameComboBox.setEditor(comboEditor);
diff --git a/python/src/com/jetbrains/python/refactoring/introduce/constant/ConstantIntroduceHandler.java b/python/src/com/jetbrains/python/refactoring/introduce/constant/ConstantIntroduceHandler.java
index c7ebb01e1329..e155cf025fa3 100644
--- a/python/src/com/jetbrains/python/refactoring/introduce/constant/ConstantIntroduceHandler.java
+++ b/python/src/com/jetbrains/python/refactoring/introduce/constant/ConstantIntroduceHandler.java
@@ -1,7 +1,6 @@
 package com.jetbrains.python.refactoring.introduce.constant;
 
 import com.intellij.psi.PsiElement;
-import com.intellij.util.ArrayUtil;
 import com.intellij.util.containers.HashSet;
 import com.jetbrains.python.PyBundle;
 import com.jetbrains.python.psi.PyExpression;
@@ -13,10 +12,7 @@ import java.util.Collection;
 import java.util.List;
 
 /**
- * Created by IntelliJ IDEA.
- * User: Alexey.Ivanov
- * Date: Aug 25, 2009
- * Time: 6:48:16 PM
+ * @author Alexey.Ivanov
  */
 public class ConstantIntroduceHandler extends IntroduceHandler {
   public ConstantIntroduceHandler() {
@@ -35,12 +31,12 @@ public class ConstantIntroduceHandler extends IntroduceHandler {
     return anchor.addBefore(declaration, ((PyFile)anchor).getStatements().get(0));
   }
 
-  protected String[] getSuggestedNames(@NotNull final PyExpression expression) {
+  public Collection<String> getSuggestedNames(@NotNull final PyExpression expression) {
     Collection<String> names = new HashSet<String>();
     for (String name : super.getSuggestedNames(expression)) {
       names.add(name.toUpperCase());
     }
-    return ArrayUtil.toStringArray(names);
+    return names;
   }
 
   @Override
diff --git a/python/testData/refactoring/introduceVariable/suggestArgumentName.py b/python/testData/refactoring/introduceVariable/suggestArgumentName.py
new file mode 100644
index 000000000000..80a5ff0ee381
--- /dev/null
+++ b/python/testData/refactoring/introduceVariable/suggestArgumentName.py
@@ -0,0 +1,4 @@
+def foo(extra_context):
+    pass
+
+foo(<caret>{'a': 1})
diff --git a/python/testData/refactoring/introduceVariable/suggestKeywordArgumentName.py b/python/testData/refactoring/introduceVariable/suggestKeywordArgumentName.py
new file mode 100644
index 000000000000..10023f4b9fce
--- /dev/null
+++ b/python/testData/refactoring/introduceVariable/suggestKeywordArgumentName.py
@@ -0,0 +1,4 @@
+def foo(**kwargs):
+    pass
+
+foo(extra_context=<caret>{'a': 1})
diff --git a/python/testSrc/com/jetbrains/python/refactoring/PyIntroduceVariableTest.java b/python/testSrc/com/jetbrains/python/refactoring/PyIntroduceVariableTest.java
index f5e9dad2d1c9..82605832fb1c 100644
--- a/python/testSrc/com/jetbrains/python/refactoring/PyIntroduceVariableTest.java
+++ b/python/testSrc/com/jetbrains/python/refactoring/PyIntroduceVariableTest.java
@@ -1,8 +1,12 @@
 package com.jetbrains.python.refactoring;
 
+import com.intellij.psi.util.PsiTreeUtil;
 import com.jetbrains.python.fixtures.PyLightFixtureTestCase;
+import com.jetbrains.python.psi.PyExpression;
 import com.jetbrains.python.refactoring.introduce.variable.VariableIntroduceHandler;
 
+import java.util.Collection;
+
 /**
  * @author yole
  */
@@ -12,15 +16,31 @@ public class PyIntroduceVariableTest extends PyLightFixtureTestCase {
     return super.getTestDataPath() + "/refactoring/introduceVariable";
   }
 
-  public void testSimple() throws Exception {
+  public void testSimple() {
     doTest();
   }
 
-  public void testPy995() throws Exception {
+  public void testPy995() {
     doTest();
   }
 
-  private void doTest() throws Exception {
+  public void testSuggestKeywordArgumentName() {   // PY-1260
+    myFixture.configureByFile(getTestName(true) + ".py");
+    VariableIntroduceHandler handler = new VariableIntroduceHandler();
+    PyExpression expr = PsiTreeUtil.getParentOfType(myFixture.getFile().findElementAt(myFixture.getEditor().getCaretModel().getOffset()), PyExpression.class);
+    final Collection<String> names = handler.getSuggestedNames(expr);
+    assertTrue(names.contains("extra_context"));
+  }
+
+  public void testSuggestArgumentName() {   // PY-1260
+    myFixture.configureByFile(getTestName(true) + ".py");
+    VariableIntroduceHandler handler = new VariableIntroduceHandler();
+    PyExpression expr = PsiTreeUtil.getParentOfType(myFixture.getFile().findElementAt(myFixture.getEditor().getCaretModel().getOffset()), PyExpression.class);
+    final Collection<String> names = handler.getSuggestedNames(expr);
+    assertTrue(names.contains("extra_context"));
+  }
+
+  private void doTest() {
     myFixture.configureByFile(getTestName(true) + ".py");
     VariableIntroduceHandler handler = new VariableIntroduceHandler();
     handler.performAction(myFixture.getProject(),  myFixture.getEditor(), myFixture.getFile(), "a", true, false, false);