diff --git a/python/src/com/jetbrains/python/psi/impl/PyCallExpressionHelper.java b/python/src/com/jetbrains/python/psi/impl/PyCallExpressionHelper.java
index d520c8386f05..7a9dd4f7127e 100644
--- a/python/src/com/jetbrains/python/psi/impl/PyCallExpressionHelper.java
+++ b/python/src/com/jetbrains/python/psi/impl/PyCallExpressionHelper.java
@@ -921,6 +921,7 @@ public class PyCallExpressionHelper {
           }
           else {
             parametersMappedToVariadicKeywordArguments.add(parameter);
+            mappedVariadicArgumentsToParameters = true;
           }
         }
         else {
diff --git a/python/testData/inspections/PyArgumentListInspection/kwargsAgainstKeywordOnly.py b/python/testData/inspections/PyArgumentListInspection/kwargsAgainstKeywordOnly.py
new file mode 100644
index 000000000000..cbe9a989988d
--- /dev/null
+++ b/python/testData/inspections/PyArgumentListInspection/kwargsAgainstKeywordOnly.py
@@ -0,0 +1,10 @@
+def f1(arg):
+    return 2
+
+def f2(*, arg):
+    return 2
+
+
+def test(**kwargs):
+    f1(**kwargs)
+    f2(**kwargs)
diff --git a/python/testSrc/com/jetbrains/python/inspections/PyArgumentListInspectionTest.java b/python/testSrc/com/jetbrains/python/inspections/PyArgumentListInspectionTest.java
index ccf903d425b9..97efabafbd04 100644
--- a/python/testSrc/com/jetbrains/python/inspections/PyArgumentListInspectionTest.java
+++ b/python/testSrc/com/jetbrains/python/inspections/PyArgumentListInspectionTest.java
@@ -322,6 +322,11 @@ public class PyArgumentListInspectionTest extends PyTestCase {
     runWithLanguageLevel(LanguageLevel.PYTHON35, this::doTest);
   }
 
+  // PY-16968
+  public void testKwargsAgainstKeywordOnly() {
+    runWithLanguageLevel(LanguageLevel.PYTHON36, this::doTest);
+  }
+
   private void doMultiFileTest() {
     final String folderPath = "inspections/PyArgumentListInspection/" + getTestName(false) + "/";