diff --git a/java/java-impl/src/com/intellij/psi/controlFlow/ControlFlowUtil.java b/java/java-impl/src/com/intellij/psi/controlFlow/ControlFlowUtil.java
index a751630b5bb5..d85b2e576931 100644
--- a/java/java-impl/src/com/intellij/psi/controlFlow/ControlFlowUtil.java
+++ b/java/java-impl/src/com/intellij/psi/controlFlow/ControlFlowUtil.java
@@ -264,7 +264,7 @@ public class ControlFlowUtil {
       }
 
       @Override public void visitBranchingInstruction(BranchingInstruction instruction, int offset, int nextOffset) {
-        processGoto(flow, start, end, exitPoints, exitStatements, instruction.offset, classesFilter, findStatement(flow, offset));
+        processGoto(flow, start, end, exitPoints, exitStatements, instruction, classesFilter, findStatement(flow, offset));
       }
 
       // call/return do not incur exit points
@@ -297,8 +297,9 @@ public class ControlFlowUtil {
 
   private static void processGoto(ControlFlow flow, int start, int end,
                                   IntArrayList exitPoints,
-                                  Collection<PsiStatement> exitStatements, int gotoOffset, Class[] classesFilter, final PsiStatement statement) {
+                                  Collection<PsiStatement> exitStatements, BranchingInstruction instruction, Class[] classesFilter, final PsiStatement statement) {
     if (statement == null) return;
+    int gotoOffset = instruction.offset;
     if (start > gotoOffset || gotoOffset >= end || isElementOfClass(statement, classesFilter)) {
       // process chain of goto's
       gotoOffset = promoteThroughGotoChain(flow, gotoOffset);
@@ -306,7 +307,16 @@ public class ControlFlowUtil {
       if (!exitPoints.contains(gotoOffset) && (gotoOffset >= end || gotoOffset < start)) {
         exitPoints.add(gotoOffset);
       }
-      processGotoStatement(classesFilter, exitStatements, statement);
+      if (gotoOffset >= end || gotoOffset < start) {
+        processGotoStatement(classesFilter, exitStatements, statement);
+      } else {
+        boolean isReturn = instruction instanceof GoToInstruction && ((GoToInstruction)instruction).isReturn;
+        final Instruction gotoInstruction = flow.getInstructions().get(gotoOffset);
+        isReturn |= gotoInstruction instanceof GoToInstruction && ((GoToInstruction)gotoInstruction).isReturn;
+        if (isReturn) {
+          processGotoStatement(classesFilter, exitStatements, statement);
+        }
+      }
     }
   }
 
diff --git a/java/java-tests/testData/refactoring/extractMethod/ContinueInside.java b/java/java-tests/testData/refactoring/extractMethod/ContinueInside.java
new file mode 100644
index 000000000000..892e22d93a9c
--- /dev/null
+++ b/java/java-tests/testData/refactoring/extractMethod/ContinueInside.java
@@ -0,0 +1,12 @@
+class Test {
+  String foo(String[] args) {
+    <selection>
+    for(String arg : args) {
+      if (arg == null) continue;
+      System.out.println(arg);
+    }
+    if (args.length == 0) return null;
+    </selection>
+    return null;
+  }
+}
diff --git a/java/java-tests/testData/refactoring/extractMethod/ContinueInside_after.java b/java/java-tests/testData/refactoring/extractMethod/ContinueInside_after.java
new file mode 100644
index 000000000000..a8e17f76c123
--- /dev/null
+++ b/java/java-tests/testData/refactoring/extractMethod/ContinueInside_after.java
@@ -0,0 +1,17 @@
+class Test {
+  String foo(String[] args) {
+
+      if (newMethod(args)) return null;
+
+      return null;
+  }
+
+    private boolean newMethod(String[] args) {
+        for(String arg : args) {
+          if (arg == null) continue;
+          System.out.println(arg);
+        }
+        if (args.length == 0) return true;
+        return false;
+    }
+}
diff --git a/java/java-tests/testSrc/com/intellij/refactoring/ExtractMethodTest.java b/java/java-tests/testSrc/com/intellij/refactoring/ExtractMethodTest.java
index 6602b68e390b..7a39171d37ce 100644
--- a/java/java-tests/testSrc/com/intellij/refactoring/ExtractMethodTest.java
+++ b/java/java-tests/testSrc/com/intellij/refactoring/ExtractMethodTest.java
@@ -74,6 +74,10 @@ public class ExtractMethodTest extends LightCodeInsightTestCase {
     doExitPointsTest(false);
   }
 
+  public void testContinueInside() throws Exception {
+    doTest();
+  }
+
   public void testBooleanExpression() throws Exception {
     doTest();
   }
@@ -496,4 +500,4 @@ public class ExtractMethodTest extends LightCodeInsightTestCase {
 
     return true;
   }
-}
\ No newline at end of file
+}