diff --git a/java/java-impl/src/com/intellij/refactoring/introduceVariable/IntroduceVariableBase.java b/java/java-impl/src/com/intellij/refactoring/introduceVariable/IntroduceVariableBase.java
index 84bc10e52484..385fe8b578ee 100644
--- a/java/java-impl/src/com/intellij/refactoring/introduceVariable/IntroduceVariableBase.java
+++ b/java/java-impl/src/com/intellij/refactoring/introduceVariable/IntroduceVariableBase.java
@@ -319,7 +319,8 @@ public abstract class IntroduceVariableBase extends IntroduceHandlerBase {
     if (endOffset <= startOffset) return null;
 
     PsiElement elementAt = PsiTreeUtil.findCommonParent(elementAtStart, elementAtEnd);
-    if (PsiTreeUtil.getParentOfType(elementAt, PsiExpression.class, false) == null) {
+    final PsiExpression containingExpression = PsiTreeUtil.getParentOfType(elementAt, PsiExpression.class, false);
+    if (containingExpression == null || containingExpression instanceof PsiLambdaExpression) {
       if (injectedLanguageManager.isInjectedFragment(file)) {
         return getSelectionFromInjectedHost(project, file, injectedLanguageManager, startOffset, endOffset);
       }
diff --git a/java/java-tests/testData/codeInsight/generation/surroundWith/java/LocalClasses.java b/java/java-tests/testData/codeInsight/generation/surroundWith/java/LocalClasses.java
new file mode 100644
index 000000000000..079d6f7cc30b
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/generation/surroundWith/java/LocalClasses.java
@@ -0,0 +1,8 @@
+interface I {
+  String apply(String s);
+}
+class Test {
+  {
+    I f = <selection>s</selection> -> s;
+  }
+}
\ No newline at end of file
diff --git a/java/java-tests/testData/codeInsight/generation/surroundWith/java/NoParenthesisSurrounderForLambdaParameter.java b/java/java-tests/testData/codeInsight/generation/surroundWith/java/NoParenthesisSurrounderForLambdaParameter.java
new file mode 100644
index 000000000000..e69de29bb2d1
diff --git a/java/java-tests/testSrc/com/intellij/codeInsight/generation/surroundWith/JavaSurroundWithTest.java b/java/java-tests/testSrc/com/intellij/codeInsight/generation/surroundWith/JavaSurroundWithTest.java
index 5d023b45137c..a2a9ac9c59f9 100644
--- a/java/java-tests/testSrc/com/intellij/codeInsight/generation/surroundWith/JavaSurroundWithTest.java
+++ b/java/java-tests/testSrc/com/intellij/codeInsight/generation/surroundWith/JavaSurroundWithTest.java
@@ -194,6 +194,16 @@ public class JavaSurroundWithTest extends LightCodeInsightTestCase {
     doTest(new JavaWithBlockSurrounder());
   }
 
+  public void testNoParenthesisSurrounderForLambdaParameter() throws Exception {
+    configureByFile(BASE_PATH + getTestName(false) + ".java");
+
+    SurroundDescriptor item = ContainerUtil.getFirstItem(LanguageSurrounders.INSTANCE.allForLanguage(JavaLanguage.INSTANCE));
+    assertNotNull(item);
+    SelectionModel selectionModel = getEditor().getSelectionModel();
+    PsiElement[] elements = item.getElementsToSurround(getFile(), selectionModel.getSelectionStart(), selectionModel.getSelectionEnd());
+    assertEmpty(elements);
+  }
+
   private void doTest(Surrounder surrounder) {
     doTest(getTestName(false), surrounder);
   }