diff --git a/java/java-analysis-impl/src/com/intellij/codeInsight/daemon/impl/analysis/GenericsHighlightUtil.java b/java/java-analysis-impl/src/com/intellij/codeInsight/daemon/impl/analysis/GenericsHighlightUtil.java
index da4de94a4a37..9120611f4072 100644
--- a/java/java-analysis-impl/src/com/intellij/codeInsight/daemon/impl/analysis/GenericsHighlightUtil.java
+++ b/java/java-analysis-impl/src/com/intellij/codeInsight/daemon/impl/analysis/GenericsHighlightUtil.java
@@ -265,8 +265,8 @@ public class GenericsHighlightUtil {
     }
 
     final PsiClassType[] bounds = classParameter.getSuperTypes();
-    for (PsiClassType type1 : bounds) {
-      PsiType bound = substitutor.substitute(type1);
+    for (PsiType bound : bounds) {
+      bound = substitutor.substitute(bound);
       if (!bound.equalsToText(CommonClassNames.JAVA_LANG_OBJECT) && GenericsUtil.checkNotInBounds(type, bound, referenceParameterList)) {
         PsiClass boundClass = bound instanceof PsiClassType ? ((PsiClassType)bound).resolve() : null;
 
diff --git a/java/java-psi-impl/src/com/intellij/psi/impl/JavaClassSupersImpl.java b/java/java-psi-impl/src/com/intellij/psi/impl/JavaClassSupersImpl.java
index cb6f80275021..ccb1b9e813ec 100644
--- a/java/java-psi-impl/src/com/intellij/psi/impl/JavaClassSupersImpl.java
+++ b/java/java-psi-impl/src/com/intellij/psi/impl/JavaClassSupersImpl.java
@@ -129,7 +129,12 @@ public class JavaClassSupersImpl extends JavaClassSupers {
     Map<PsiTypeParameter, PsiType> innerMap = inner.getSubstitutionMap();
     for (PsiTypeParameter parameter : PsiUtil.typeParametersIterable(onClass)) {
       if (outerMap.containsKey(parameter) || innerMap.containsKey(parameter)) {
-        answer = answer.put(parameter, outer.substitute(inner.substitute(parameter)));
+        PsiType innerType = inner.substitute(parameter);
+        PsiClass paramCandidate = PsiCapturedWildcardType.isCapture() ? PsiUtil.resolveClassInClassTypeOnly(innerType) : null;
+        PsiType targetType = paramCandidate instanceof PsiTypeParameter && paramCandidate != parameter
+                             ? outer.substituteWithBoundsPromotion((PsiTypeParameter)paramCandidate)
+                             : outer.substitute(innerType);
+        answer = answer.put(parameter, targetType);
       }
     }
     return answer;
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/RecursiveParamBoundsWhenSuperSubstitution.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/RecursiveParamBoundsWhenSuperSubstitution.java
new file mode 100644
index 000000000000..94cabdf16d16
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/RecursiveParamBoundsWhenSuperSubstitution.java
@@ -0,0 +1,12 @@
+class P<T, Self extends P<T, Self>> { }
+
+class MM<T, H extends P<T, H>> {
+  H last;
+
+  void m(final Function<P<T, ?>, P<T, ?>> function) {
+    generate(last, function);
+  }
+  public static <E> void generate(E first, Function<? super E, ? extends E> generator) { }
+
+}
+interface Function<Param, Result> {}
\ No newline at end of file
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/NestedWildcardsWithImplicitBounds.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/NestedWildcardsWithImplicitBounds.java
new file mode 100644
index 000000000000..a04073430230
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/NestedWildcardsWithImplicitBounds.java
@@ -0,0 +1,9 @@
+
+import java.io.Serializable;
+import java.util.List;
+
+interface Child<T extends Serializable> extends List<T> {
+  default void m(List<Child<?>> l) {
+    List<? extends List<? extends Serializable>> ll =  l;
+  }
+}
\ No newline at end of file
diff --git a/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/GenericsHighlightingTest.java b/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/GenericsHighlightingTest.java
index 9d6fba2e6352..c69bf2b82fdf 100644
--- a/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/GenericsHighlightingTest.java
+++ b/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/GenericsHighlightingTest.java
@@ -425,4 +425,5 @@ public class GenericsHighlightingTest extends LightDaemonAnalyzerTestCase {
   public void testUncheckedWarningWhenCastingFromCapturedWildcard() { doTest8Incompatibility(true); }
   public void testEnclosingRefInTopLevelClassExtendingInnerWhichExtendsItsOuter() { doTest8Incompatibility(true); }
   public void testGenericThrowTypes() { doTest5(false); }
+  public void testRecursiveParamBoundsWhenSuperSubstitution() { doTest6(false); }
 }
\ No newline at end of file
diff --git a/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/lambda/GenericsHighlighting8Test.java b/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/lambda/GenericsHighlighting8Test.java
index d813ee3d466e..deb7e2624db6 100644
--- a/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/lambda/GenericsHighlighting8Test.java
+++ b/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/lambda/GenericsHighlighting8Test.java
@@ -1032,4 +1032,5 @@ public class GenericsHighlighting8Test extends LightDaemonAnalyzerTestCase {
   }
 
   public void testBridgeMethodOverriding() { doTest(); }
+  public void testNestedWildcardsWithImplicitBounds() { doTest(); }
 }