diff --git a/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/InferenceIncorporationPhase.java b/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/InferenceIncorporationPhase.java
index 11b8fefb06d2..b60a12e04e65 100644
--- a/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/InferenceIncorporationPhase.java
+++ b/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/InferenceIncorporationPhase.java
@@ -265,9 +265,17 @@ public class InferenceIncorporationPhase {
    */
   private void upDown(List<PsiType> eqBounds, List<PsiType> upperBounds, PsiSubstitutor substitutor) {
     for (PsiType upperBound : upperBounds) {
-      if (upperBound == null || PsiType.NULL.equals(upperBound)) continue;
+      if (upperBound == null || PsiType.NULL.equals(upperBound) || upperBound instanceof PsiWildcardType) continue;
+
+      if (upperBound instanceof PsiCapturedWildcardType) {
+        upperBound = ((PsiCapturedWildcardType)upperBound).getUpperBound();
+      }
+
       for (PsiType eqBound : eqBounds) {
-        if (eqBound == null || PsiType.NULL.equals(eqBound)) continue;
+        if (eqBound == null || PsiType.NULL.equals(eqBound) || eqBound instanceof PsiWildcardType) continue;
+        if (eqBound instanceof PsiCapturedWildcardType) {
+          eqBound = ((PsiCapturedWildcardType)eqBound).getUpperBound();
+        }
         addConstraint(new StrictSubtypingConstraint(substitutor.substitute(upperBound), substitutor.substitute(eqBound)));
       }
     }
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/lambda/graphInference/IncorporationOfBoundsAsTypeArguments.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/lambda/graphInference/IncorporationOfBoundsAsTypeArguments.java
new file mode 100644
index 000000000000..b55a7b9805ed
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/lambda/graphInference/IncorporationOfBoundsAsTypeArguments.java
@@ -0,0 +1,20 @@
+
+import java.util.*;
+
+class Test {
+  public static void main(String[] args) {
+    Factory factory = new Factory();
+    final Class<? extends ClassB> bClass = null;
+    ClassB b   = factory.create(bClass);
+    String str = factory.create<error descr="'create(java.lang.Class<T>)' in 'Test.Factory' cannot be applied to '(java.lang.Class<capture<? extends Test.ClassB>>)'">(bClass)</error>;
+  }
+
+  public static class Factory {
+    <T extends ClassA<I>, I extends List<String>> T create(Class<T> pClassA) {
+      return null;
+    }
+  }
+
+  interface ClassA<T extends List<String>> {}
+  interface ClassB extends ClassA<ArrayList<String>> {}
+}
\ No newline at end of file
diff --git a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/lambda/GraphInferenceHighlightingTest.java b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/lambda/GraphInferenceHighlightingTest.java
index 01ef24e8630f..580cae3595d9 100644
--- a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/lambda/GraphInferenceHighlightingTest.java
+++ b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/lambda/GraphInferenceHighlightingTest.java
@@ -327,6 +327,10 @@ public class GraphInferenceHighlightingTest extends LightDaemonAnalyzerTestCase
     doTest();
   }
 
+  public void testIncorporationOfBoundsAsTypeArguments() throws Exception {
+    doTest();
+  }
+
   private void doTest() throws Exception {
     doTest(false);
   }