diff --git a/platform/lang-api/src/com/intellij/lang/folding/CustomFoldingSurroundDescriptor.java b/platform/lang-api/src/com/intellij/lang/folding/CustomFoldingSurroundDescriptor.java
index 21ba9f03f639..f4f76b3fd515 100644
--- a/platform/lang-api/src/com/intellij/lang/folding/CustomFoldingSurroundDescriptor.java
+++ b/platform/lang-api/src/com/intellij/lang/folding/CustomFoldingSurroundDescriptor.java
@@ -32,6 +32,7 @@ import com.intellij.psi.PsiWhiteSpace;
 import com.intellij.psi.codeStyle.CodeStyleManager;
 import com.intellij.psi.codeStyle.CodeStyleSettingsManager;
 import com.intellij.psi.codeStyle.CommonCodeStyleSettings;
+import com.intellij.psi.util.PsiTreeUtil;
 import com.intellij.util.IncorrectOperationException;
 import org.jetbrains.annotations.NotNull;
 import org.jetbrains.annotations.Nullable;
@@ -73,10 +74,12 @@ public class CustomFoldingSurroundDescriptor implements SurroundDescriptor {
       if (startElement != null) {
         endElement = findClosestParentBeforeLineBreak(endElement);
         if (endElement != null) {
-          PsiElement commonParent = startElement.getParent();
+          startElement = adjustStartElementIfEndAbsorbed(startElement, endElement);
+          endElement = adjustEndElementIfStartAbsorbed(startElement, endElement);
+          final PsiElement commonParent = startElement.getParent();
           if (endElement.getParent() == commonParent) {
-            if (startElement == endElement) return new PsiElement[] {startElement};
-            return new PsiElement[] {startElement, endElement};
+            if (startElement == endElement) return new PsiElement[]{startElement};
+            return new PsiElement[]{startElement, endElement};
           }
         }
       }
@@ -84,6 +87,22 @@ public class CustomFoldingSurroundDescriptor implements SurroundDescriptor {
     return PsiElement.EMPTY_ARRAY;
   }
 
+  @NotNull
+  private static PsiElement adjustEndElementIfStartAbsorbed(@NotNull PsiElement start, @NotNull PsiElement end) {
+    if (PsiTreeUtil.isAncestor(end, start, false) && start.getTextRange().getEndOffset() == end.getTextRange().getEndOffset()) {
+      return start;
+    }
+    return end;
+  }
+
+  @NotNull
+  private static PsiElement adjustStartElementIfEndAbsorbed(@NotNull PsiElement start, @NotNull PsiElement end) {
+    if (PsiTreeUtil.isAncestor(start, end, false) && start.getTextRange().getStartOffset() == end.getTextRange().getStartOffset()) {
+      return end;
+    }
+    return start;
+  }
+
   @Nullable
   private static PsiElement findClosestParentAfterLineBreak(PsiElement element) {
     PsiElement parent = element;
diff --git a/python/testData/surround/SurroundFirstMethodWithCustomFoldingRegion.py b/python/testData/surround/SurroundFirstMethodWithCustomFoldingRegion.py
new file mode 100644
index 000000000000..0323c905851a
--- /dev/null
+++ b/python/testData/surround/SurroundFirstMethodWithCustomFoldingRegion.py
@@ -0,0 +1,15 @@
+class ThisIsATest():
+    <selection>def __init__(self):
+        self.test = 1</selection>
+
+    def another_one(self):
+        print "Hello, world!"
+
+    def another_two(self):
+        print "Hello, world!"
+
+    def another_three(self):
+        print "Hello, world!"
+
+    def another_four(self):
+        print "Hello, world!"
\ No newline at end of file
diff --git a/python/testData/surround/SurroundLastMethodWithCustomFoldingRegion.py b/python/testData/surround/SurroundLastMethodWithCustomFoldingRegion.py
new file mode 100644
index 000000000000..2dbc0cb2d23d
--- /dev/null
+++ b/python/testData/surround/SurroundLastMethodWithCustomFoldingRegion.py
@@ -0,0 +1,15 @@
+class ThisIsATest():
+    def __init__(self):
+        self.test = 1
+
+    def another_one(self):
+        print "Hello, world!"
+
+    def another_two(self):
+        print "Hello, world!"
+
+    def another_three(self):
+        print "Hello, world!"
+
+    <selection>def another_four(self):
+        print "Hello, world!"</selection>
diff --git a/python/testSrc/com/jetbrains/python/PySurroundWithTest.java b/python/testSrc/com/jetbrains/python/PySurroundWithTest.java
index 5f49581f1e71..fc7136f3bf52 100644
--- a/python/testSrc/com/jetbrains/python/PySurroundWithTest.java
+++ b/python/testSrc/com/jetbrains/python/PySurroundWithTest.java
@@ -16,9 +16,14 @@
 package com.jetbrains.python;
 
 import com.intellij.codeInsight.generation.surroundWith.SurroundWithHandler;
+import com.intellij.lang.folding.CustomFoldingSurroundDescriptor;
 import com.intellij.lang.surroundWith.Surrounder;
 import com.intellij.openapi.command.WriteCommandAction;
+import com.intellij.openapi.editor.SelectionModel;
+import com.intellij.psi.PsiElement;
 import com.jetbrains.python.fixtures.PyTestCase;
+import com.jetbrains.python.psi.PyElement;
+import com.jetbrains.python.psi.PyFunction;
 import com.jetbrains.python.refactoring.surround.surrounders.statements.PyWithIfSurrounder;
 import com.jetbrains.python.refactoring.surround.surrounders.statements.PyWithTryExceptSurrounder;
 import com.jetbrains.python.refactoring.surround.surrounders.statements.PyWithWhileSurrounder;
@@ -39,6 +44,29 @@ public class PySurroundWithTest extends PyTestCase {
     doTest(new PyWithTryExceptSurrounder());
   }
 
+  // PY-11357
+  public void testSurroundFirstMethodWithCustomFoldingRegion() {
+    checkCustomFoldingRegionRange(PyFunction.class);
+  }
+
+  // PY-11357
+  public void testSurroundLastMethodWithCustomFoldingRegion() {
+    checkCustomFoldingRegionRange(PyFunction.class);
+  }
+
+  private PsiElement[] checkCustomFoldingRegionRange(Class<? extends PyElement>... elementTypes) {
+    myFixture.configureByFile("/surround/" + getTestName(false) + ".py");
+    final SelectionModel selection = myFixture.getEditor().getSelectionModel();
+    final PsiElement[] range = CustomFoldingSurroundDescriptor.INSTANCE.getElementsToSurround(myFixture.getFile(),
+                                                                                              selection.getSelectionStart(),
+                                                                                              selection.getSelectionEnd());
+    assertEquals(elementTypes.length, range.length);
+    for (int i = 0; i < elementTypes.length; i++) {
+      assertInstanceOf(range[i], elementTypes[i]);
+    }
+    return range;
+  }
+
   private void doTest(final Surrounder surrounder) throws Exception {
     String baseName = "/surround/" + getTestName(false);
     myFixture.configureByFile(baseName + ".py");