diff --git a/java/java-tests/testData/refactoring/renameLocal/ConflictInLambdaParameter.java b/java/java-tests/testData/refactoring/renameLocal/ConflictInLambdaParameter.java
new file mode 100644
index 000000000000..9a722fa7d39b
--- /dev/null
+++ b/java/java-tests/testData/refactoring/renameLocal/ConflictInLambdaParameter.java
@@ -0,0 +1,10 @@
+class ConfictInLambdaParameter {
+  public void consume(Consumer<Object> c) {
+  }
+
+  public void bug() {
+    consume(o -> {       // line 1
+      consume(o1<caret> -> {}); // line 2
+    });
+  }
+}
\ No newline at end of file
diff --git a/java/java-tests/testSrc/com/intellij/java/refactoring/RenameLocalTest.java b/java/java-tests/testSrc/com/intellij/java/refactoring/RenameLocalTest.java
index 778a4f96a6bd..b4588556976f 100644
--- a/java/java-tests/testSrc/com/intellij/java/refactoring/RenameLocalTest.java
+++ b/java/java-tests/testSrc/com/intellij/java/refactoring/RenameLocalTest.java
@@ -1,4 +1,4 @@
-// Copyright 2000-2022 JetBrains s.r.o. and contributors. Use of this source code is governed by the Apache 2.0 license.
+// Copyright 2000-2025 JetBrains s.r.o. and contributors. Use of this source code is governed by the Apache 2.0 license.
 package com.intellij.java.refactoring;
 
 import com.intellij.JavaTestUtil;
@@ -116,6 +116,12 @@ public class RenameLocalTest extends LightRefactoringTestCase {
                  "Variable 's' Already Exists",
                  () -> doTestInplaceRename("s"));
   }
+  
+  public void testConflictInLambdaParameter() {
+    assertThrows(BaseRefactoringProcessor.ConflictsInTestsException.class,
+                 "Variable 'o' Already Exists",
+                 () -> doTestInplaceRename("o"));
+  }
 
   public void testConflictWithFutureVar() {
     assertThrows(BaseRefactoringProcessor.ConflictsInTestsException.class, 
diff --git a/platform/lang-impl/api-dump.txt b/platform/lang-impl/api-dump.txt
index e283a9a500b0..cfe54be55dae 100644
--- a/platform/lang-impl/api-dump.txt
+++ b/platform/lang-impl/api-dump.txt
@@ -999,6 +999,8 @@ com.intellij.refactoring.introduce.IntroduceTarget
 - a:render():java.lang.String
 com.intellij.refactoring.move.MoveCallback
 - a:refactoringCompleted():V
+c:com.intellij.refactoring.rename.inplace.VariableInplaceRenamer
+- p:checkLocalScope():com.intellij.psi.PsiElement
 com.intellij.refactoring.safeDelete.SafeDeleteDialog$Callback
 - a:run(com.intellij.refactoring.safeDelete.SafeDeleteDialog):V
 com.intellij.refactoring.safeDelete.SafeDeleteProcessorDelegate
diff --git a/platform/lang-impl/src/com/intellij/refactoring/rename/inplace/VariableInplaceRenamer.java b/platform/lang-impl/src/com/intellij/refactoring/rename/inplace/VariableInplaceRenamer.java
index 179216782366..82522c709322 100644
--- a/platform/lang-impl/src/com/intellij/refactoring/rename/inplace/VariableInplaceRenamer.java
+++ b/platform/lang-impl/src/com/intellij/refactoring/rename/inplace/VariableInplaceRenamer.java
@@ -394,6 +394,12 @@ public class VariableInplaceRenamer extends InplaceRefactoring {
     myEditor.getCaretModel().moveToOffset(myOrigOffset);
   }
 
+  @Override
+  protected @Nullable PsiElement checkLocalScope() {
+    PsiElement scope = super.checkLocalScope();
+    return scope != null && !(scope instanceof PsiFileSystemItem) ? scope.getParent() : scope;
+  }
+
   private @Nullable RangeHighlighter highlightConflictingElement(PsiElement conflictingElement) {
     if (conflictingElement != null) {
       try {