diff --git a/java/java-impl/src/com/intellij/refactoring/inline/InlineMethodProcessor.java b/java/java-impl/src/com/intellij/refactoring/inline/InlineMethodProcessor.java
index 32b09f5b0965..2ded8d71ab55 100644
--- a/java/java-impl/src/com/intellij/refactoring/inline/InlineMethodProcessor.java
+++ b/java/java-impl/src/com/intellij/refactoring/inline/InlineMethodProcessor.java
@@ -570,7 +570,7 @@ public class InlineMethodProcessor extends BaseRefactoringProcessor {
 
     PsiSubstitutor callSubstitutor = getCallSubstitutor(methodCall);
     BlockData blockData = prepareBlock(ref, callSubstitutor, methodCall.getArgumentList(), tailCall);
-    solveVariableNameConflicts(blockData.block, ref);
+    InlineUtil.solveVariableNameConflicts(blockData.block, ref, myMethodCopy.getBody());
     if (callSubstitutor != PsiSubstitutor.EMPTY) {
       substituteMethodTypeParams(blockData.block, callSubstitutor);
     }
@@ -851,31 +851,6 @@ public class InlineMethodProcessor extends BaseRefactoringProcessor {
     return new BlockData(block, thisVar, parmVars, resultVar);
   }
 
-  private void solveVariableNameConflicts(PsiElement scope, final PsiElement placeToInsert) throws IncorrectOperationException {
-    if (scope instanceof PsiVariable) {
-      PsiVariable var = (PsiVariable)scope;
-      String name = var.getName();
-      String oldName = name;
-      while (true) {
-        String newName = myJavaCodeStyle.suggestUniqueVariableName(name, placeToInsert, true);
-        if (newName.equals(name)) break;
-        name = newName;
-        newName = myJavaCodeStyle.suggestUniqueVariableName(name, var, true);
-        if (newName.equals(name)) break;
-        name = newName;
-      }
-      if (!name.equals(oldName)) {
-        RefactoringUtil.renameVariableReferences(var, name, new LocalSearchScope(myMethodCopy.getBody()), true);
-        var.getNameIdentifier().replace(myFactory.createIdentifier(name));
-      }
-    }
-
-    PsiElement[] children = scope.getChildren();
-    for (PsiElement child : children) {
-      solveVariableNameConflicts(child, placeToInsert);
-    }
-  }
-
   private void addParmAndThisVarInitializers(BlockData blockData, PsiMethodCallExpression methodCall) throws IncorrectOperationException {
     PsiExpression[] args = methodCall.getArgumentList().getExpressions();
     if (blockData.parmVars.length > 0) {
diff --git a/java/java-impl/src/com/intellij/refactoring/util/InlineUtil.java b/java/java-impl/src/com/intellij/refactoring/util/InlineUtil.java
index 673a71c56ac1..a10f13120ef4 100644
--- a/java/java-impl/src/com/intellij/refactoring/util/InlineUtil.java
+++ b/java/java-impl/src/com/intellij/refactoring/util/InlineUtil.java
@@ -22,6 +22,8 @@ import com.intellij.openapi.progress.ProgressManager;
 import com.intellij.openapi.util.Comparing;
 import com.intellij.openapi.util.text.StringUtil;
 import com.intellij.psi.*;
+import com.intellij.psi.codeStyle.JavaCodeStyleManager;
+import com.intellij.psi.search.LocalSearchScope;
 import com.intellij.psi.search.searches.ReferencesSearch;
 import com.intellij.psi.util.PsiTreeUtil;
 import com.intellij.psi.util.RedundantCastUtil;
@@ -52,6 +54,7 @@ public class InlineUtil {
     boolean insertCastWhenUnchecked = ref.getParent() instanceof PsiForeachStatement;
     final PsiType varType = variable.getType();
     initializer = RefactoringUtil.convertInitializerToNormalExpression(initializer, varType);
+    solveVariableNameConflicts(initializer, ref, initializer);
 
     ChangeContextUtil.encodeContextInfo(initializer, false);
     PsiExpression expr = (PsiExpression)replaceDiamondWithInferredTypesIfNeeded(initializer, ref);
@@ -400,6 +403,34 @@ public class InlineUtil {
     return ref != initializer ? ref.replace(initializer) : initializer;
   }
 
+  public static void solveVariableNameConflicts(final PsiElement scope,
+                                                final PsiElement placeToInsert,
+                                                final PsiElement renameScope) throws IncorrectOperationException {
+    if (scope instanceof PsiVariable) {
+      PsiVariable var = (PsiVariable)scope;
+      String name = var.getName();
+      String oldName = name;
+      final JavaCodeStyleManager codeStyleManager = JavaCodeStyleManager.getInstance(scope.getProject());
+      while (true) {
+        String newName = codeStyleManager.suggestUniqueVariableName(name, placeToInsert, true);
+        if (newName.equals(name)) break;
+        name = newName;
+        newName = codeStyleManager.suggestUniqueVariableName(name, var, true);
+        if (newName.equals(name)) break;
+        name = newName;
+      }
+      if (!name.equals(oldName)) {
+        RefactoringUtil.renameVariableReferences(var, name, new LocalSearchScope(renameScope), true);
+        var.getNameIdentifier().replace(JavaPsiFacade.getElementFactory(scope.getProject()).createIdentifier(name));
+      }
+    }
+
+    PsiElement[] children = scope.getChildren();
+    for (PsiElement child : children) {
+      solveVariableNameConflicts(child, placeToInsert, renameScope);
+    }
+  }
+
   public enum TailCallType {
     None, Simple, Return
   }
diff --git a/java/java-tests/testData/refactoring/inlineLocal/RenameLambdaParamsToAvoidConflicts.java b/java/java-tests/testData/refactoring/inlineLocal/RenameLambdaParamsToAvoidConflicts.java
new file mode 100644
index 000000000000..9e5d7a43c910
--- /dev/null
+++ b/java/java-tests/testData/refactoring/inlineLocal/RenameLambdaParamsToAvoidConflicts.java
@@ -0,0 +1,13 @@
+class MyClass {
+  void m() {
+    Consumer c = o -> {
+      System.out.println(o);
+    };
+    Object o = null;
+    Consumer cc = <caret>c;
+  }
+}
+
+interface Consumer {
+  void accept(Object o);
+}
diff --git a/java/java-tests/testData/refactoring/inlineLocal/RenameLambdaParamsToAvoidConflicts.java.after b/java/java-tests/testData/refactoring/inlineLocal/RenameLambdaParamsToAvoidConflicts.java.after
new file mode 100644
index 000000000000..d62dbdc036d4
--- /dev/null
+++ b/java/java-tests/testData/refactoring/inlineLocal/RenameLambdaParamsToAvoidConflicts.java.after
@@ -0,0 +1,12 @@
+class MyClass {
+  void m() {
+      Object o = null;
+    Consumer cc = o1 -> {
+      System.out.println(o1);
+    };
+  }
+}
+
+interface Consumer {
+  void accept(Object o);
+}
diff --git a/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineLocalTest.java b/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineLocalTest.java
index 98ce0097b13c..7c7b39800219 100644
--- a/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineLocalTest.java
+++ b/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineLocalTest.java
@@ -240,6 +240,10 @@ public class InlineLocalTest extends LightCodeInsightTestCase {
     doTest(true);
   }
 
+  public void testRenameLambdaParamsToAvoidConflicts() throws Exception {
+    doTest(true);
+  }
+
   public void testLocalVarInsideLambdaBodyWriteUsage() throws Exception {
     doTest(true, "Cannot perform refactoring.\n" +
                  "Variable 'hello' is accessed for writing");