diff --git a/python/src/META-INF/python-plugin-common.xml b/python/src/META-INF/python-plugin-common.xml
index 1b02cfd7d813..7cd53851f868 100644
--- a/python/src/META-INF/python-plugin-common.xml
+++ b/python/src/META-INF/python-plugin-common.xml
@@ -148,6 +148,11 @@
       <category>Python</category>
     </intentionAction>
 
+    <intentionAction>
+      <className>com.jetbrains.python.codeInsight.intentions.PyConvertLambdaToFunctionIntention</className>
+      <category>Python</category>
+    </intentionAction>
+
     <stubElementTypeHolder class="com.jetbrains.python.PyElementTypes"/>
     <inspectionToolProvider implementation="com.jetbrains.python.inspections.PythonInspectionToolProvider"/>
 
diff --git a/python/src/com/jetbrains/python/PyBundle.properties b/python/src/com/jetbrains/python/PyBundle.properties
index f7d2a8834a2f..a4a812658721 100644
--- a/python/src/com/jetbrains/python/PyBundle.properties
+++ b/python/src/com/jetbrains/python/PyBundle.properties
@@ -130,7 +130,9 @@ INTN.convert.dict.literal.to.dict.constructor=Convert dict literal to dict const
 
 INTN.quoted.string=Convert between single-quoted and double-quoted strings
 INTN.quoted.string.single.to.double=Convert single-quoted string to double-quoted string
-INTN.quoted.string.double.to.single=Convert double-quoted string to sungle-quoted string
+INTN.quoted.string.double.to.single=Convert double-quoted string to single-quoted string
+
+INTN.convert.lambda.to.function=Convert lambda to function
 
 # Conflict checker
 CONFLICT.name.$0.obscured=Name ''{0}'' obscured by local definitions
diff --git a/python/src/com/jetbrains/python/codeInsight/intentions/PyConvertLambdaToFunctionIntention.java b/python/src/com/jetbrains/python/codeInsight/intentions/PyConvertLambdaToFunctionIntention.java
new file mode 100644
index 000000000000..ce0726cd99fd
--- /dev/null
+++ b/python/src/com/jetbrains/python/codeInsight/intentions/PyConvertLambdaToFunctionIntention.java
@@ -0,0 +1,100 @@
+package com.jetbrains.python.codeInsight.intentions;
+
+import com.intellij.codeInsight.intention.impl.BaseIntentionAction;
+import com.intellij.openapi.application.Application;
+import com.intellij.openapi.application.ApplicationManager;
+import com.intellij.openapi.editor.Editor;
+import com.intellij.openapi.project.Project;
+import com.intellij.psi.PsiElement;
+import com.intellij.psi.PsiFile;
+import com.intellij.psi.util.PsiTreeUtil;
+import com.intellij.util.IncorrectOperationException;
+import com.jetbrains.python.PyBundle;
+import com.jetbrains.python.psi.*;
+import org.jetbrains.annotations.NotNull;
+
+/**
+ * User: catherine
+ * Intention to convert lambda to function
+ */
+public class PyConvertLambdaToFunctionIntention extends BaseIntentionAction {
+
+  @NotNull
+  public String getFamilyName() {
+    return PyBundle.message("INTN.convert.lambda.to.function");
+  }
+
+  @NotNull
+  public String getText() {
+    return PyBundle.message("INTN.convert.lambda.to.function");
+  }
+
+  public boolean isAvailable(@NotNull Project project, Editor editor, PsiFile file) {
+    PyLambdaExpression lambdaExpression = PsiTreeUtil.getParentOfType(file.findElementAt(editor.getCaretModel().getOffset()), PyLambdaExpression.class);
+    if (lambdaExpression != null) {
+      if (lambdaExpression.getBody() != null)
+        return true;
+    }
+    return false;
+  }
+
+  public void invoke(@NotNull Project project, Editor editor, PsiFile file) throws IncorrectOperationException {
+    PyLambdaExpression lambdaExpression = PsiTreeUtil.getParentOfType(file.findElementAt(editor.getCaretModel().getOffset()), PyLambdaExpression.class);
+    PyElementGenerator elementGenerator = PyElementGenerator.getInstance(project);
+    if (lambdaExpression != null) {
+      String name;
+      PsiElement parent = lambdaExpression.getParent();
+      if (parent instanceof PyAssignmentStatement) {
+        name = ((PyAssignmentStatement)parent).getLeftHandSideExpression().getText();
+      }
+      else {
+        Application application = ApplicationManager.getApplication();
+        if (application != null && !application.isUnitTestMode()) {
+          AskNameDialog dialog = new AskNameDialog(project);
+          dialog.setTitle("Enter function name");
+          dialog.show();
+          if (!dialog.isOK()) return; // 'Cancel' button cancels everything
+          name = dialog.getAlias();
+          if (name.isEmpty()) return;
+        }
+        else
+          name = "function";
+      }
+      
+      PyExpression body = lambdaExpression.getBody();
+      PyParameter[] parameters = lambdaExpression.getParameterList().getParameters();
+      StringBuilder stringBuilder = new StringBuilder();
+      stringBuilder.append("def ");
+      stringBuilder.append(name);
+      stringBuilder.append("(");
+      int size = parameters.length;
+      for (int i = 0; i != size; ++i) {
+        PyParameter parameter = parameters[i];
+        stringBuilder.append(parameter.getName());
+        if ( i != size - 1)
+          stringBuilder.append(",");
+      }
+      stringBuilder.append("):\n  return ");
+      stringBuilder.append(body.getText());
+
+      PyFunction function = elementGenerator.createFromText(LanguageLevel.forElement(lambdaExpression),
+                                                            PyFunction.class, stringBuilder.toString());
+
+      PyFunction pyFunction = PsiTreeUtil.getParentOfType(lambdaExpression, PyFunction.class);
+      if (pyFunction != null) {
+        pyFunction.getStatementList().addBefore(function, pyFunction.getStatementList().getStatements()[0]);
+      }
+      else {
+        PyStatement statement = PsiTreeUtil.getParentOfType(lambdaExpression, PyStatement.class);
+        file.addBefore(function, statement);
+      }
+      if (parent instanceof PyAssignmentStatement) {
+        parent.delete();
+      }
+      else {
+        lambdaExpression.replace(elementGenerator.createFromText(LanguageLevel.forElement(lambdaExpression), PyExpression.class,
+                                                               name));
+      }
+    }
+  }
+}
diff --git a/python/testData/intentions/afterConvertLambdaToFunction.py b/python/testData/intentions/afterConvertLambdaToFunction.py
new file mode 100644
index 000000000000..619b1e392e9c
--- /dev/null
+++ b/python/testData/intentions/afterConvertLambdaToFunction.py
@@ -0,0 +1,6 @@
+def func(seq):
+    def function(x, y):
+        return (x + y) / y
+
+    newlist = reduce(function
+                     , seq)
\ No newline at end of file
diff --git a/python/testData/intentions/beforeConvertLambdaToFunction.py b/python/testData/intentions/beforeConvertLambdaToFunction.py
new file mode 100644
index 000000000000..eaa151a875ac
--- /dev/null
+++ b/python/testData/intentions/beforeConvertLambdaToFunction.py
@@ -0,0 +1,2 @@
+def func(seq):
+    newlist = reduce(lambda x<caret>, y: (x+y)/y, seq)
\ No newline at end of file
diff --git a/python/testSrc/com/jetbrains/python/PyIntentionTest.java b/python/testSrc/com/jetbrains/python/PyIntentionTest.java
index c5a4a0112bc3..5799c1ffb6f1 100644
--- a/python/testSrc/com/jetbrains/python/PyIntentionTest.java
+++ b/python/testSrc/com/jetbrains/python/PyIntentionTest.java
@@ -124,4 +124,8 @@ public class PyIntentionTest extends PyLightFixtureTestCase {
   public void testQuotedString() {
     doTest(PyBundle.message("INTN.quoted.string.double.to.single"));
   }
+
+  public void testConvertLambdaToFunction() {
+    doTest(PyBundle.message("INTN.convert.lambda.to.function"));
+  }
 }