diff --git a/python/src/com/jetbrains/python/psi/impl/PyReferenceImpl.java b/python/src/com/jetbrains/python/psi/impl/PyReferenceImpl.java
index ed268b3ffc96..975099ed2e26 100644
--- a/python/src/com/jetbrains/python/psi/impl/PyReferenceImpl.java
+++ b/python/src/com/jetbrains/python/psi/impl/PyReferenceImpl.java
@@ -166,17 +166,7 @@ public class PyReferenceImpl implements PsiReferenceEx, PsiPolyVariantReference
 
     // Use real context here to enable correct completion and resolve in case of PyExpressionCodeFragment!!!
     final PsiElement realContext = PyPsiUtils.getRealContext(myElement);
-    PsiElement roof = null;
-    if (PyUtil.isClassPrivateName(referencedName)) {
-      // a class-private name; limited by either class or this file
-      PsiElement one = myElement;
-      do {
-        one = PyUtil.getConcealingParent(one);
-      }
-      while (one instanceof PyFunction);
-      if (one instanceof PyClass) roof = one;
-    }
-    if (roof == null) roof = realContext.getContainingFile();
+    PsiElement roof = findResolveRoof(referencedName, realContext);
     PsiElement uexpr = PyResolveUtil.treeCrawlUp(processor, false, realContext, roof);
     if ((uexpr != null)) {
       if ((uexpr instanceof PyClass)) {
@@ -216,9 +206,10 @@ public class PyReferenceImpl implements PsiReferenceEx, PsiPolyVariantReference
         uexpr = bfile.getElementNamed(referencedName);
       }
     }
-    if (uexpr == null) {
+    if (uexpr == null && !(myElement instanceof PyTargetExpression)) {
       //uexpr = PyResolveUtil.resolveOffContext(this);
-      uexpr = PyUtil.turnDirIntoInit(PyResolveUtil.scanOuterContext(new ResolveProcessor(referencedName), realContext));
+      final PsiElement outerContextElement = PyResolveUtil.scanOuterContext(new ResolveProcessor(referencedName), realContext);
+      uexpr = PyUtil.turnDirIntoInit(outerContextElement);
     }
     if (uexpr != null) {
       ret.add(new ImportedResolveResult(uexpr, getRate(uexpr), processor.getDefiners()));
@@ -227,6 +218,28 @@ public class PyReferenceImpl implements PsiReferenceEx, PsiPolyVariantReference
     return ret;
   }
 
+  private PsiElement findResolveRoof(String referencedName, PsiElement realContext) {
+    if (PyUtil.isClassPrivateName(referencedName)) {
+      // a class-private name; limited by either class or this file
+      PsiElement one = myElement;
+      do {
+        one = PyUtil.getConcealingParent(one);
+      }
+      while (one instanceof PyFunction);
+      if (one instanceof PyClass) {
+        return one;
+      }
+    }
+    
+    if (myElement instanceof PyTargetExpression) {
+      final ScopeOwner scopeOwner = PsiTreeUtil.getParentOfType(myElement, ScopeOwner.class);
+      if (scopeOwner != null && !scopeOwner.getScope().isGlobal(myElement.getName())) {
+        return scopeOwner;
+      }
+    }
+    return realContext.getContainingFile();
+  }
+
   private boolean isSuperClassExpression(PyClass cls) {
     if (myElement.getContainingFile() != cls.getContainingFile()) {  // quick check to avoid unnecessary tree loading
       return false;
diff --git a/python/testData/findUsages/NonGlobalUsages.py b/python/testData/findUsages/NonGlobalUsages.py
new file mode 100644
index 000000000000..42e4b87b3c8c
--- /dev/null
+++ b/python/testData/findUsages/NonGlobalUsages.py
@@ -0,0 +1,4 @@
+<caret>a = 0
+def b():
+    a = 1
+    print a
diff --git a/python/testSrc/com/jetbrains/python/PyFindUsagesTest.java b/python/testSrc/com/jetbrains/python/PyFindUsagesTest.java
index 156849f2521e..9aa18685cfb5 100644
--- a/python/testSrc/com/jetbrains/python/PyFindUsagesTest.java
+++ b/python/testSrc/com/jetbrains/python/PyFindUsagesTest.java
@@ -43,4 +43,9 @@ public class PyFindUsagesTest extends PyLightFixtureTestCase {
     final Collection<UsageInfo> usages = myFixture.testFindUsages("findUsages/GlobalUsages2.py");
     assertEquals(3, usages.size());
   }
+
+  public void testNonGlobalUsages() { // PY-1179
+    final Collection<UsageInfo> usages = myFixture.testFindUsages("findUsages/NonGlobalUsages.py");
+    assertEquals(1, usages.size());
+  }
 }