diff --git a/java/java-psi-impl/src/com/intellij/psi/controlFlow/ControlFlowAnalyzer.java b/java/java-psi-impl/src/com/intellij/psi/controlFlow/ControlFlowAnalyzer.java
index bbaa5017f036..90b235c071ff 100644
--- a/java/java-psi-impl/src/com/intellij/psi/controlFlow/ControlFlowAnalyzer.java
+++ b/java/java-psi-impl/src/com/intellij/psi/controlFlow/ControlFlowAnalyzer.java
@@ -1449,6 +1449,16 @@ class ControlFlowAnalyzer extends JavaElementVisitor {
   @Override
   public void visitLambdaExpression(PsiLambdaExpression expression) {
     startElement(expression);
+    final PsiElement body = expression.getBody();
+    if (body != null) {
+      body.accept(this);
+      List<PsiVariable> array = new ArrayList<PsiVariable>();
+      addUsedVariables(array, body);
+      for (PsiVariable var : array) {
+        ProgressIndicatorProvider.checkCanceled();
+        generateReadInstruction(var);
+      }
+    }
     finishElement(expression);
   }
 
diff --git a/java/java-tests/testData/refactoring/inlineLocal/LocalVarInsideLambdaBody.java b/java/java-tests/testData/refactoring/inlineLocal/LocalVarInsideLambdaBody.java
new file mode 100644
index 000000000000..550a93f4addf
--- /dev/null
+++ b/java/java-tests/testData/refactoring/inlineLocal/LocalVarInsideLambdaBody.java
@@ -0,0 +1,23 @@
+/*
+ * Copyright 2000-2012 JetBrains s.r.o.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+public class Test2 {
+  {
+    final String p = "hello";
+    Runnable r = () -> {System.out.println(<caret>p);};
+    System.out.println(p);
+  }
+}
+
diff --git a/java/java-tests/testData/refactoring/inlineLocal/LocalVarInsideLambdaBody.java.after b/java/java-tests/testData/refactoring/inlineLocal/LocalVarInsideLambdaBody.java.after
new file mode 100644
index 000000000000..e941dd3d7453
--- /dev/null
+++ b/java/java-tests/testData/refactoring/inlineLocal/LocalVarInsideLambdaBody.java.after
@@ -0,0 +1,22 @@
+/*
+ * Copyright 2000-2012 JetBrains s.r.o.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+public class Test2 {
+  {
+      Runnable r = () -> {System.out.println("hello");};
+    System.out.println("hello");
+  }
+}
+
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 24c3fda9ecc5..45103653238f 100644
--- a/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineLocalTest.java
+++ b/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineLocalTest.java
@@ -154,6 +154,10 @@ public class InlineLocalTest extends LightCodeInsightTestCase {
     doTest(true);
   }
 
+  public void testLocalVarInsideLambdaBody() throws Exception {
+    doTest(true);
+  }
+
   private void doTest(final boolean inlineDef, String conflictMessage) throws Exception {
     try {
       doTest(inlineDef);