diff --git a/plugins/kotlin/idea/tests/testData/refactoring/extractFunctionInplace/ExtractLocal.after.kt b/plugins/kotlin/idea/tests/testData/refactoring/extractFunctionInplace/ExtractLocal.after.kt
new file mode 100644
index 000000000000..f307e8da46f9
--- /dev/null
+++ b/plugins/kotlin/idea/tests/testData/refactoring/extractFunctionInplace/ExtractLocal.after.kt
@@ -0,0 +1,7 @@
+fun main() {
+    fun extracted() {
+        val a = "".takeIf { true }
+    }
+
+    extracted<caret>()
+}
\ No newline at end of file
diff --git a/plugins/kotlin/idea/tests/testData/refactoring/extractFunctionInplace/ExtractLocal.kt b/plugins/kotlin/idea/tests/testData/refactoring/extractFunctionInplace/ExtractLocal.kt
new file mode 100644
index 000000000000..4973da33d736
--- /dev/null
+++ b/plugins/kotlin/idea/tests/testData/refactoring/extractFunctionInplace/ExtractLocal.kt
@@ -0,0 +1,3 @@
+fun main() {
+    <selection>val a = "".takeIf { true }</selection>
+}
\ No newline at end of file
diff --git a/plugins/kotlin/refactorings/kotlin.refactorings.common/src/org/jetbrains/kotlin/idea/refactoring/introduce/extractFunction/AbstractInplaceExtractionHelper.kt b/plugins/kotlin/refactorings/kotlin.refactorings.common/src/org/jetbrains/kotlin/idea/refactoring/introduce/extractFunction/AbstractInplaceExtractionHelper.kt
index 51a5dcb7553d..a08e6412ed76 100644
--- a/plugins/kotlin/refactorings/kotlin.refactorings.common/src/org/jetbrains/kotlin/idea/refactoring/introduce/extractFunction/AbstractInplaceExtractionHelper.kt
+++ b/plugins/kotlin/refactorings/kotlin.refactorings.common/src/org/jetbrains/kotlin/idea/refactoring/introduce/extractFunction/AbstractInplaceExtractionHelper.kt
@@ -10,6 +10,7 @@ import com.intellij.openapi.editor.Editor
 import com.intellij.openapi.keymap.KeymapUtil
 import com.intellij.openapi.project.Project
 import com.intellij.openapi.util.Disposer
+import com.intellij.openapi.util.NlsSafe
 import com.intellij.openapi.util.TextRange
 import com.intellij.psi.PsiComment
 import com.intellij.psi.PsiElement
@@ -29,6 +30,8 @@ import org.jetbrains.kotlin.idea.refactoring.introduce.extractionEngine.processD
 import org.jetbrains.kotlin.psi.KtCallExpression
 import org.jetbrains.kotlin.psi.KtExpression
 import org.jetbrains.kotlin.psi.KtFile
+import org.jetbrains.kotlin.psi.KtNameReferenceExpression
+import org.jetbrains.kotlin.psi.psiUtil.getCallNameExpression
 import kotlin.math.max
 import kotlin.math.min
 
@@ -82,7 +85,7 @@ interface AbstractInplaceExtractionHelper<KotlinType,
                 return
             }
             val callRange: TextRange = callTextRange.textRange
-            val callIdentifier = findCallExpressionInRange(file, callRange)?.calleeExpression ?: throw IllegalStateException()
+            val callIdentifier = findCallExpressionInRange(file, callRange, extraction.declaration.name)?.calleeExpression ?: throw IllegalStateException()
             val methodIdentifier = extraction.declaration.nameIdentifier ?: throw IllegalStateException()
             val methodRange = extraction.declaration.textRange
             val methodOffset = extraction.declaration.navigationElement.textRange.endOffset
@@ -140,12 +143,23 @@ interface AbstractInplaceExtractionHelper<KotlinType,
         return ::findRange
     }
 
-
-    fun findCallExpressionInRange(file: KtFile, range: TextRange?): KtCallExpression? {
+    /**
+     * Finds the first occurrence of a call expression within the given range.
+     * If [name] is specified, first occurrence with the given reference name would be taken.
+     *
+     * Range is created from the previous element of the extraction, and thus when the function is inserted before the selection,
+     * e.g., when extracted function is added as local function, range contains extracted function and the call to it.
+     * So we need additional ad hock filtering to prevent broken code on rename template start.
+     */
+    fun findCallExpressionInRange(file: KtFile, range: TextRange?, name: @NlsSafe String?): KtCallExpression? {
         if (range == null) return null
-        val container = PsiTreeUtil.findCommonParent(file.findElementAt(range.startOffset),
-                                                     file.findElementAt(min(file.textLength - 1, range.endOffset)))
+        val container = PsiTreeUtil.findCommonParent(
+            file.findElementAt(range.startOffset), file.findElementAt(min(file.textLength - 1, range.endOffset))
+        )
         val callExpressions = PsiTreeUtil.findChildrenOfType(container, KtCallExpression::class.java)
-        return callExpressions.firstOrNull { it.textRange in range }
+        val callExpressionsInRange = callExpressions.filter { it.textRange in range }
+        if (name == null) return callExpressionsInRange.firstOrNull()
+        return callExpressionsInRange.find { (it.calleeExpression as? KtNameReferenceExpression)?.getReferencedName() == name }
+            ?: callExpressionsInRange.firstOrNull()
     }
 }
\ No newline at end of file
diff --git a/plugins/kotlin/refactorings/kotlin.refactorings.tests.k2/test/org/jetbrains/kotlin/idea/k2/refactoring/introduce/FirInplaceExtractFunctionTest.kt b/plugins/kotlin/refactorings/kotlin.refactorings.tests.k2/test/org/jetbrains/kotlin/idea/k2/refactoring/introduce/FirInplaceExtractFunctionTest.kt
index 0cbc6bfdf10f..4f999e4ace7c 100644
--- a/plugins/kotlin/refactorings/kotlin.refactorings.tests.k2/test/org/jetbrains/kotlin/idea/k2/refactoring/introduce/FirInplaceExtractFunctionTest.kt
+++ b/plugins/kotlin/refactorings/kotlin.refactorings.tests.k2/test/org/jetbrains/kotlin/idea/k2/refactoring/introduce/FirInplaceExtractFunctionTest.kt
@@ -54,6 +54,10 @@ class FirInplaceExtractFunctionTest : KotlinLightCodeInsightFixtureTestCase() {
         doTest()
     }
 
+    fun testExtractLocal() {
+        doTest()
+    }
+
     fun testStringTemplateWithNameConflict() {
         doTest(changedName = "substring")
     }
@@ -74,7 +78,7 @@ class FirInplaceExtractFunctionTest : KotlinLightCodeInsightFixtureTestCase() {
     fun doTest(changedName: String? = null, checkResult: Boolean = true) {
         TemplateManagerImpl.setTemplateTesting(testRootDisposable)
         myFixture.configureByFile("${getTestName(false)}.kt")
-        KotlinFirExtractFunctionHandler().invoke(myFixture.project, myFixture.editor, myFixture.file, null)
+        KotlinFirExtractFunctionHandler(getTestName(true).contains("Local")).invoke(myFixture.project, myFixture.editor, myFixture.file, null)
         NonBlockingReadActionImpl.waitForAsyncTaskCompletion()
         val template = getActiveTemplate()
         require(template != null) { "Failed to start refactoring" }