diff --git a/java/java-psi-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java b/java/java-psi-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
index 48a41cbafc8f..0bfa3befdbc7 100644
--- a/java/java-psi-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
+++ b/java/java-psi-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
@@ -344,7 +344,23 @@ public class PsiSubstitutorImpl implements PsiSubstitutor {
             }
           }
           if (alreadyFound) continue;*/
-          final PsiType substituted = substituteInternal(original);
+          PsiType substituted;
+          if (original instanceof PsiWildcardType) {
+            substituted = substituteInternal(original);
+            if (substituted instanceof PsiCapturedWildcardType) {
+              substituted = PsiCapturedWildcardType.create(((PsiCapturedWildcardType)substituted).getWildcard(), ((PsiCapturedWildcardType)substituted).getContext(), param);
+            }
+            else if (substituted instanceof PsiWildcardType) {
+              PsiType bound = ((PsiWildcardType)substituted).getBound();
+              if (bound instanceof PsiCapturedWildcardType) {
+                bound = PsiCapturedWildcardType.create(((PsiCapturedWildcardType)bound).getWildcard(), ((PsiCapturedWildcardType)bound).getContext(), param);
+                substituted = ((PsiWildcardType)substituted).isExtends() ? PsiWildcardType.createExtends(((PsiWildcardType)substituted).getManager(), bound)
+                              : PsiWildcardType.createSuper(((PsiWildcardType)substituted).getManager(), bound);
+              }
+            }
+          } else {
+            substituted = substituteInternal(original);
+          }
           //if (substituted == null) return false;
           substMap.put(param, substituted);
         }
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SubstituteTypeParameterOfCapturedWildcardOnSubstitution.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SubstituteTypeParameterOfCapturedWildcardOnSubstitution.java
new file mode 100644
index 000000000000..6bd8b7a192cf
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SubstituteTypeParameterOfCapturedWildcardOnSubstitution.java
@@ -0,0 +1,34 @@
+class B<T1,S> {}
+abstract class A<T> {
+  <K> void baz5(B<K, K> a) {}
+  abstract B<T, ? super T> foo5();
+  void bar5(A<? super T> a) {
+    baz5<error descr="'baz5(B<capture<? super T>,capture<? super T>>)' in 'A' cannot be applied to '(B<capture<? super T>,capture<? super T>>)'">(a.foo5())</error>;
+  }
+
+  <K> void baz7(B<K, K> a) {}
+  abstract B<T, ? extends T> foo7();
+  void bar7(A<?> a) {
+    baz7<error descr="'baz7(B<capture<?>,capture<?>>)' in 'A' cannot be applied to '(B<capture<?>,capture<?>>)'">(a.foo7())</error>;
+  }
+
+  <K> void baz9(B<K, K> a) {}
+  abstract B<T, ? extends T> foo9();
+  void bar9(A<? extends T> a) {
+    baz9<error descr="'baz9(B<capture<? extends T>,capture<? extends T>>)' in 'A' cannot be applied to '(B<capture<? extends T>,capture<? extends T>>)'">(a.foo9())</error>;
+  }
+
+
+  <K> void baz14(B<K, K> a) {}
+  abstract B<? super T, ? super T> foo14();
+  void bar14(A<? super T> a) {
+    baz14<error descr="'baz14(B<capture<? super T>,capture<? super T>>)' in 'A' cannot be applied to '(B<capture<? super T>,capture<? super T>>)'">(a.foo14())</error>;
+  }
+
+
+  <K> void baz24(B<K, K> a) {}
+  abstract B<? extends T, ? extends T> foo24();
+  void bar24(A<? extends T> a) {
+    baz24<error descr="'baz24(B<capture<? extends T>,capture<? extends T>>)' in 'A' cannot be applied to '(B<capture<? extends T>,capture<? extends T>>)'">(a.foo24())</error>;
+  }
+}
\ No newline at end of file
diff --git a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java
index 1e7629aefca6..bb377400bd06 100644
--- a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java
+++ b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java
@@ -446,6 +446,10 @@ public class GenericsHighlightingTest extends LightDaemonAnalyzerTestCase {
     doTest(LanguageLevel.JDK_1_7, JavaSdkVersion.JDK_1_7, false);
   }
 
+  public void testSubstituteTypeParameterOfCapturedWildcardOnSubstitution() throws Exception {
+    doTest(LanguageLevel.JDK_1_7, JavaSdkVersion.JDK_1_7, false);
+  }
+
   public void testJavaUtilCollections_NoVerify() throws Exception {
     PsiClass collectionsClass = getJavaFacade().findClass("java.util.Collections", GlobalSearchScope.moduleWithLibrariesScope(getModule()));
     assertNotNull(collectionsClass);