diff --git a/java/java-analysis-impl/src/com/intellij/codeInsight/daemon/impl/analysis/HighlightControlFlowUtil.java b/java/java-analysis-impl/src/com/intellij/codeInsight/daemon/impl/analysis/HighlightControlFlowUtil.java
index 031590492d9f..b626b08ef7ad 100644
--- a/java/java-analysis-impl/src/com/intellij/codeInsight/daemon/impl/analysis/HighlightControlFlowUtil.java
+++ b/java/java-analysis-impl/src/com/intellij/codeInsight/daemon/impl/analysis/HighlightControlFlowUtil.java
@@ -675,7 +675,7 @@ public class HighlightControlFlowUtil {
     return null;
   }
 
-  public static boolean isEffectivelyFinal(PsiVariable variable, PsiElement scope, PsiJavaCodeReferenceElement context) {
+  public static boolean isEffectivelyFinal(PsiVariable variable, PsiElement scope, @Nullable PsiJavaCodeReferenceElement context) {
     boolean effectivelyFinal;
     if (variable instanceof PsiParameter) {
       effectivelyFinal = notAccessedForWriting(variable, new LocalSearchScope(((PsiParameter)variable).getDeclarationScope()));
diff --git a/plugins/InspectionGadgets/InspectionGadgetsAnalysis/src/com/siyeh/ig/dataflow/UnnecessaryLocalVariableInspectionBase.java b/plugins/InspectionGadgets/InspectionGadgetsAnalysis/src/com/siyeh/ig/dataflow/UnnecessaryLocalVariableInspectionBase.java
index 4c82119a3483..ad4273156865 100644
--- a/plugins/InspectionGadgets/InspectionGadgetsAnalysis/src/com/siyeh/ig/dataflow/UnnecessaryLocalVariableInspectionBase.java
+++ b/plugins/InspectionGadgets/InspectionGadgetsAnalysis/src/com/siyeh/ig/dataflow/UnnecessaryLocalVariableInspectionBase.java
@@ -15,16 +15,18 @@
  */
 package com.siyeh.ig.dataflow;
 
+import com.intellij.codeInsight.daemon.impl.analysis.HighlightControlFlowUtil;
 import com.intellij.codeInspection.ui.MultipleCheckboxOptionsPanel;
 import com.intellij.openapi.util.Comparing;
 import com.intellij.openapi.util.DefaultJDOMExternalizer;
-import com.intellij.openapi.util.InvalidDataException;
 import com.intellij.openapi.util.WriteExternalException;
 import com.intellij.psi.*;
+import com.intellij.psi.search.LocalSearchScope;
+import com.intellij.psi.search.searches.ReferencesSearch;
 import com.intellij.psi.tree.IElementType;
 import com.intellij.psi.util.PsiTreeUtil;
+import com.intellij.psi.util.PsiUtil;
 import com.intellij.psi.util.TypeConversionUtil;
-import com.intellij.util.xmlb.XmlSerializer;
 import com.siyeh.InspectionGadgetsBundle;
 import com.siyeh.ig.BaseInspection;
 import com.siyeh.ig.BaseInspectionVisitor;
@@ -162,11 +164,17 @@ public class UnnecessaryLocalVariableInspectionBase extends BaseInspection {
           VariableAccessUtils.variableIsAssigned(initialization, containingScope, false)) {
         return false;
       }
-      if (!initialization.hasModifierProperty(PsiModifier.FINAL) && variable.hasModifierProperty(PsiModifier.FINAL)) {
-        if (VariableAccessUtils.variableIsUsedInInnerClass(variable, containingScope)) {
-          return false;
+
+      if (!initialization.hasModifierProperty(PsiModifier.FINAL) && variable.hasModifierProperty(PsiModifier.FINAL) ||
+          PsiUtil.isLanguageLevel8OrHigher(initialization) && !HighlightControlFlowUtil.isEffectivelyFinal(initialization, containingScope, null) && HighlightControlFlowUtil.isEffectivelyFinal(variable, containingScope, null)) {
+        for (PsiReference ref : ReferencesSearch.search(variable, new LocalSearchScope(containingScope))) {
+          final PsiElement element = PsiTreeUtil.getParentOfType(ref.getElement(), PsiClass.class, PsiLambdaExpression.class);
+          if (element != null && PsiTreeUtil.isAncestor(containingScope, element, true)) {
+            return false;
+          }
         }
       }
+
       return !TypeConversionUtil.boxingConversionApplicable(variable.getType(), initialization.getType());
     }
 
diff --git a/plugins/InspectionGadgets/test/com/siyeh/igtest/dataflow/unnecessary_local_vars/C.java b/plugins/InspectionGadgets/test/com/siyeh/igtest/dataflow/unnecessary_local_vars/C.java
index da4b4b43181c..c316742bb3e9 100644
--- a/plugins/InspectionGadgets/test/com/siyeh/igtest/dataflow/unnecessary_local_vars/C.java
+++ b/plugins/InspectionGadgets/test/com/siyeh/igtest/dataflow/unnecessary_local_vars/C.java
@@ -115,4 +115,15 @@ class C {
     System.out.println(k);
   }
 
+  void usedIn8Inner(int j) {
+    for (int i = 0; i < 7; i++) {
+      int k = i;
+      int n = j;
+      class F {
+        {
+          System.out.println(k + n);
+        }
+      }
+    }
+  } 
 }
\ No newline at end of file
diff --git a/plugins/InspectionGadgets/test/com/siyeh/igtest/dataflow/unnecessary_local_vars/expected.xml b/plugins/InspectionGadgets/test/com/siyeh/igtest/dataflow/unnecessary_local_vars/expected.xml
index 70ce7071c30e..aa7bda34c4c4 100644
--- a/plugins/InspectionGadgets/test/com/siyeh/igtest/dataflow/unnecessary_local_vars/expected.xml
+++ b/plugins/InspectionGadgets/test/com/siyeh/igtest/dataflow/unnecessary_local_vars/expected.xml
@@ -119,4 +119,10 @@
     <description>Local variable &lt;code&gt;k&lt;/code&gt; is redundant #loc</description>
   </problem>
 
+  <problem>
+    <file>C.java</file>
+    <line>121</line>
+    <problem_class severity="WARNING" attribute_key="WARNING_ATTRIBUTES">Redundant local variable</problem_class>
+    <description>Local variable &lt;code&gt;n&lt;/code&gt; is redundant #loc</description>
+  </problem>
 </problems>
\ No newline at end of file
diff --git a/plugins/InspectionGadgets/testsrc/com/siyeh/ig/dataflow/UnnecessaryLocalVariableInspectionTest.java b/plugins/InspectionGadgets/testsrc/com/siyeh/ig/dataflow/UnnecessaryLocalVariableInspectionTest.java
index b7f1fb4ff67f..4efbf1a23d4b 100644
--- a/plugins/InspectionGadgets/testsrc/com/siyeh/ig/dataflow/UnnecessaryLocalVariableInspectionTest.java
+++ b/plugins/InspectionGadgets/testsrc/com/siyeh/ig/dataflow/UnnecessaryLocalVariableInspectionTest.java
@@ -15,18 +15,17 @@
  */
 package com.siyeh.ig.dataflow;
 
-import com.intellij.testFramework.IdeaTestUtil;
-import com.siyeh.ig.IGInspectionTestCase;
 import com.intellij.openapi.projectRoots.Sdk;
-import com.intellij.openapi.projectRoots.impl.JavaSdkImpl;
 import com.intellij.openapi.roots.LanguageLevelProjectExtension;
 import com.intellij.pom.java.LanguageLevel;
+import com.intellij.testFramework.IdeaTestUtil;
+import com.siyeh.ig.IGInspectionTestCase;
 
 public class UnnecessaryLocalVariableInspectionTest extends IGInspectionTestCase {
   @Override
   protected Sdk getTestProjectSdk() {
     final Sdk sdk = IdeaTestUtil.getMockJdk17();
-    LanguageLevelProjectExtension.getInstance(getProject()).setLanguageLevel(LanguageLevel.JDK_1_7);
+    LanguageLevelProjectExtension.getInstance(getProject()).setLanguageLevel(LanguageLevel.HIGHEST);
     return sdk;
   }