diff --git a/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/constraints/SubtypingConstraint.java b/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/constraints/SubtypingConstraint.java
index 0e293f276224..c78ae8ec221e 100644
--- a/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/constraints/SubtypingConstraint.java
+++ b/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/constraints/SubtypingConstraint.java
@@ -15,7 +15,11 @@
  */
 package com.intellij.psi.impl.source.resolve.graphInference.constraints;
 
-import com.intellij.psi.*;
+import com.intellij.openapi.diagnostic.Logger;
+import com.intellij.psi.PsiCapturedWildcardType;
+import com.intellij.psi.PsiSubstitutor;
+import com.intellij.psi.PsiType;
+import com.intellij.psi.PsiWildcardType;
 import com.intellij.psi.impl.source.resolve.graphInference.InferenceBound;
 import com.intellij.psi.impl.source.resolve.graphInference.InferenceSession;
 import com.intellij.psi.impl.source.resolve.graphInference.InferenceVariable;
@@ -23,6 +27,8 @@ import com.intellij.psi.impl.source.resolve.graphInference.InferenceVariable;
 import java.util.List;
 
 public class SubtypingConstraint implements ConstraintFormula {
+  private static final Logger LOG = Logger.getInstance("#" + SubtypingConstraint.class.getName());
+
   private PsiType myS;
   private PsiType myT;
 
@@ -72,13 +78,10 @@ public class SubtypingConstraint implements ConstraintFormula {
       }
 
       if (((PsiWildcardType)myT).isExtends()) {
-        if (tBound.equalsToText(CommonClassNames.JAVA_LANG_OBJECT)) {
-          return true;
-        }
-
         if (myS instanceof PsiWildcardType) {
           final PsiType sBound = ((PsiWildcardType)myS).getBound();
           if (sBound == null) {
+            constraints.add(new StrictSubtypingConstraint(tBound, ((PsiWildcardType)myS).getExtendsBound()));
             return true;
           }
 
@@ -86,12 +89,21 @@ public class SubtypingConstraint implements ConstraintFormula {
             constraints.add(new StrictSubtypingConstraint(tBound, sBound));
             return true;
           }
-        } else {
+          
+          if (((PsiWildcardType)myS).isSuper()) {
+            constraints.add(new TypeEqualityConstraint(tBound, PsiType.getJavaLangObject(((PsiWildcardType)myT).getManager(), myT.getResolveScope())));
+            return true;
+          }
+
+          assert false;
+        } 
+        else {
           constraints.add(new StrictSubtypingConstraint(tBound, myS));
           return true;
         }
-        return false;
-      } else {
+      } 
+      else {
+        LOG.assertTrue(((PsiWildcardType)myT).isSuper());
 
         if (myS instanceof PsiWildcardType) {
           final PsiType sBound = ((PsiWildcardType)myS).getBound();
@@ -120,8 +132,11 @@ public class SubtypingConstraint implements ConstraintFormula {
           inferenceVariable.addBound(myS, InferenceBound.EQ);
           return true;
         }
-        constraints.add(new StrictSubtypingConstraint(myT, myS));
-        return true;
+        if (myT != null && myS != null) {
+          constraints.add(new TypeEqualityConstraint(myT, myS));
+          return true;
+        }
+        return false;
       }
     }
   }
diff --git a/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/constraints/TypeEqualityConstraint.java b/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/constraints/TypeEqualityConstraint.java
index d49366f83d3c..b05414e7ef7e 100644
--- a/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/constraints/TypeEqualityConstraint.java
+++ b/java/java-psi-impl/src/com/intellij/psi/impl/source/resolve/graphInference/constraints/TypeEqualityConstraint.java
@@ -39,6 +39,38 @@ public class TypeEqualityConstraint implements ConstraintFormula {
 
   @Override
   public boolean reduce(InferenceSession session, List<ConstraintFormula> constraints) {
+    if (myT instanceof PsiWildcardType && myS instanceof PsiWildcardType) {
+      final PsiType tBound = ((PsiWildcardType)myT).getBound();
+      final PsiType sBound = ((PsiWildcardType)myS).getBound();
+
+      if (tBound == null && sBound == null) return true;
+
+      if (sBound == null && ((PsiWildcardType)myT).isExtends()) {
+        //extends bound of "?" (Object)
+        constraints.add(new TypeEqualityConstraint(((PsiWildcardType)myS).getExtendsBound(), tBound));
+        return true;
+      }
+
+      if (tBound == null && ((PsiWildcardType)myS).isExtends()) {
+        //extends bound of "?" (Object)
+        constraints.add(new TypeEqualityConstraint(((PsiWildcardType)myT).getExtendsBound(), sBound));
+        return true;
+      }
+
+      if (((PsiWildcardType)myT).isExtends() && ((PsiWildcardType)myS).isExtends() ||
+          ((PsiWildcardType)myT).isSuper() && ((PsiWildcardType)myS).isSuper()) {
+
+        LOG.assertTrue(tBound != null);
+        LOG.assertTrue(sBound != null);
+        constraints.add(new TypeEqualityConstraint(tBound, sBound));
+        return true;
+      }
+    }
+
+    if (myT instanceof PsiWildcardType || myS instanceof PsiWildcardType) {
+      return false;
+    }
+
     if (session.isProperType(myT) && session.isProperType(myS)) {
       return myT.equals(myS);
     }
@@ -75,33 +107,6 @@ public class TypeEqualityConstraint implements ConstraintFormula {
       return true;
     }
 
-    if (myT instanceof PsiWildcardType && myS instanceof PsiWildcardType) {
-      final PsiType tBound = ((PsiWildcardType)myT).getBound();
-      final PsiType sBound = ((PsiWildcardType)myS).getBound();
-
-      if (tBound == null && sBound == null) return true;
-
-      if (sBound == null && ((PsiWildcardType)myT).isExtends()) {
-        //extends bound of "?" (Object)
-        constraints.add(new TypeEqualityConstraint(((PsiWildcardType)myS).getExtendsBound(), tBound));
-        return true;
-      }
-
-      if (tBound == null && ((PsiWildcardType)myS).isExtends()) {
-        //extends bound of "?" (Object)
-        constraints.add(new TypeEqualityConstraint(((PsiWildcardType)myT).getExtendsBound(), sBound));
-        return true;
-      }
-
-      if (((PsiWildcardType)myT).isExtends() && ((PsiWildcardType)myS).isExtends() || 
-          ((PsiWildcardType)myT).isSuper() && ((PsiWildcardType)myS).isSuper()) {
-
-        LOG.assertTrue(tBound != null);
-        LOG.assertTrue(sBound != null);
-        constraints.add(new TypeEqualityConstraint(tBound, sBound));
-        return true;
-      }
-    }
     return false;
   }
 
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/IDEA57439.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/IDEA57439.java
index 686e1817362e..765d20bb2f8d 100644
--- a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/IDEA57439.java
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting8/IDEA57439.java
@@ -18,14 +18,14 @@ class B<T> extends A<A<T>> {
         foo2(s);
     
         foo3<error descr="'foo3(A<A<?>>)' in 'B' cannot be applied to '(B<capture<?>>)'">(b)</error>;
-        foo3<error descr="'foo3(A<A<? extends java.lang.String>>)' in 'B' cannot be applied to '(B<capture<? extends java.lang.String>>)'">(eb)</error>;
+        foo3<error descr="'foo3(A<A<?>>)' in 'B' cannot be applied to '(B<capture<? extends java.lang.String>>)'">(eb)</error>;
         foo3<error descr="'foo3(A<A<?>>)' in 'B' cannot be applied to '(B<capture<? super java.lang.String>>)'">(sb)</error>;
-        foo3<error descr="'foo3(A<A<? extends java.lang.String>>)' in 'B' cannot be applied to '(B<java.lang.String>)'">(s)</error>;
+        foo3<error descr="'foo3(A<A<?>>)' in 'B' cannot be applied to '(B<java.lang.String>)'">(s)</error>;
 
         foo4<error descr="'foo4(A<A<? super java.lang.Object>>)' in 'B' cannot be applied to '(B<capture<?>>)'">(b)</error>;
         foo4<error descr="'foo4(A<A<? super java.lang.Object>>)' in 'B' cannot be applied to '(B<capture<? extends java.lang.String>>)'">(eb)</error>;
-        foo4<error descr="'foo4(A<A<? super java.lang.String>>)' in 'B' cannot be applied to '(B<capture<? super java.lang.String>>)'">(sb)</error>;
-        foo4<error descr="'foo4(A<A<? super java.lang.String>>)' in 'B' cannot be applied to '(B<java.lang.String>)'">(s)</error>;
+        foo4<error descr="'foo4(A<A<? super java.lang.Object>>)' in 'B' cannot be applied to '(B<capture<? super java.lang.String>>)'">(sb)</error>;
+        foo4<error descr="'foo4(A<A<? super java.lang.Object>>)' in 'B' cannot be applied to '(B<java.lang.String>)'">(s)</error>;
 
         foo5(b);
         foo5(eb);
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/lambda/constraints/SubtypingExtendsSuper.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/lambda/constraints/SubtypingExtendsSuper.java
new file mode 100644
index 000000000000..1ced38b65118
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/lambda/constraints/SubtypingExtendsSuper.java
@@ -0,0 +1,22 @@
+import java.util.ArrayList;
+import java.util.Collection;
+import java.util.List;
+
+public class Sample {
+
+  static List<String> getList(Function<Object, String> function, ArrayList<? super String> objects) {
+    return transform(objects, new ArrayList<String>(), function);
+  }
+
+  static <R, S, T extends Collection<S>> T transform(Iterable<? extends R> oldCollection,
+                                                     T newCollection,
+                                                     Function<R, S> function) {
+
+    return newCollection;
+  }
+
+  interface Function<X, Y> {
+    Y apply(X input);
+  }
+
+}
diff --git a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/lambda/ConstraintsInferenceMiscTest.java b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/lambda/ConstraintsInferenceMiscTest.java
index 163be85c9634..035ea16b8c4d 100644
--- a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/lambda/ConstraintsInferenceMiscTest.java
+++ b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/lambda/ConstraintsInferenceMiscTest.java
@@ -42,6 +42,10 @@ public class ConstraintsInferenceMiscTest extends LightDaemonAnalyzerTestCase {
     doTest(false);
   }
 
+  public void testSubtypingExtendsSuper() throws Exception {
+    doTest(false);
+  }
+
   private void doTest(final boolean checkWarnings) {
     doTestNewInference(BASE_PATH + "/" + getTestName(false) + ".java", checkWarnings, false);
   }