diff --git a/java/java-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java b/java/java-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
index ac2afc346ab8..a71a149a14aa 100644
--- a/java/java-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
+++ b/java/java-impl/src/com/intellij/psi/impl/PsiSubstitutorImpl.java
@@ -298,7 +298,7 @@ public class PsiSubstitutorImpl implements PsiSubstitutor {
         PsiType substitutedBoundType = boundType.accept(mySimpleSubstitutionVisitor);
         PsiWildcardType wildcardType = (PsiWildcardType)substituted;
         if (substitutedBoundType != null && !(substitutedBoundType instanceof PsiWildcardType) && !substitutedBoundType.equalsToText("java.lang.Object")) {
-          if (originalBound == null || !TypeConversionUtil.erasure(substitutedBoundType).isAssignableFrom(originalBound)) { //erasure is essential to avoid infinite recursion
+          if (originalBound == null || !TypeConversionUtil.erasure(substitutedBoundType).isAssignableFrom(TypeConversionUtil.erasure(originalBound))) { //erasure is essential to avoid infinite recursion
             if (wildcardType.isExtends()) {
               final PsiType glb = GenericsUtil.getGreatestLowerBound(wildcardType.getBound(), substitutedBoundType);
               if (glb != null) {
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SOE.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SOE.java
new file mode 100644
index 000000000000..a5f43e18be90
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/genericsHighlighting/SOE.java
@@ -0,0 +1,24 @@
+public class SOE {
+}
+abstract class VersionEntity<V extends Version<V, R>, R extends Ref<V, R>>
+    implements Version<V, R>{}
+
+interface Version<V extends Version<V, R>, R extends Ref<V, R>>{}
+
+abstract class RefEntity<V extends Version<V, R>, R extends Ref<V, R>>
+    implements Ref<V, R> {}
+
+interface Ref<V extends Version<V, R>, R extends Ref<V, R>>{}
+
+
+abstract class Node<G extends Node<G, GR>,
+               GR extends NodeRef<G, GR>> extends VersionEntity<G, GR> {}
+
+abstract class NodeRef<G extends Node<G, GR>, GR extends NodeRef<G, GR>> extends RefEntity<G, GR> {}
+
+
+class D {
+    void f() {
+        Version v = new Node<<error descr="Wildcard type '?' cannot be instantiated directly">?</error>, <error descr="Wildcard type '?' cannot be instantiated directly">?</error>>(){}<EOLError descr="';' expected"></EOLError>
+    }
+}
\ 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 efabf585cf53..00fab84cb81c 100644
--- a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java
+++ b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/GenericsHighlightingTest.java
@@ -81,6 +81,7 @@ public class GenericsHighlightingTest extends LightDaemonAnalyzerTestCase {
   public void testIDEADEV24166() throws Exception { doTest(true); }
   public void testIDEADEV25778() throws Exception { doTest(true); }
   public void testIDEADEV57343() throws Exception { doTest(false); }
+  public void testSOE() throws Exception { doTest(true); }
 
   public void testGenericExtendException() throws Exception { doTest(false); }
   public void testSameErasureDifferentReturnTypes() throws Exception { doTest(false); }