diff --git a/java/java-impl/src/com/intellij/codeInsight/daemon/impl/analysis/HighlightClassUtil.java b/java/java-impl/src/com/intellij/codeInsight/daemon/impl/analysis/HighlightClassUtil.java
index a28be95d2166..08e9dc352a3f 100644
--- a/java/java-impl/src/com/intellij/codeInsight/daemon/impl/analysis/HighlightClassUtil.java
+++ b/java/java-impl/src/com/intellij/codeInsight/daemon/impl/analysis/HighlightClassUtil.java
@@ -689,8 +689,15 @@ public class HighlightClassUtil {
       return null;
     }
     final PsiClass aClass = (PsiClass)grand;
+    final PsiClass containerClass;
     if (aClass instanceof PsiTypeParameter) {
-      return null;
+      final PsiTypeParameterListOwner owner = ((PsiTypeParameter)aClass).getOwner();
+      if (!(owner instanceof PsiClass)) {
+        return null;
+      }
+      containerClass = (PsiClass)owner;
+    } else {
+      containerClass = aClass;
     }
     if (aClass.getExtendsList() != parent && aClass.getImplementsList() != parent) {
       return null;
@@ -713,7 +720,7 @@ public class HighlightClassUtil {
         if (resolve instanceof PsiClass) {
           final PsiClass base = (PsiClass)resolve;
           final PsiClass baseClass = base.getContainingClass();
-          if (baseClass != null && base.hasModifierProperty(PsiModifier.PRIVATE) && !PsiTreeUtil.isAncestor(baseClass, aClass, true)) {
+          if (baseClass != null && base.hasModifierProperty(PsiModifier.PRIVATE) && baseClass == containerClass) {
             String description = JavaErrorMessages.message("private.symbol",
                                                            HighlightUtil.formatClass(base),
                                                            HighlightUtil.formatClass(baseClass));
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/advHighlighting7/InnerInTypeArguments.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/advHighlighting7/InnerInTypeArguments.java
new file mode 100644
index 000000000000..594fee242c64
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/advHighlighting7/InnerInTypeArguments.java
@@ -0,0 +1,3 @@
+class A<T extends <error descr="'A.B' has private access in 'A'">A<T>.B</error>> {
+    private class B {}
+}
diff --git a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/LightAdvHighlightingJdk7Test.java b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/LightAdvHighlightingJdk7Test.java
index acb08fd82d81..2bac9bb26aba 100644
--- a/java/java-tests/testSrc/com/intellij/codeInsight/daemon/LightAdvHighlightingJdk7Test.java
+++ b/java/java-tests/testSrc/com/intellij/codeInsight/daemon/LightAdvHighlightingJdk7Test.java
@@ -87,6 +87,7 @@ public class LightAdvHighlightingJdk7Test extends LightDaemonAnalyzerTestCase {
   public void testDiamondNeg14() throws Exception { doTest(false, false); }
   public void testDiamondMisc() throws Exception { doTest(false, false); }
   public void testHighlightInaccessibleFromClassModifierList() throws Exception { doTest(false, false); }
+  public void testInnerInTypeArguments() throws Exception { doTest(false, false); }
 
   public void testDynamicallyAddIgnoredAnnotations() throws Exception {
     ExtensionPoint<EntryPoint> point = Extensions.getRootArea().getExtensionPoint(ExtensionPoints.DEAD_CODE_TOOL);