diff --git a/plugins/IntentionPowerPak/src/com/siyeh/ipp/trivialif/ReplaceIfWithConditionalIntention.java b/plugins/IntentionPowerPak/src/com/siyeh/ipp/trivialif/ReplaceIfWithConditionalIntention.java
index 5d4f1218ac31..28e8c09aad4c 100644
--- a/plugins/IntentionPowerPak/src/com/siyeh/ipp/trivialif/ReplaceIfWithConditionalIntention.java
+++ b/plugins/IntentionPowerPak/src/com/siyeh/ipp/trivialif/ReplaceIfWithConditionalIntention.java
@@ -26,6 +26,7 @@ import com.siyeh.ipp.base.Intention;
 import com.siyeh.ipp.base.PsiElementPredicate;
 import org.jetbrains.annotations.NonNls;
 import org.jetbrains.annotations.NotNull;
+import org.jetbrains.annotations.Nullable;
 
 import java.util.Collection;
 
@@ -88,13 +89,10 @@ public class ReplaceIfWithConditionalIntention extends Intention {
       if (elseReturnValue == null) {
         return;
       }
-      final PsiElement method = PsiTreeUtil.getParentOfType(thenReturn, PsiMethod.class, PsiLambdaExpression.class);
-      if (method == null) {
+      final String conditional = getConditional(condition, thenReturn, thenReturnValue, elseReturnValue);
+      if (conditional == null) {
         return;
       }
-      final PsiType returnType = method instanceof PsiMethod ? ((PsiMethod)method).getReturnType() 
-                                                             : LambdaUtil.getFunctionalInterfaceReturnType((PsiLambdaExpression)method);
-      final String conditional = getConditionalText(condition, thenReturnValue, elseReturnValue, returnType);
       replaceIfStatement(ifStatement, "return " + conditional + ';');
     }
     else if (ReplaceIfWithConditionalPredicate.isReplaceableMethodCall(ifStatement)) {
@@ -159,20 +157,31 @@ public class ReplaceIfWithConditionalIntention extends Intention {
       if (elseReturnValue == null) {
         return;
       }
-      final PsiMethod method = PsiTreeUtil.getParentOfType(thenBranch, PsiMethod.class);
-      if (method == null) {
-        return;
-      }
-      final PsiType methodType = method.getReturnType();
-      final String conditional = getConditionalText(condition, thenReturnValue, elseReturnValue, methodType);
-      if (conditional == null) {
-        return;
-      }
+      final String conditional = getConditional(condition, thenBranch, thenReturnValue, elseReturnValue);
+      if (conditional == null) return;
       replaceIfStatement(ifStatement, "return " + conditional + ';');
       elseBranch.delete();
     }
   }
 
+  @Nullable
+  private static String getConditional(PsiExpression condition,
+                                       PsiElement thenBranch,
+                                       PsiExpression thenReturnValue,
+                                       PsiExpression elseReturnValue) {
+    final PsiElement method = PsiTreeUtil.getParentOfType(thenBranch, PsiMethod.class, PsiLambdaExpression.class);
+    if (method == null) {
+      return null;
+    }
+    final PsiType methodType = method instanceof PsiMethod ? ((PsiMethod)method).getReturnType()
+                                                           : LambdaUtil.getFunctionalInterfaceReturnType((PsiLambdaExpression)method);
+    final String conditional = getConditionalText(condition, thenReturnValue, elseReturnValue, methodType);
+    if (conditional == null) {
+      return null;
+    }
+    return conditional;
+  }
+
   private static void replaceIfStatement(PsiIfStatement ifStatement, String text) {
     PsiElement parent = ifStatement.getParent();
     final Collection<PsiComment> comments = PsiTreeUtil.findChildrenOfType(ifStatement, PsiComment.class);
diff --git a/plugins/IntentionPowerPak/test/com/siyeh/ipp/trivialif/replaceIfWithConditional/InsideLambda1.java b/plugins/IntentionPowerPak/test/com/siyeh/ipp/trivialif/replaceIfWithConditional/InsideLambda1.java
new file mode 100644
index 000000000000..c82c044167f7
--- /dev/null
+++ b/plugins/IntentionPowerPak/test/com/siyeh/ipp/trivialif/replaceIfWithConditional/InsideLambda1.java
@@ -0,0 +1,15 @@
+class Test {
+  interface I {
+    int m();
+  }
+  
+  String foo() {
+    I i = () -> {
+      <caret>if (true) {
+        return 1;
+      }
+      return new Integer(2);
+    };
+    return null;
+  }
+}
\ No newline at end of file
diff --git a/plugins/IntentionPowerPak/test/com/siyeh/ipp/trivialif/replaceIfWithConditional/InsideLambda1_after.java b/plugins/IntentionPowerPak/test/com/siyeh/ipp/trivialif/replaceIfWithConditional/InsideLambda1_after.java
new file mode 100644
index 000000000000..6a9591a2f06e
--- /dev/null
+++ b/plugins/IntentionPowerPak/test/com/siyeh/ipp/trivialif/replaceIfWithConditional/InsideLambda1_after.java
@@ -0,0 +1,12 @@
+class Test {
+  interface I {
+    int m();
+  }
+  
+  String foo() {
+    I i = () -> {
+        return true ? 1 : new Integer(2);
+    };
+    return null;
+  }
+}
\ No newline at end of file
diff --git a/plugins/IntentionPowerPak/testSrc/com/siyeh/ipp/trivialif/ReplaceIfWithConditionalIntentionTest.java b/plugins/IntentionPowerPak/testSrc/com/siyeh/ipp/trivialif/ReplaceIfWithConditionalIntentionTest.java
index da8ada756b4f..007fb4c3fed7 100644
--- a/plugins/IntentionPowerPak/testSrc/com/siyeh/ipp/trivialif/ReplaceIfWithConditionalIntentionTest.java
+++ b/plugins/IntentionPowerPak/testSrc/com/siyeh/ipp/trivialif/ReplaceIfWithConditionalIntentionTest.java
@@ -30,6 +30,10 @@ public class ReplaceIfWithConditionalIntentionTest extends IPPTestCase {
   public void testComments() { doTest(); }
   public void testInsideLambda() { doTest(); }
 
+  public void testInsideLambda1() {
+    doTest();
+  }
+
   @Override
   protected String getIntentionName() {
     return IntentionPowerPackBundle.message("replace.if.with.conditional.intention.name");