diff --git a/java/java-impl/src/com/intellij/refactoring/inline/InlineParameterExpressionProcessor.java b/java/java-impl/src/com/intellij/refactoring/inline/InlineParameterExpressionProcessor.java
index 81c5b6985ea0..5046a30fb94f 100644
--- a/java/java-impl/src/com/intellij/refactoring/inline/InlineParameterExpressionProcessor.java
+++ b/java/java-impl/src/com/intellij/refactoring/inline/InlineParameterExpressionProcessor.java
@@ -342,7 +342,15 @@ public class InlineParameterExpressionProcessor extends BaseRefactoringProcessor
           myConflicts.putValue(expression, "Parameter initializer depends on value which is not available inside method");
         }
       } else if (element instanceof PsiParameter) {
-        myConflicts.putValue(expression, "Parameter initializer depends on callers parameter");
+        boolean bound = false;
+        for (PsiParameter parameter : myMethod.getParameterList().getParameters()) {
+          if (parameter.getType().equals(((PsiParameter)element).getType()) && parameter.getName().equals(((PsiParameter)element).getName())) {
+            bound = true;
+          }
+        }
+        if (!bound) {
+          myConflicts.putValue(expression, "Parameter initializer depends on callers parameter");
+        }
       }
     }
 
diff --git a/java/java-tests/testData/refactoring/inlineParameter/PropagatedParams.java b/java/java-tests/testData/refactoring/inlineParameter/PropagatedParams.java
new file mode 100644
index 000000000000..e554bf2683f1
--- /dev/null
+++ b/java/java-tests/testData/refactoring/inlineParameter/PropagatedParams.java
@@ -0,0 +1,10 @@
+class X {
+    void bar(String str){
+        foo(str, str.substring(0));
+    }
+
+    void foo(String str, String st<caret>r1) {
+      System.out.println(str);
+      System.out.println(str1);
+    }
+}
\ No newline at end of file
diff --git a/java/java-tests/testData/refactoring/inlineParameter/PropagatedParams.java.after b/java/java-tests/testData/refactoring/inlineParameter/PropagatedParams.java.after
new file mode 100644
index 000000000000..354e5378b7bc
--- /dev/null
+++ b/java/java-tests/testData/refactoring/inlineParameter/PropagatedParams.java.after
@@ -0,0 +1,10 @@
+class X {
+    void bar(String str){
+        foo(str);
+    }
+
+    void foo(String str) {
+      System.out.println(str);
+      System.out.println(str.substring(0));
+    }
+}
\ No newline at end of file
diff --git a/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineParameterTest.java b/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineParameterTest.java
index b49a306ccedd..64327636836e 100644
--- a/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineParameterTest.java
+++ b/java/java-tests/testSrc/com/intellij/refactoring/inline/InlineParameterTest.java
@@ -138,6 +138,10 @@ public class InlineParameterTest extends LightRefactoringTestCase {
     doTest(false);
   }
 
+  public void testPropagatedParams() throws Exception {
+    doTest(false);
+  }
+
   public void testParameterWithWriteAccess() throws Exception {
     try {
       doTest(false);