diff --git a/java/java-analysis-impl/src/com/intellij/codeInspection/dataFlow/TypeConstraints.java b/java/java-analysis-impl/src/com/intellij/codeInspection/dataFlow/TypeConstraints.java
index a7d0507c83f0..161a5dc78cdd 100644
--- a/java/java-analysis-impl/src/com/intellij/codeInspection/dataFlow/TypeConstraints.java
+++ b/java/java-analysis-impl/src/com/intellij/codeInspection/dataFlow/TypeConstraints.java
@@ -13,6 +13,8 @@ import org.jetbrains.annotations.Nullable;
 
 import java.util.*;
 
+import static com.intellij.psi.util.TypeConversionUtil.canConvertSealedTo;
+
 public final class TypeConstraints {
   /**
    * Top constraint (no restriction; any non-primitive value satisfies this)
@@ -374,6 +376,8 @@ public final class TypeConstraints {
       }
       if (other instanceof ExactClass) {
         PsiClass otherClass = ((ExactClass)other).myClass;
+        if (otherClass.hasModifierProperty(PsiModifier.SEALED)) return canConvertSealedTo(otherClass, myClass);
+        if (myClass.hasModifierProperty(PsiModifier.SEALED)) return canConvertSealedTo(myClass, otherClass);
         if (myClass.isInterface() && otherClass.isInterface()) return true;
         if (myClass.isInterface() && !otherClass.hasModifierProperty(PsiModifier.FINAL)) return true;
         if (otherClass.isInterface() && !myClass.hasModifierProperty(PsiModifier.FINAL)) return true;
diff --git a/java/java-psi-api/src/com/intellij/psi/util/TypeConversionUtil.java b/java/java-psi-api/src/com/intellij/psi/util/TypeConversionUtil.java
index fb2502412190..e64213fcd596 100644
--- a/java/java-psi-api/src/com/intellij/psi/util/TypeConversionUtil.java
+++ b/java/java-psi-api/src/com/intellij/psi/util/TypeConversionUtil.java
@@ -11,6 +11,7 @@ import com.intellij.pom.java.LanguageLevel;
 import com.intellij.psi.*;
 import com.intellij.psi.search.GlobalSearchScope;
 import com.intellij.psi.tree.IElementType;
+import com.intellij.util.SmartList;
 import com.intellij.util.containers.ContainerUtil;
 import it.unimi.dsi.fastutil.objects.Object2IntMap;
 import it.unimi.dsi.fastutil.objects.Object2IntOpenHashMap;
@@ -252,6 +253,15 @@ public final class TypeConversionUtil {
 
     PsiManager manager = fromClass.getManager();
     final LanguageLevel languageLevel = toClassType.getLanguageLevel();
+    //  jep-397
+    if (languageLevel.isAtLeast(LanguageLevel.JDK_16_PREVIEW)) {
+      if (fromClass.hasModifierProperty(PsiModifier.SEALED)) {
+        if (!canConvertSealedTo(fromClass, toClass)) return false;
+      }
+      else if (toClass.hasModifierProperty(PsiModifier.SEALED)) {
+        if (!canConvertSealedTo(toClass, fromClass)) return false;
+      }
+    }
     if (!fromClass.isInterface()) {
       if (toClass.isInterface()) {
         return (!fromClass.hasModifierProperty(PsiModifier.FINAL) || fromClass.isInheritor(toClass, true)) &&
@@ -320,6 +330,74 @@ public final class TypeConversionUtil {
     }
   }
 
+  /**
+   * Check if sealed class can be narrowed down to a given interface.
+   * Sealed class can be narrowed down to an interface in one of the following cases:
+   * <ul>
+   *  <li>sealed class implements interface
+   *  <li>sealed class have at least one non-sealed subclass
+   *  <li>at least one of final/sealed subclasses of sealed parent implement interface
+   * </ul>
+   *
+   * <p>Note that sealed subclasses are checked recursively, e.g. in hierarchy:</p>
+   *
+   * <code>
+   * <p>sealed class Parent {}
+   * <p>sealed class A extends Parent {}
+   * <p>final class C extends A {}
+   * </code>
+   * <p>all classes would be checked.</p>
+   * <br>
+   * <p>See JEP-397 for more details.</p>
+   */
+  public static boolean canConvertSealedTo(@NotNull PsiClass sealedClass, @NotNull PsiClass psiClass) {
+    PsiReferenceList permitsList = sealedClass.getPermitsList();
+    List<PsiClass> sealedSubClasses = new SmartList<>();
+    boolean hasClassInheritors;
+    if (permitsList == null) {
+      Set<PsiClass> subClasses = findDirectSubClassesInFile(sealedClass);
+      hasClassInheritors = subClasses.stream().anyMatch(subClass -> subClassExtendsClass(subClass, psiClass, sealedSubClasses));
+    }
+    else {
+      hasClassInheritors = Arrays.stream(permitsList.getReferencedTypes())
+        .map(t -> t.resolve())
+        .anyMatch(subClass -> subClassExtendsClass(subClass, psiClass, sealedSubClasses));
+    }
+    return hasClassInheritors || sealedSubClasses.stream().anyMatch(subClass -> canConvertSealedTo(subClass, psiClass));
+  }
+
+  private static @NotNull Set<PsiClass> findDirectSubClassesInFile(@NotNull PsiClass sealedClass) {
+    Set<PsiClass> subClasses = new HashSet<>();
+    sealedClass.getContainingFile().accept(new JavaElementVisitor() {
+      @Override
+      public void visitJavaFile(PsiJavaFile file) {
+        for (PsiClass psiClass : file.getClasses()) {
+          visitClass(psiClass);
+        }
+      }
+
+      @Override
+      public void visitClass(PsiClass psiClass) {
+        for (PsiClass inner : psiClass.getInnerClasses()) {
+          visitClass(inner);
+        }
+        if (psiClass.isInheritor(sealedClass, false)) {
+          subClasses.add(psiClass);
+        }
+      }
+    });
+    return subClasses;
+  }
+
+  private static boolean subClassExtendsClass(@Nullable PsiClass subClass,
+                                              @NotNull PsiClass psiClass,
+                                              @NotNull List<PsiClass> sealedClasses) {
+    if (subClass == null) return false;
+    if (subClass.hasModifierProperty(PsiModifier.NON_SEALED) || subClass.isInheritor(psiClass, true)) return true;
+    if (subClass.hasModifierProperty(PsiModifier.SEALED)) sealedClasses.add(subClass);
+    return false;
+  }
+
   @NotNull
   private static PsiClassType obtainSafeSuperType(@NotNull PsiTypeParameter typeParameter) {
     final PsiClassType superType = typeParameter.getSuperTypes()[0];
diff --git a/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/advHighlightingSealedTypes/SealedClassCast.java b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/advHighlightingSealedTypes/SealedClassCast.java
new file mode 100644
index 000000000000..ff14ac9d4726
--- /dev/null
+++ b/java/java-tests/testData/codeInsight/daemonCodeAnalyzer/advHighlightingSealedTypes/SealedClassCast.java
@@ -0,0 +1,79 @@
+interface Foo {
+  
+  sealed class A {}
+  final class B extends A {}
+  
+  sealed class C {}
+  non-sealed class D extends C {}
+
+  sealed class E {}
+  sealed class F extends E {}
+  final class G extends F implements Foo {}
+  
+  sealed class H permits I {}
+  final class I extends H {}
+  
+  sealed class J permits K {}
+  non-sealed class K extends J {}
+  
+  final class L implements M {}
+  sealed interface M permits L {}
+  
+  class N {}
+  sealed interface O permits P {}
+  final class P extends N implements O {}
+
+  class R {}
+  sealed interface S permits T {}
+  final class T extends U implements S {}
+  class U extends R {}
+  
+  class V {}
+  sealed interface W permits X {}
+  final class X implements W {}
+  
+  static void testA(A a) {
+    if (<error descr="Inconvertible types; cannot cast 'Foo.A' to 'Foo'">a instanceof Foo</error>)
+      System.out.println("It's a Foo");
+  }
+
+  static void testC(C c) {
+    if (c instanceof Foo)
+      System.out.println("It's a Foo");
+  }
+
+  static void testE(E e) {
+    if (e instanceof Foo)
+      System.out.println("It's a Foo");
+  }
+
+  static void testH(H h) {
+    if (<error descr="Inconvertible types; cannot cast 'Foo.H' to 'Foo'">h instanceof Foo</error>)
+      System.out.println("It's a Foo");
+  }
+
+  static void testJ(J j) {
+    if (j instanceof Foo)
+      System.out.println("It's a Foo");
+  }
+
+  static void testL(L l) {
+    if (l instanceof M)
+      System.out.println("It's a M");
+  }
+
+  static void testN(N n) {
+    if (n instanceof O)
+      System.out.println("It's an O");
+  }
+
+  static void testR(R r) {
+    if (r instanceof S)
+      System.out.println("It's a S");
+  }
+
+  static void testV(V v) {
+    if (<error descr="Inconvertible types; cannot cast 'Foo.V' to 'Foo.W'">v instanceof W</error>)
+      System.out.println("It's a W");
+  }
+}
\ No newline at end of file
diff --git a/java/java-tests/testData/inspection/dataFlow/fixture/CastToSealedInterface.java b/java/java-tests/testData/inspection/dataFlow/fixture/CastToSealedInterface.java
new file mode 100644
index 000000000000..778b4745193a
--- /dev/null
+++ b/java/java-tests/testData/inspection/dataFlow/fixture/CastToSealedInterface.java
@@ -0,0 +1,9 @@
+class Foo {
+  static void test(Foo foo) {
+   if (<error descr="Inconvertible types; cannot cast 'Foo' to 'I'"><warning descr="Condition 'foo instanceof I' is always 'false'">foo instanceof I</warning></error>)
+    System.out.println("This is a Foo");
+   }
+}
+
+sealed interface I {}
+final class C implements I {} 
\ No newline at end of file
diff --git a/java/java-tests/testData/inspection/dataFlow/fixture/SealedClassCast.java b/java/java-tests/testData/inspection/dataFlow/fixture/SealedClassCast.java
new file mode 100644
index 000000000000..69865394be45
--- /dev/null
+++ b/java/java-tests/testData/inspection/dataFlow/fixture/SealedClassCast.java
@@ -0,0 +1,13 @@
+interface Foo {
+
+  sealed class A permits B, C {}
+  final class B extends A {}
+  sealed class C extends A permits D {}
+  final class D extends C {}
+
+  static void test(A a) {
+    if (<error descr="Inconvertible types; cannot cast 'Foo.A' to 'Foo'"><warning descr="Condition 'a instanceof Foo' is always 'false'">a instanceof Foo</warning></error>)
+    System.out.println("This is a Foo");
+  }
+
+}
\ No newline at end of file
diff --git a/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/LightSealedTypesHighlightingTest.java b/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/LightSealedTypesHighlightingTest.java
index c6af04befb1b..275d625201bc 100644
--- a/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/LightSealedTypesHighlightingTest.java
+++ b/java/java-tests/testSrc/com/intellij/java/codeInsight/daemon/LightSealedTypesHighlightingTest.java
@@ -15,7 +15,7 @@ public class LightSealedTypesHighlightingTest extends LightJavaCodeInsightFixtur
   @NotNull
   @Override
   protected LightProjectDescriptor getProjectDescriptor() {
-    return JAVA_15;
+    return JAVA_16;
   }
 
   public void testSealedTypesBasics() { doTest(); }
@@ -26,6 +26,7 @@ public class LightSealedTypesHighlightingTest extends LightJavaCodeInsightFixtur
     myFixture.addClass("package p; public class P extends A {}");
     doTest(); 
   }
+  public void testSealedClassCast() { doTest(); }
   
   private void doTest() {
     myFixture.configureByFile(getTestName(false) + ".java");
diff --git a/java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspection14Test.java b/java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspection16Test.java
similarity index 84%
rename from java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspection14Test.java
rename to java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspection16Test.java
index 1d26f46337c4..9c285c4e4dd7 100644
--- a/java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspection14Test.java
+++ b/java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspection16Test.java
@@ -5,11 +5,11 @@ import com.intellij.JavaTestUtil;
 import com.intellij.testFramework.LightProjectDescriptor;
 import org.jetbrains.annotations.NotNull;
 
-public class DataFlowInspection14Test extends DataFlowInspectionTestCase {
+public class DataFlowInspection16Test extends DataFlowInspectionTestCase {
   @NotNull
   @Override
   protected LightProjectDescriptor getProjectDescriptor() {
-    return JAVA_15;
+    return JAVA_16;
   }
 
   @Override
@@ -27,4 +27,6 @@ public class DataFlowInspection14Test extends DataFlowInspectionTestCase {
   }
   public void testSwitchExpressionAndLambdaInlining() { doTest(); }
   public void testRecordAccessorStability() { doTest(); }
+  public void testSealedClassCast() { doTest(); }
+  public void testCastToSealedInterface() { doTest(); }
 }
\ No newline at end of file
diff --git a/java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspectionTestSuite.java b/java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspectionTestSuite.java
index 27e4299e756d..180161a9678a 100644
--- a/java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspectionTestSuite.java
+++ b/java/java-tests/testSrc/com/intellij/java/codeInspection/DataFlowInspectionTestSuite.java
@@ -30,7 +30,7 @@ import org.junit.runners.Suite;
   DataFlowInspection8Test.class,
   DataFlowInspection9Test.class,
   DataFlowInspection10Test.class,
-  DataFlowInspection14Test.class,
+  DataFlowInspection16Test.class,
   DataFlowInspectionHeavyTest.class,
   DataFlowInspectionAncientTest.class,
   DataFlowInspectionCancellingTest.class,