diff --git a/python/src/com/jetbrains/python/codeInsight/liveTemplates/PythonTemplateContextType.java b/python/src/com/jetbrains/python/codeInsight/liveTemplates/PythonTemplateContextType.java
index 11734409377b..23d21a6bbf59 100644
--- a/python/src/com/jetbrains/python/codeInsight/liveTemplates/PythonTemplateContextType.java
+++ b/python/src/com/jetbrains/python/codeInsight/liveTemplates/PythonTemplateContextType.java
@@ -2,6 +2,7 @@
 package com.jetbrains.python.codeInsight.liveTemplates;
 
 import com.intellij.codeInsight.template.EverywhereContextType;
+import com.intellij.codeInsight.template.TemplateActionContext;
 import com.intellij.codeInsight.template.TemplateContextType;
 import com.intellij.openapi.util.NlsContexts;
 import com.intellij.patterns.PsiElementPattern;
@@ -31,19 +32,19 @@ public abstract class PythonTemplateContextType extends TemplateContextType {
   }
 
   @Override
-  public boolean isInContext(@NotNull PsiFile file, int offset) {
-    if (isPythonLanguage(file, offset)) {
-      final PsiElement element = file.findElementAt(offset);
-
+  public boolean isInContext(@NotNull TemplateActionContext templateActionContext) {
+    PsiFile file = templateActionContext.getFile();
+    if (isPythonLanguage(file, templateActionContext.getStartOffset())) {
+      final PsiElement element = file.findElementAt(templateActionContext.getStartOffset());
       if (element != null) {
-        if (isAfterDot(element) || element instanceof PsiComment || isInsideStringLiteral(element) || isInsideParameterList(element)) {
-          return false;
+        if (!templateActionContext.isSurrounding()) {
+          if (isAfterDot(element) || element instanceof PsiComment || isInsideStringLiteral(element) || isInsideParameterList(element)) {
+            return false;
+          }
         }
-
         return isInContext(element);
       }
     }
-
     return false;
   }
 
diff --git a/python/testData/codeInsight/liveTemplates/context/surroundStringLiteral.py b/python/testData/codeInsight/liveTemplates/context/surroundStringLiteral.py
new file mode 100644
index 000000000000..e54b04511f6b
--- /dev/null
+++ b/python/testData/codeInsight/liveTemplates/context/surroundStringLiteral.py
@@ -0,0 +1 @@
+<selection>'test<caret>'</selection>
\ No newline at end of file
diff --git a/python/testSrc/com/jetbrains/python/codeInsight/liveTemplates/PyLiveTemplatesContextTest.java b/python/testSrc/com/jetbrains/python/codeInsight/liveTemplates/PyLiveTemplatesContextTest.java
index 6e9d2a1bf953..280717fc5073 100644
--- a/python/testSrc/com/jetbrains/python/codeInsight/liveTemplates/PyLiveTemplatesContextTest.java
+++ b/python/testSrc/com/jetbrains/python/codeInsight/liveTemplates/PyLiveTemplatesContextTest.java
@@ -15,13 +15,14 @@
  */
 package com.jetbrains.python.codeInsight.liveTemplates;
 
-import com.intellij.codeInsight.template.TemplateContextType;
+import com.intellij.codeInsight.template.*;
+import com.intellij.codeInsight.template.impl.*;
+import com.intellij.testFramework.fixtures.CodeInsightTestUtil;
+import com.intellij.util.containers.ContainerUtil;
 import com.jetbrains.python.fixtures.PyTestCase;
 import org.jetbrains.annotations.NotNull;
 
-import java.util.Arrays;
-import java.util.Comparator;
-import java.util.List;
+import java.util.*;
 import java.util.stream.Collectors;
 
 public class PyLiveTemplatesContextTest extends PyTestCase {
@@ -32,7 +33,7 @@ public class PyLiveTemplatesContextTest extends PyTestCase {
   }
 
   public void testNotPython() {
-    doTest("html");
+    doTest(false, "html");
   }
 
   // PY-12212
@@ -64,22 +65,48 @@ public class PyLiveTemplatesContextTest extends PyTestCase {
     doTest(PythonTemplateContextType.Class.class, PythonTemplateContextType.General.class);
   }
 
-  private void doTest(Class<? extends PythonTemplateContextType> @NotNull ... expectedContextTypes) {
-    doTest("py", expectedContextTypes);
+  // PY-52162
+  public void testSurroundStringLiteral() {
+    doTest(true, "py", PythonTemplateContextType.General.class, PythonTemplateContextType.TopLevel.class);
   }
 
-  private void doTest(@NotNull String extension, Class<? extends PythonTemplateContextType> @NotNull ... expectedContextTypes) {
+  // PY-52162
+  public void testSurroundTemplateWithStringLiterals() {
+    final TemplateManager templateManager = TemplateManager.getInstance(myFixture.getProject());
+    final Template template = templateManager.createTemplate("pri", "Python", "print($SELECTION$)$END$");
+
+    TemplateContextType context = ContainerUtil.findInstance(TemplateContextType.EP_NAME.getExtensions(), PythonTemplateContextType.General.class);
+    assertNotNull(context);
+    ((TemplateImpl)template).getTemplateContext().setEnabled(context, true);
+
+    CodeInsightTestUtil.addTemplate(template, myFixture.getTestRootDisposable());
+
+    myFixture.configureByText("abc.py", "'test'<caret>");
+    myFixture.getEditor().getSelectionModel().setSelection(0, 6);
+    new InvokeTemplateAction((TemplateImpl)template, myFixture.getEditor(), myFixture.getProject(), new HashSet<>()).perform();
+    myFixture.checkResult("print('test')");
+  }
+
+  private void doTest(Class<? extends PythonTemplateContextType> @NotNull ... expectedContextTypes) {
+    doTest(false, "py", expectedContextTypes);
+  }
+
+  private void doTest(boolean isSurrounding,
+                      @NotNull String extension,
+                      Class<? extends PythonTemplateContextType> @NotNull ... expectedContextTypes) {
     myFixture.configureByFile(getTestName(true) + "." + extension);
 
-    final List<Class<? extends PythonTemplateContextType>> actualContextTypes = calculateEnabledContextTypes(getRegisteredContextTypes());
+    final List<Class<? extends PythonTemplateContextType>> actualContextTypes =
+      calculateEnabledContextTypes(isSurrounding, getRegisteredContextTypes());
     assertSameElements(actualContextTypes, expectedContextTypes);
   }
 
   @NotNull
-  private List<Class<? extends PythonTemplateContextType>> calculateEnabledContextTypes(@NotNull List<PythonTemplateContextType> registeredContextTypes) {
+  private List<Class<? extends PythonTemplateContextType>> calculateEnabledContextTypes(boolean isSurrounding, @NotNull List<PythonTemplateContextType> registeredContextTypes) {
+    TemplateActionContext context = TemplateActionContext.create(myFixture.getFile(), null, myFixture.getCaretOffset(), myFixture.getCaretOffset(), isSurrounding);
     return registeredContextTypes
       .stream()
-      .filter(type -> type.isInContext(myFixture.getFile(), myFixture.getCaretOffset()))
+      .filter(type -> type.isInContext(context))
       .map(PythonTemplateContextType::getClass)
       .sorted(Comparator.comparing(Class::getSimpleName))
       .collect(Collectors.toList());