diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/descriptors/MutableClassDescriptor.java b/compiler/frontend/src/org/jetbrains/jet/lang/descriptors/MutableClassDescriptor.java
index d9a993b4155..3e500172016 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/descriptors/MutableClassDescriptor.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/descriptors/MutableClassDescriptor.java
@@ -61,6 +61,9 @@ public class MutableClassDescriptor extends MutableDeclarationDescriptor impleme
     @Override
     public ClassObjectStatus setClassObjectDescriptor(@NotNull MutableClassDescriptor classObjectDescriptor) {
         if (this.classObjectDescriptor != null) return ClassObjectStatus.DUPLICATE;
+        if (!(this.getContainingDeclaration() instanceof NamespaceDescriptor)) {
+            return ClassObjectStatus.NOT_ALLOWED;
+        }
         assert classObjectDescriptor.getKind() == ClassKind.OBJECT;
         this.classObjectDescriptor = classObjectDescriptor;
         return ClassObjectStatus.OK;
diff --git a/compiler/testData/checkerWithErrorTypes/quick/InnerClassClassObject.jet b/compiler/testData/checkerWithErrorTypes/quick/InnerClassClassObject.jet
new file mode 100644
index 00000000000..0d8f5da30f2
--- /dev/null
+++ b/compiler/testData/checkerWithErrorTypes/quick/InnerClassClassObject.jet
@@ -0,0 +1,7 @@
+// http://youtrack.jetbrains.net/issue/KT-449
+
+class A {
+    class B {
+        <!CLASS_OBJECT_NOT_ALLOWED!>class object { }<!>
+    }
+}