diff --git a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/RawTypesCheck.java b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/RawTypesCheck.java
index bc1227d4636..dcc5ec8f888 100644
--- a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/RawTypesCheck.java
+++ b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/RawTypesCheck.java
@@ -95,7 +95,8 @@ public class RawTypesCheck {
         }
 
         for (HierarchicalMethodSignature superSignature : method.getHierarchicalMethodSignature().getSuperSignatures()) {
-            if (superSignature.isRaw() || hasRawTypesInSignature(superSignature.getMethod())) {
+            PsiMethod superMethod = superSignature.getMethod();
+            if (superSignature.isRaw() || typeParameterIsErased(method, superMethod) || hasRawTypesInSignature(superMethod)) {
                 return true;
             }
         }
@@ -103,6 +104,14 @@ public class RawTypesCheck {
         return false;
     }
 
+    private static boolean typeParameterIsErased(@NotNull PsiMethod a, @NotNull PsiMethod b) {
+        // Java allows you to write
+        //   <T extends Foo> T foo(), in the superclass and then
+        //   Foo foo(), in the subclass
+        // this is a valid Java override, but in fact it is an erasure
+        return a.getTypeParameters().length != b.getTypeParameters().length;
+    }
+
     private RawTypesCheck() {
     }
 }
diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/resolve/OverridingUtil.java b/compiler/frontend/src/org/jetbrains/jet/lang/resolve/OverridingUtil.java
index 1bac2952bb3..5a1e9c525ef 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/resolve/OverridingUtil.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/resolve/OverridingUtil.java
@@ -22,6 +22,7 @@ import com.google.common.collect.Maps;
 import com.google.common.collect.Sets;
 import com.intellij.util.Function;
 import org.jetbrains.annotations.NotNull;
+import org.jetbrains.annotations.Nullable;
 import org.jetbrains.jet.lang.descriptors.*;
 import org.jetbrains.jet.lang.types.*;
 import org.jetbrains.jet.lang.types.checker.JetTypeChecker;
@@ -222,6 +223,7 @@ public class OverridingUtil {
 
     public static boolean isReturnTypeOkForOverride(@NotNull JetTypeChecker typeChecker, @NotNull CallableDescriptor superDescriptor, @NotNull CallableDescriptor subDescriptor) {
         TypeSubstitutor typeSubstitutor = prepareTypeSubstitutor(superDescriptor, subDescriptor);
+        if (typeSubstitutor == null) return false;
 
         JetType superReturnType = superDescriptor.getReturnType();
         assert superReturnType != null;
@@ -235,11 +237,14 @@ public class OverridingUtil {
         return typeChecker.isSubtypeOf(subReturnType, substitutedSuperReturnType);
     }
 
+    @Nullable
     private static TypeSubstitutor prepareTypeSubstitutor(@NotNull CallableDescriptor superDescriptor, @NotNull CallableDescriptor subDescriptor) {
         List<TypeParameterDescriptor> superTypeParameters = superDescriptor.getTypeParameters();
         List<TypeParameterDescriptor> subTypeParameters = subDescriptor.getTypeParameters();
+        if (subTypeParameters.size() != superTypeParameters.size()) return null;
+
         Map<TypeConstructor, TypeProjection> substitutionContext = Maps.newHashMap();
-        for (int i = 0, typeParametersSize = superTypeParameters.size(); i < typeParametersSize; i++) {
+        for (int i = 0; i < superTypeParameters.size(); i++) {
             TypeParameterDescriptor superTypeParameter = superTypeParameters.get(i);
             TypeParameterDescriptor subTypeParameter = subTypeParameters.get(i);
             substitutionContext.put(
diff --git a/compiler/testData/diagnostics/tests/j+k/kt3307.kt b/compiler/testData/diagnostics/tests/j+k/kt3307.kt
new file mode 100644
index 00000000000..340842481bc
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/j+k/kt3307.kt
@@ -0,0 +1,21 @@
+// FILE: Bug.java
+
+public interface Bug {
+        <RET extends Bug> RET save();
+}
+
+// FILE: SubBug.java
+
+public class SubBug implements Bug {
+        public SubBug save() {
+                return this;
+        }
+}
+
+// FILE: Bug.kt
+
+fun TestBug() {
+   SubBug().save() // can resolve on subtype
+   val bug: Bug = SubBug()
+   bug.save<Bug>() // can resolve on supertype
+}
\ No newline at end of file
diff --git a/compiler/testData/loadJavaCustom/methodTypeParameterErased/MethodTypeParameterErased.java b/compiler/testData/loadJavaCustom/methodTypeParameterErased/MethodTypeParameterErased.java
new file mode 100644
index 00000000000..81f54e78c18
--- /dev/null
+++ b/compiler/testData/loadJavaCustom/methodTypeParameterErased/MethodTypeParameterErased.java
@@ -0,0 +1,19 @@
+package test;
+
+public interface MethodTypeParameterErased {
+
+    public interface Bug<T> {
+            <RET extends Bug<T>> RET save();
+            void foo();
+    }
+
+    public abstract class SubBug implements Bug<Object> {
+            public SubBug save() {
+                    return this;
+            }
+
+            public void foo() {}
+
+    }
+
+}
\ No newline at end of file
diff --git a/compiler/testData/loadJavaCustom/methodTypeParameterErased/MethodTypeParameterErased.txt b/compiler/testData/loadJavaCustom/methodTypeParameterErased/MethodTypeParameterErased.txt
new file mode 100644
index 00000000000..ff574930690
--- /dev/null
+++ b/compiler/testData/loadJavaCustom/methodTypeParameterErased/MethodTypeParameterErased.txt
@@ -0,0 +1,13 @@
+package test
+
+public trait MethodTypeParameterErased : java.lang.Object {
+    
+    public trait Bug</*0*/ T> : java.lang.Object {
+        public abstract fun </*0*/ RET : test.MethodTypeParameterErased.Bug<T>?> save() : RET?
+    }
+    
+    public open class SubBug : test.MethodTypeParameterErased.Bug<jet.Any> {
+        public constructor SubBug()
+        public open fun save() : test.MethodTypeParameterErased.SubBug?
+    }
+}
diff --git a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
index e26e668826a..590af93ef55 100644
--- a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
@@ -16,16 +16,13 @@
 
 package org.jetbrains.jet.checkers;
 
-import junit.framework.Assert;
 import junit.framework.Test;
 import junit.framework.TestSuite;
-
-import java.io.File;
 import org.jetbrains.jet.JetTestUtils;
 import org.jetbrains.jet.test.InnerTestClasses;
 import org.jetbrains.jet.test.TestMetadata;
 
-import org.jetbrains.jet.checkers.AbstractDiagnosticsTestWithEagerResolve;
+import java.io.File;
 
 /** This class is generated by {@link org.jetbrains.jet.generators.tests.GenerateTests}. DO NOT MODIFY MANUALLY */
 @SuppressWarnings("all")
@@ -2629,6 +2626,11 @@ public class JetDiagnosticsTestGenerated extends AbstractDiagnosticsTestWithEage
                 doTest("compiler/testData/diagnostics/tests/j+k/kt2890.kt");
             }
             
+            @TestMetadata("kt3307.kt")
+            public void testKt3307() throws Exception {
+                doTest("compiler/testData/diagnostics/tests/j+k/kt3307.kt");
+            }
+            
             @TestMetadata("mutableIterator.kt")
             public void testMutableIterator() throws Exception {
                 doTest("compiler/testData/diagnostics/tests/j+k/mutableIterator.kt");
diff --git a/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaCustomTest.java b/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaCustomTest.java
index 5fda5ccfaea..edd4036efe5 100644
--- a/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaCustomTest.java
+++ b/compiler/tests/org/jetbrains/jet/jvm/compiler/LoadJavaCustomTest.java
@@ -161,6 +161,12 @@ public final class LoadJavaCustomTest extends KotlinTestWithEnvironment {
                dir + "SubclassWithRawType.java");
     }
 
+    public void testMethodTypeParameterErased() throws Exception {
+        String dir = PATH + "/methodTypeParameterErased/";
+        doTest(dir + "MethodTypeParameterErased.txt",
+               dir + "MethodTypeParameterErased.java");
+    }
+
     public static class SubclassingKotlinInJavaTest extends KotlinTestWithEnvironmentManagement {
         public void testSubclassingKotlinInJava() throws Exception {
             doTest(PATH + "/" + getTestName(true));