diff --git a/compiler/fir/fir-deserialization/src/org/jetbrains/kotlin/fir/deserialization/ClassDeserialization.kt b/compiler/fir/fir-deserialization/src/org/jetbrains/kotlin/fir/deserialization/ClassDeserialization.kt
index 50027605c55..95d567fe815 100644
--- a/compiler/fir/fir-deserialization/src/org/jetbrains/kotlin/fir/deserialization/ClassDeserialization.kt
+++ b/compiler/fir/fir-deserialization/src/org/jetbrains/kotlin/fir/deserialization/ClassDeserialization.kt
@@ -85,11 +85,12 @@ fun deserializeClassToSymbol(
     val context =
         parentContext?.childContext(
             classProto.typeParameterList,
+            containingDeclarationSymbol = symbol,
             nameResolver,
             TypeTable(classProto.typeTable),
             classId.relativeClassName,
             containerSource,
-            symbol,
+            outerClassSymbol = symbol,
             annotationDeserializer,
             if (status.isCompanion) {
                 parentContext.constDeserializer
diff --git a/compiler/fir/fir-deserialization/src/org/jetbrains/kotlin/fir/deserialization/FirMemberDeserializer.kt b/compiler/fir/fir-deserialization/src/org/jetbrains/kotlin/fir/deserialization/FirMemberDeserializer.kt
index 75c62548959..6f6acc34166 100644
--- a/compiler/fir/fir-deserialization/src/org/jetbrains/kotlin/fir/deserialization/FirMemberDeserializer.kt
+++ b/compiler/fir/fir-deserialization/src/org/jetbrains/kotlin/fir/deserialization/FirMemberDeserializer.kt
@@ -60,6 +60,7 @@ class FirDeserializationContext(
 
     fun childContext(
         typeParameterProtos: List<ProtoBuf.TypeParameter>,
+        containingDeclarationSymbol: FirBasedSymbol<*>,
         nameResolver: NameResolver = this.nameResolver,
         typeTable: TypeTable = this.typeTable,
         relativeClassName: FqName? = this.relativeClassName,
@@ -68,7 +69,6 @@ class FirDeserializationContext(
         annotationDeserializer: AbstractAnnotationDeserializer = this.annotationDeserializer,
         constDeserializer: FirConstDeserializer = this.constDeserializer,
         capturesTypeParameters: Boolean = true,
-        containingDeclarationSymbol: FirBasedSymbol<*>? = this.outerClassSymbol
     ): FirDeserializationContext = FirDeserializationContext(
         nameResolver,
         typeTable,
diff --git a/compiler/fir/fir2ir/tests-gen/org/jetbrains/kotlin/test/runners/codegen/FirBlackBoxCodegenTestGenerated.java b/compiler/fir/fir2ir/tests-gen/org/jetbrains/kotlin/test/runners/codegen/FirBlackBoxCodegenTestGenerated.java
index bb6c2cd8352..84ef171ce55 100644
--- a/compiler/fir/fir2ir/tests-gen/org/jetbrains/kotlin/test/runners/codegen/FirBlackBoxCodegenTestGenerated.java
+++ b/compiler/fir/fir2ir/tests-gen/org/jetbrains/kotlin/test/runners/codegen/FirBlackBoxCodegenTestGenerated.java
@@ -18511,6 +18511,12 @@ public class FirBlackBoxCodegenTestGenerated extends AbstractFirBlackBoxCodegenT
             runTest("compiler/testData/codegen/box/fir/namedArgumentOnTypeAnnotation.kt");
         }
 
+        @Test
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
+
         @Test
         @TestMetadata("noSymbolForIntRangeIterator.kt")
         public void testNoSymbolForIntRangeIterator() throws Exception {
diff --git a/compiler/fir/fir2ir/tests-gen/org/jetbrains/kotlin/test/runners/codegen/FirPsiBlackBoxCodegenTestGenerated.java b/compiler/fir/fir2ir/tests-gen/org/jetbrains/kotlin/test/runners/codegen/FirPsiBlackBoxCodegenTestGenerated.java
index 853ec89f9b5..3179bcf3fcd 100644
--- a/compiler/fir/fir2ir/tests-gen/org/jetbrains/kotlin/test/runners/codegen/FirPsiBlackBoxCodegenTestGenerated.java
+++ b/compiler/fir/fir2ir/tests-gen/org/jetbrains/kotlin/test/runners/codegen/FirPsiBlackBoxCodegenTestGenerated.java
@@ -18511,6 +18511,12 @@ public class FirPsiBlackBoxCodegenTestGenerated extends AbstractFirPsiBlackBoxCo
             runTest("compiler/testData/codegen/box/fir/namedArgumentOnTypeAnnotation.kt");
         }
 
+        @Test
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
+
         @Test
         @TestMetadata("noSymbolForIntRangeIterator.kt")
         public void testNoSymbolForIntRangeIterator() throws Exception {
diff --git a/compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt b/compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt
new file mode 100644
index 00000000000..661a865d58b
--- /dev/null
+++ b/compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt
@@ -0,0 +1,27 @@
+// ISSUE: KT-56706
+// MODULE: lib
+// FILE: lib.kt
+package lib
+
+abstract class BaseRoot<TNested : BaseRoot.BaseNested<*>> {
+    open class BaseNested<V>(val box: V)
+}
+
+// MODULE: main(lib)
+// FILE: main.kt
+package main
+import lib.BaseRoot
+
+class Foo(val v: String)
+
+class ImplRoot : BaseRoot<ImplRoot.ImplNested>() {
+
+    class ImplNested: BaseNested<Foo>(box = Foo("OK")) {
+        fun bar(): String {
+            return BaseNested(box).box.v // K1 doesn't report it, yet message is really strange
+            // "actual type is main/Foo but lib/BaseRoot.BaseNested<*> was expected" which is also strange, since type of box is main/Foo and V for argument
+        }
+    }
+}
+
+fun box(): String = ImplRoot.ImplNested().bar()
diff --git a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/codegen/BlackBoxCodegenTestGenerated.java b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/codegen/BlackBoxCodegenTestGenerated.java
index 9ee0c751d14..da3c88cae74 100644
--- a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/codegen/BlackBoxCodegenTestGenerated.java
+++ b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/codegen/BlackBoxCodegenTestGenerated.java
@@ -17581,6 +17581,12 @@ public class BlackBoxCodegenTestGenerated extends AbstractBlackBoxCodegenTest {
             runTest("compiler/testData/codegen/box/fir/NameHighlighter.kt");
         }
 
+        @Test
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
+
         @Test
         @TestMetadata("notFoundClasses.kt")
         public void testNotFoundClasses() throws Exception {
diff --git a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/codegen/IrBlackBoxCodegenTestGenerated.java b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/codegen/IrBlackBoxCodegenTestGenerated.java
index eb570f58a32..cefce102f33 100644
--- a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/codegen/IrBlackBoxCodegenTestGenerated.java
+++ b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/codegen/IrBlackBoxCodegenTestGenerated.java
@@ -18511,6 +18511,12 @@ public class IrBlackBoxCodegenTestGenerated extends AbstractIrBlackBoxCodegenTes
             runTest("compiler/testData/codegen/box/fir/namedArgumentOnTypeAnnotation.kt");
         }
 
+        @Test
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
+
         @Test
         @TestMetadata("noSymbolForIntRangeIterator.kt")
         public void testNoSymbolForIntRangeIterator() throws Exception {
diff --git a/compiler/tests-gen/org/jetbrains/kotlin/codegen/LightAnalysisModeTestGenerated.java b/compiler/tests-gen/org/jetbrains/kotlin/codegen/LightAnalysisModeTestGenerated.java
index 3588f216089..66e245599a9 100644
--- a/compiler/tests-gen/org/jetbrains/kotlin/codegen/LightAnalysisModeTestGenerated.java
+++ b/compiler/tests-gen/org/jetbrains/kotlin/codegen/LightAnalysisModeTestGenerated.java
@@ -14568,6 +14568,11 @@ public class LightAnalysisModeTestGenerated extends AbstractLightAnalysisModeTes
             runTest("compiler/testData/codegen/box/fir/NameHighlighter.kt");
         }
 
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
+
         @TestMetadata("notFoundClasses.kt")
         public void testNotFoundClasses() throws Exception {
             runTest("compiler/testData/codegen/box/fir/notFoundClasses.kt");
diff --git a/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/JsCodegenBoxTestGenerated.java b/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/JsCodegenBoxTestGenerated.java
index 92c822c8bac..105c9d4ad3e 100644
--- a/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/JsCodegenBoxTestGenerated.java
+++ b/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/JsCodegenBoxTestGenerated.java
@@ -13544,6 +13544,12 @@ public class JsCodegenBoxTestGenerated extends AbstractJsCodegenBoxTest {
         public void testFalsePositiveBoundSmartcast() throws Exception {
             runTest("compiler/testData/codegen/box/fir/falsePositiveBoundSmartcast.kt");
         }
+
+        @Test
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
     }
 
     @Nested
diff --git a/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/fir/FirJsCodegenBoxTestGenerated.java b/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/fir/FirJsCodegenBoxTestGenerated.java
index 234a29a9f2d..05b7d03f60a 100644
--- a/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/fir/FirJsCodegenBoxTestGenerated.java
+++ b/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/fir/FirJsCodegenBoxTestGenerated.java
@@ -13640,6 +13640,12 @@ public class FirJsCodegenBoxTestGenerated extends AbstractFirJsCodegenBoxTest {
         public void testFalsePositiveBoundSmartcast() throws Exception {
             runTest("compiler/testData/codegen/box/fir/falsePositiveBoundSmartcast.kt");
         }
+
+        @Test
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
     }
 
     @Nested
diff --git a/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/ir/IrJsCodegenBoxTestGenerated.java b/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/ir/IrJsCodegenBoxTestGenerated.java
index 9381a27f81a..0b5c55e7c17 100644
--- a/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/ir/IrJsCodegenBoxTestGenerated.java
+++ b/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/ir/IrJsCodegenBoxTestGenerated.java
@@ -13640,6 +13640,12 @@ public class IrJsCodegenBoxTestGenerated extends AbstractIrJsCodegenBoxTest {
         public void testFalsePositiveBoundSmartcast() throws Exception {
             runTest("compiler/testData/codegen/box/fir/falsePositiveBoundSmartcast.kt");
         }
+
+        @Test
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
     }
 
     @Nested
diff --git a/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/ir/IrJsES6CodegenBoxTestGenerated.java b/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/ir/IrJsES6CodegenBoxTestGenerated.java
index b600430e545..36f5f4f5453 100644
--- a/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/ir/IrJsES6CodegenBoxTestGenerated.java
+++ b/js/js.tests/tests-gen/org/jetbrains/kotlin/js/test/ir/IrJsES6CodegenBoxTestGenerated.java
@@ -13640,6 +13640,12 @@ public class IrJsES6CodegenBoxTestGenerated extends AbstractIrJsES6CodegenBoxTes
         public void testFalsePositiveBoundSmartcast() throws Exception {
             runTest("compiler/testData/codegen/box/fir/falsePositiveBoundSmartcast.kt");
         }
+
+        @Test
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
     }
 
     @Nested
diff --git a/native/native.tests/tests-gen/org/jetbrains/kotlin/konan/blackboxtest/K2NativeCodegenBoxTestGenerated.java b/native/native.tests/tests-gen/org/jetbrains/kotlin/konan/blackboxtest/K2NativeCodegenBoxTestGenerated.java
index ac53abc620a..5d00e2a4b01 100644
--- a/native/native.tests/tests-gen/org/jetbrains/kotlin/konan/blackboxtest/K2NativeCodegenBoxTestGenerated.java
+++ b/native/native.tests/tests-gen/org/jetbrains/kotlin/konan/blackboxtest/K2NativeCodegenBoxTestGenerated.java
@@ -14858,6 +14858,12 @@ public class K2NativeCodegenBoxTestGenerated extends AbstractNativeCodegenBoxTes
             public void testFalsePositiveBoundSmartcast() throws Exception {
                 runTest("compiler/testData/codegen/box/fir/falsePositiveBoundSmartcast.kt");
             }
+
+            @Test
+            @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+            public void testNestedClassTypeParameterDeserialization() throws Exception {
+                runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+            }
         }
 
         @Nested
diff --git a/native/native.tests/tests-gen/org/jetbrains/kotlin/konan/blackboxtest/NativeCodegenBoxTestGenerated.java b/native/native.tests/tests-gen/org/jetbrains/kotlin/konan/blackboxtest/NativeCodegenBoxTestGenerated.java
index 7a1907575ba..84027e65885 100644
--- a/native/native.tests/tests-gen/org/jetbrains/kotlin/konan/blackboxtest/NativeCodegenBoxTestGenerated.java
+++ b/native/native.tests/tests-gen/org/jetbrains/kotlin/konan/blackboxtest/NativeCodegenBoxTestGenerated.java
@@ -14682,6 +14682,12 @@ public class NativeCodegenBoxTestGenerated extends AbstractNativeCodegenBoxTest
             public void testFalsePositiveBoundSmartcast() throws Exception {
                 runTest("compiler/testData/codegen/box/fir/falsePositiveBoundSmartcast.kt");
             }
+
+            @Test
+            @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+            public void testNestedClassTypeParameterDeserialization() throws Exception {
+                runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+            }
         }
 
         @Nested
diff --git a/wasm/wasm.tests/tests-gen/org/jetbrains/kotlin/wasm/test/IrCodegenBoxWasmTestGenerated.java b/wasm/wasm.tests/tests-gen/org/jetbrains/kotlin/wasm/test/IrCodegenBoxWasmTestGenerated.java
index bcb0a5a16cb..fe3a3cfe863 100644
--- a/wasm/wasm.tests/tests-gen/org/jetbrains/kotlin/wasm/test/IrCodegenBoxWasmTestGenerated.java
+++ b/wasm/wasm.tests/tests-gen/org/jetbrains/kotlin/wasm/test/IrCodegenBoxWasmTestGenerated.java
@@ -12107,6 +12107,11 @@ public class IrCodegenBoxWasmTestGenerated extends AbstractIrCodegenBoxWasmTest
         public void testFalsePositiveBoundSmartcast() throws Exception {
             runTest("compiler/testData/codegen/box/fir/falsePositiveBoundSmartcast.kt");
         }
+
+        @TestMetadata("nestedClassTypeParameterDeserialization.kt")
+        public void testNestedClassTypeParameterDeserialization() throws Exception {
+            runTest("compiler/testData/codegen/box/fir/nestedClassTypeParameterDeserialization.kt");
+        }
     }
 
     @TestMetadata("compiler/testData/codegen/box/fullJdk")