diff --git a/compiler/fir/analysis-tests/testData/resolve/inlineClasses/inlineClassDeclaration.fir.txt b/compiler/fir/analysis-tests/testData/resolve/inlineClasses/inlineClassDeclaration.fir.txt
index 4e10c559708..139580c6a75 100644
--- a/compiler/fir/analysis-tests/testData/resolve/inlineClasses/inlineClassDeclaration.fir.txt
+++ b/compiler/fir/analysis-tests/testData/resolve/inlineClasses/inlineClassDeclaration.fir.txt
@@ -4,7 +4,7 @@ FILE: inlineClassDeclaration.kt
             super<R|kotlin/Any|>()
         }
 
-        public final inline class B : R|kotlin/Any| {
+        public final inner inline class B : R|kotlin/Any| {
             public constructor(x: R|kotlin/Int|): R|A.B| {
                 super<R|kotlin/Any|>()
             }
diff --git a/compiler/fir/analysis-tests/testData/resolve/inlineClasses/inlineClassDeclaration.kt b/compiler/fir/analysis-tests/testData/resolve/inlineClasses/inlineClassDeclaration.kt
index 29fb1c6778c..7d2b7097a78 100644
--- a/compiler/fir/analysis-tests/testData/resolve/inlineClasses/inlineClassDeclaration.kt
+++ b/compiler/fir/analysis-tests/testData/resolve/inlineClasses/inlineClassDeclaration.kt
@@ -1,5 +1,5 @@
 class A {
-    <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> class B(val x: Int)
+    <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> inner class B(val x: Int)
     fun foo() {
         <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> class C(val x: Int)
     }
diff --git a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/declaration/FirInlineClassDeclarationChecker.kt b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/declaration/FirInlineClassDeclarationChecker.kt
index 90e57a1cc6f..fa089274aeb 100644
--- a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/declaration/FirInlineClassDeclarationChecker.kt
+++ b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/declaration/FirInlineClassDeclarationChecker.kt
@@ -31,7 +31,7 @@ object FirInlineClassDeclarationChecker : FirRegularClassChecker() {
             return
         }
 
-        if (context.containingDeclarations.size > 1) {
+        if (declaration.isInner || declaration.isLocal) {
             reporter.reportOn(declaration.source, FirErrors.INLINE_CLASS_NOT_TOP_LEVEL, context)
         }
 
diff --git a/compiler/testData/diagnostics/tests/inlineClasses/inlineClassDeclarationCheck.fir.kt b/compiler/testData/diagnostics/tests/inlineClasses/inlineClassDeclarationCheck.fir.kt
index 99cd1c2f489..c8f57d8f443 100644
--- a/compiler/testData/diagnostics/tests/inlineClasses/inlineClassDeclarationCheck.fir.kt
+++ b/compiler/testData/diagnostics/tests/inlineClasses/inlineClassDeclarationCheck.fir.kt
@@ -15,16 +15,16 @@ inline class A9(final val x: Int)
 
 class B1 {
     companion object {
-        <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> class C1(val x: Int)
+        inline class C1(val x: Int)
         inner <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> class C11(val x: Int)
     }
 
-    <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> class C2(val x: Int)
+    inline class C2(val x: Int)
     inner <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> class C21(val x: Int)
 }
 
 object B2 {
-    <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> class C3(val x: Int)
+    inline class C3(val x: Int)
     inner <!INLINE_CLASS_NOT_TOP_LEVEL!>inline<!> class C31(val x: Int)
 }
 
diff --git a/compiler/testData/diagnostics/tests/valueClasses/valueClassDeclarationCheck.fir.kt b/compiler/testData/diagnostics/tests/valueClasses/valueClassDeclarationCheck.fir.kt
index e1a337da762..f6dd33b95f1 100644
--- a/compiler/testData/diagnostics/tests/valueClasses/valueClassDeclarationCheck.fir.kt
+++ b/compiler/testData/diagnostics/tests/valueClasses/valueClassDeclarationCheck.fir.kt
@@ -31,16 +31,16 @@ value class A9(final val x: Int)
 class B1 {
     companion object {
         @JvmInline
-        <!INLINE_CLASS_NOT_TOP_LEVEL!>value<!> class C1(val x: Int)
+        value class C1(val x: Int)
     }
 
     @JvmInline
-    <!INLINE_CLASS_NOT_TOP_LEVEL!>value<!> class C2(val x: Int)
+    value class C2(val x: Int)
 }
 
 object B2 {
     @JvmInline
-    <!INLINE_CLASS_NOT_TOP_LEVEL!>value<!> class C3(val x: Int)
+    value class C3(val x: Int)
 }
 
 @JvmInline