diff --git a/idea/src/org/jetbrains/kotlin/idea/quickfix/createFromUsage/callableBuilder/typeUtils.kt b/idea/src/org/jetbrains/kotlin/idea/quickfix/createFromUsage/callableBuilder/typeUtils.kt
index e485db61244..5e1161dffcd 100644
--- a/idea/src/org/jetbrains/kotlin/idea/quickfix/createFromUsage/callableBuilder/typeUtils.kt
+++ b/idea/src/org/jetbrains/kotlin/idea/quickfix/createFromUsage/callableBuilder/typeUtils.kt
@@ -19,18 +19,18 @@ package org.jetbrains.kotlin.idea.quickfix.createFromUsage.callableBuilder
 import com.intellij.refactoring.psi.SearchUtils
 import org.jetbrains.kotlin.builtins.KotlinBuiltIns
 import org.jetbrains.kotlin.cfg.pseudocode.*
-import org.jetbrains.kotlin.descriptors.DeclarationDescriptor
 import org.jetbrains.kotlin.descriptors.ModuleDescriptor
 import org.jetbrains.kotlin.descriptors.TypeParameterDescriptor
 import org.jetbrains.kotlin.descriptors.VariableDescriptor
 import org.jetbrains.kotlin.idea.references.JetSimpleNameReference
+import org.jetbrains.kotlin.idea.util.IdeDescriptorRenderers
 import org.jetbrains.kotlin.incremental.components.NoLookupLocation
 import org.jetbrains.kotlin.name.FqName
+import org.jetbrains.kotlin.name.Name
 import org.jetbrains.kotlin.psi.*
 import org.jetbrains.kotlin.psi.psiUtil.getAssignmentByLHS
 import org.jetbrains.kotlin.psi.psiUtil.getNonStrictParentOfType
 import org.jetbrains.kotlin.resolve.BindingContext
-import org.jetbrains.kotlin.resolve.DescriptorUtils
 import org.jetbrains.kotlin.resolve.bindingContextUtil.isUsedAsStatement
 import org.jetbrains.kotlin.resolve.calls.smartcasts.DataFlowValueFactory
 import org.jetbrains.kotlin.resolve.descriptorUtil.resolveTopLevelClass
@@ -44,21 +44,36 @@ internal fun JetType.contains(inner: JetType): Boolean {
     return JetTypeChecker.DEFAULT.equalTypes(this, inner) || getArguments().any { inner in it.getType() }
 }
 
-private fun DeclarationDescriptor.render(
-        typeParameterNameMap: Map<TypeParameterDescriptor, String>,
-        fq: Boolean
-): String = when {
-    this is TypeParameterDescriptor -> typeParameterNameMap[this] ?: getName().asString()
-    fq -> DescriptorUtils.getFqName(this).asString()
-    else -> getName().asString()
-}
-
 private fun JetType.render(typeParameterNameMap: Map<TypeParameterDescriptor, String>, fq: Boolean): String {
-    val arguments = getArguments().map { if (it.isStarProjection) "*" else it.getType().render(typeParameterNameMap, fq) }
-    val typeString = getConstructor().getDeclarationDescriptor()!!.render(typeParameterNameMap, fq)
-    val typeArgumentString = if (arguments.isNotEmpty()) arguments.joinToString(", ", "<", ">") else ""
-    val nullifier = if (isMarkedNullable()) "?" else ""
-    return "$typeString$typeArgumentString$nullifier"
+    val substitution = typeParameterNameMap
+            .mapValues {
+                val name = Name.identifier(it.value)
+
+                val typeParameter = it.key
+
+                var wrappingTypeParameter: TypeParameterDescriptor
+                var wrappingTypeConstructor: TypeConstructor
+
+                wrappingTypeParameter = object : TypeParameterDescriptor by typeParameter {
+                    override fun getName() = name
+                    override fun getTypeConstructor() = wrappingTypeConstructor
+                }
+
+                wrappingTypeConstructor = object : TypeConstructor by typeParameter.typeConstructor {
+                    override fun getDeclarationDescriptor() = wrappingTypeParameter
+                }
+
+                val wrappingType = object : JetType by typeParameter.defaultType {
+                    override fun getConstructor() = wrappingTypeConstructor
+                }
+
+                TypeProjectionImpl(wrappingType)
+            }
+            .mapKeys { it.key.typeConstructor }
+
+    val typeToRender = TypeSubstitutor.create(substitution).substitute(this, Variance.INVARIANT)!!
+    val renderer = if (fq) IdeDescriptorRenderers.SOURCE_CODE else IdeDescriptorRenderers.SOURCE_CODE_SHORT_NAMES_IN_TYPES
+    return renderer.renderType(typeToRender)
 }
 
 internal fun JetType.renderShort(typeParameterNameMap: Map<TypeParameterDescriptor, String>) = render(typeParameterNameMap, false)
diff --git a/idea/testData/quickfix/createFromUsage/createClass/callExpression/callWithLambdaArg.kt.after b/idea/testData/quickfix/createFromUsage/createClass/callExpression/callWithLambdaArg.kt.after
index 5913a77ebdb..27eff900050 100644
--- a/idea/testData/quickfix/createFromUsage/createClass/callExpression/callWithLambdaArg.kt.after
+++ b/idea/testData/quickfix/createFromUsage/createClass/callExpression/callWithLambdaArg.kt.after
@@ -4,6 +4,6 @@ fun test() {
     val a = Foo(2, "2") { p: Int -> p + 1 }
 }
 
-class Foo(i: Int, s: String, function: Function1<Int, Int>) {
+class Foo(i: Int, s: String, function: (Int) -> Int) {
 
 }
diff --git a/idea/testData/quickfix/createFromUsage/createClass/callExpression/callWithLambdaArgOnly.kt.after b/idea/testData/quickfix/createFromUsage/createClass/callExpression/callWithLambdaArgOnly.kt.after
index 4141e375f11..8f06f94d84d 100644
--- a/idea/testData/quickfix/createFromUsage/createClass/callExpression/callWithLambdaArgOnly.kt.after
+++ b/idea/testData/quickfix/createFromUsage/createClass/callExpression/callWithLambdaArgOnly.kt.after
@@ -4,6 +4,6 @@ fun test() {
     val a = Foo { p: Int -> p + 1 }
 }
 
-class Foo(function: Function1<Int, Int>) {
+class Foo(function: (Int) -> Int) {
 
 }
diff --git a/idea/testData/quickfix/createFromUsage/createFunction/call/callWithLambdaArg.kt.after b/idea/testData/quickfix/createFromUsage/createFunction/call/callWithLambdaArg.kt.after
index 067ac187a8c..2239bfa74ae 100644
--- a/idea/testData/quickfix/createFromUsage/createFunction/call/callWithLambdaArg.kt.after
+++ b/idea/testData/quickfix/createFromUsage/createFunction/call/callWithLambdaArg.kt.after
@@ -1,7 +1,7 @@
 // "Create member function 'foo'" "true"
 
 class A<T>(val n: T) {
-    fun foo(t: T, s: String, function: Function1<T, T>): A<T> {
+    fun foo(t: T, s: String, function: (T) -> T): A<T> {
         throw UnsupportedOperationException("not implemented") //To change body of created functions use File | Settings | File Templates.
     }
 
diff --git a/idea/testData/quickfix/createFromUsage/createFunction/call/callWithLambdaArgOnly.kt.after b/idea/testData/quickfix/createFromUsage/createFunction/call/callWithLambdaArgOnly.kt.after
index 7a61c1307d9..553c9a35f21 100644
--- a/idea/testData/quickfix/createFromUsage/createFunction/call/callWithLambdaArgOnly.kt.after
+++ b/idea/testData/quickfix/createFromUsage/createFunction/call/callWithLambdaArgOnly.kt.after
@@ -1,7 +1,7 @@
 // "Create member function 'foo'" "true"
 
 class A<T>(val n: T) {
-    fun foo(function: Function1<T, T>): A<T> {
+    fun foo(function: (T) -> T): A<T> {
         throw UnsupportedOperationException("not implemented") //To change body of created functions use File | Settings | File Templates.
     }
 
diff --git a/idea/testData/quickfix/createFromUsage/createFunction/call/functionalType.kt b/idea/testData/quickfix/createFromUsage/createFunction/call/functionalType.kt
new file mode 100644
index 00000000000..e1699d8679c
--- /dev/null
+++ b/idea/testData/quickfix/createFromUsage/createFunction/call/functionalType.kt
@@ -0,0 +1,5 @@
+// "Create function 'bar'" "true"
+
+fun foo(block: (Int) -> String) {
+    <caret>bar(block)
+}
\ No newline at end of file
diff --git a/idea/testData/quickfix/createFromUsage/createFunction/call/functionalType.kt.after b/idea/testData/quickfix/createFromUsage/createFunction/call/functionalType.kt.after
new file mode 100644
index 00000000000..6511dbd18f6
--- /dev/null
+++ b/idea/testData/quickfix/createFromUsage/createFunction/call/functionalType.kt.after
@@ -0,0 +1,9 @@
+// "Create function 'bar'" "true"
+
+fun foo(block: (Int) -> String) {
+    bar(block)
+}
+
+fun bar(block: (Int) -> String) {
+    throw UnsupportedOperationException("not implemented") //To change body of created functions use File | Settings | File Templates.
+}
diff --git a/idea/tests/org/jetbrains/kotlin/idea/quickfix/QuickFixTestGenerated.java b/idea/tests/org/jetbrains/kotlin/idea/quickfix/QuickFixTestGenerated.java
index 83a9bae19ea..ddd8065a779 100644
--- a/idea/tests/org/jetbrains/kotlin/idea/quickfix/QuickFixTestGenerated.java
+++ b/idea/tests/org/jetbrains/kotlin/idea/quickfix/QuickFixTestGenerated.java
@@ -1784,6 +1784,12 @@ public class QuickFixTestGenerated extends AbstractQuickFixTest {
                     doTest(fileName);
                 }
 
+                @TestMetadata("functionalType.kt")
+                public void testFunctionalType() throws Exception {
+                    String fileName = JetTestUtils.navigationMetadata("idea/testData/quickfix/createFromUsage/createFunction/call/functionalType.kt");
+                    doTest(fileName);
+                }
+
                 @TestMetadata("inLambda.kt")
                 public void testInLambda() throws Exception {
                     String fileName = JetTestUtils.navigationMetadata("idea/testData/quickfix/createFromUsage/createFunction/call/inLambda.kt");