diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/cfg/JetControlFlowProcessor.java b/compiler/frontend/src/org/jetbrains/jet/lang/cfg/JetControlFlowProcessor.java
index 608ace76096..276c7c395f2 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/cfg/JetControlFlowProcessor.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/cfg/JetControlFlowProcessor.java
@@ -981,7 +981,17 @@ public class JetControlFlowProcessor {
                 generateInstructions(defaultValue);
                 builder.bindLabel(skipDefaultValue);
             }
-            generateInitializer(parameter, createSyntheticValue(parameter));
+            generateInitializer(parameter, computePseudoValueForParameter(parameter));
+        }
+
+        @NotNull
+        private PseudoValue computePseudoValueForParameter(@NotNull JetParameter parameter) {
+            PseudoValue syntheticValue = createSyntheticValue(parameter);
+            PseudoValue defaultValue = builder.getBoundValue(parameter.getDefaultValue());
+            if (defaultValue == null) {
+                return syntheticValue;
+            }
+            return builder.merge(parameter, Lists.newArrayList(defaultValue, syntheticValue)).getOutputValue();
         }
 
         @Override
diff --git a/compiler/testData/cfg/functions/DefaultValuesForArguments.instructions b/compiler/testData/cfg/functions/DefaultValuesForArguments.instructions
index a42371f93ab..c7177b5ce53 100644
--- a/compiler/testData/cfg/functions/DefaultValuesForArguments.instructions
+++ b/compiler/testData/cfg/functions/DefaultValuesForArguments.instructions
@@ -1,5 +1,5 @@
 == foo ==
-fun foo(i: Int = 1) = i + 2
+fun foo(i: Int = 1, j: Int) = i + j
 ---------------------
 L0:
   1 <START>
@@ -8,11 +8,15 @@ L0:
     r(1) -> <v0>
 L2 [after default value for parameter i]:
     magic(i: Int = 1) -> <v1>                         PREV:[jmp?(L2 [after default value for parameter i]), r(1) -> <v0>]
-    w(i|<v1>)
-    r(i) -> <v2>
-    r(2) -> <v3>
-    mark(i + 2)
-    call(+, plus|<v2>, <v3>) -> <v4>
+    merge(i: Int = 1|<v0>, <v1>) -> <v2>
+    w(i|<v2>)
+    v(j: Int)
+    magic(j: Int) -> <v3>
+    w(j|<v3>)
+    r(i) -> <v4>
+    r(j) -> <v5>
+    mark(i + j)
+    call(+, plus|<v4>, <v5>) -> <v6>
 L1:
     <END>                                             NEXT:[<SINK>]
 error:
diff --git a/compiler/testData/cfg/functions/DefaultValuesForArguments.kt b/compiler/testData/cfg/functions/DefaultValuesForArguments.kt
index 3b6a8f9835c..29b4d4e0d46 100644
--- a/compiler/testData/cfg/functions/DefaultValuesForArguments.kt
+++ b/compiler/testData/cfg/functions/DefaultValuesForArguments.kt
@@ -1 +1 @@
-fun foo(i: Int = 1) = i + 2
\ No newline at end of file
+fun foo(i: Int = 1, j: Int) = i + j
\ No newline at end of file
diff --git a/compiler/testData/cfg/functions/DefaultValuesForArguments.values b/compiler/testData/cfg/functions/DefaultValuesForArguments.values
index 4c5426bd1d6..ce90d8c6d3c 100644
--- a/compiler/testData/cfg/functions/DefaultValuesForArguments.values
+++ b/compiler/testData/cfg/functions/DefaultValuesForArguments.values
@@ -1,8 +1,9 @@
 == foo ==
-fun foo(i: Int = 1) = i + 2
+fun foo(i: Int = 1, j: Int) = i + j
 ---------------------
-1       <v0>   NEW()          
-i       <v2>   NEW()          
-2       <v3>   NEW()          
-i + 2   <v4>   NEW(<v2>, <v3>)
+1            <v0>   NEW()          
+i: Int = 1   <v2>   NEW(<v0>, <v1>)
+i            <v4>   NEW()          
+j            <v5>   NEW()          
+i + j        <v6>   NEW(<v4>, <v5>)
 =====================