diff --git a/compiler/frontend.java/src/org/jetbrains/kotlin/resolve/jvm/checkers/declarationCheckers.kt b/compiler/frontend.java/src/org/jetbrains/kotlin/resolve/jvm/checkers/declarationCheckers.kt
index d9744c56b74..cfe714713c4 100644
--- a/compiler/frontend.java/src/org/jetbrains/kotlin/resolve/jvm/checkers/declarationCheckers.kt
+++ b/compiler/frontend.java/src/org/jetbrains/kotlin/resolve/jvm/checkers/declarationCheckers.kt
@@ -45,7 +45,7 @@ class LocalFunInlineChecker : SimpleDeclarationChecker {
             declaration is KtNamedFunction &&
             descriptor is FunctionDescriptor &&
             descriptor.visibility == Visibilities.LOCAL) {
-            diagnosticHolder.report(Errors.NOT_YET_SUPPORTED_IN_INLINE.on(declaration, declaration, descriptor))
+            diagnosticHolder.report(Errors.NOT_YET_SUPPORTED_IN_INLINE.on(declaration, "Local inline functions"))
         }
     }
 }
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
index a95847df0bd..cf94aefae56 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
@@ -937,7 +937,7 @@ public interface Errors {
     DiagnosticFactory2<KtElement, DeclarationDescriptor, DeclarationDescriptor> NON_PUBLIC_CALL_FROM_PUBLIC_INLINE = DiagnosticFactory2.create(ERROR, CALL_ELEMENT);
     DiagnosticFactory2<KtElement, DeclarationDescriptor, DeclarationDescriptor> PRIVATE_CLASS_MEMBER_FROM_INLINE = DiagnosticFactory2.create(ERROR, CALL_ELEMENT);
     DiagnosticFactory1<KtElement, KtElement> NON_LOCAL_RETURN_NOT_ALLOWED = DiagnosticFactory1.create(ERROR, CALL_ELEMENT);
-    DiagnosticFactory2<KtElement, KtNamedDeclaration, DeclarationDescriptor> NOT_YET_SUPPORTED_IN_INLINE = DiagnosticFactory2.create(ERROR);
+    DiagnosticFactory1<KtDeclaration, String> NOT_YET_SUPPORTED_IN_INLINE = DiagnosticFactory1.create(ERROR, NOT_SUPPORTED_IN_INLINE_MOST_RELEVANT);
     DiagnosticFactory1<PsiElement, DeclarationDescriptor> NOTHING_TO_INLINE = DiagnosticFactory1.create(WARNING);
     DiagnosticFactory2<KtElement, KtExpression, DeclarationDescriptor> USAGE_IS_NOT_INLINABLE = DiagnosticFactory2.create(ERROR);
     DiagnosticFactory2<KtElement, KtElement, DeclarationDescriptor> NULLABLE_INLINE_PARAMETER = DiagnosticFactory2.create(ERROR);
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/PositioningStrategies.kt b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/PositioningStrategies.kt
index cb9dc99cf46..65e664099be 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/PositioningStrategies.kt
+++ b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/PositioningStrategies.kt
@@ -184,6 +184,25 @@ object PositioningStrategies {
         }
     }
 
+    @JvmField val NOT_SUPPORTED_IN_INLINE_MOST_RELEVANT: PositioningStrategy<KtDeclaration> = object : PositioningStrategy<KtDeclaration>() {
+        override fun mark(element: KtDeclaration): List<TextRange> =
+                markElement(
+                        when (element) {
+                            is KtClassOrObject ->
+                                element.getDeclarationKeyword() ?:
+                                element.nameIdentifier ?:
+                                element
+
+                            is KtNamedFunction ->
+                                element.modifierList?.getModifier(KtTokens.INLINE_KEYWORD) ?:
+                                element.funKeyword ?:
+                                element
+
+                            else -> element
+                        }
+                )
+    }
+
     @JvmField val TYPE_PARAMETERS_OR_DECLARATION_SIGNATURE: PositioningStrategy<KtDeclaration> = object : PositioningStrategy<KtDeclaration>() {
         override fun mark(element: KtDeclaration): List<TextRange> {
             if (element is KtTypeParameterListOwner) {
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java
index 7bd6b5df150..a0ee7da7873 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java
@@ -851,7 +851,7 @@ public class DefaultErrorMessages {
         //Inline
         MAP.put(NON_PUBLIC_CALL_FROM_PUBLIC_INLINE, "Public-API inline function cannot access non-public-API ''{0}''", SHORT_NAMES_IN_TYPES, SHORT_NAMES_IN_TYPES);
         MAP.put(PRIVATE_CLASS_MEMBER_FROM_INLINE, "Non-private inline function cannot access members of private classes: ''{0}''", SHORT_NAMES_IN_TYPES, SHORT_NAMES_IN_TYPES);
-        MAP.put(NOT_YET_SUPPORTED_IN_INLINE, "''{0}'' construction is not yet supported in inline functions", ELEMENT_TEXT, SHORT_NAMES_IN_TYPES);
+        MAP.put(NOT_YET_SUPPORTED_IN_INLINE, "{0} are not yet supported in inline functions", STRING);
         MAP.put(DECLARATION_CANT_BE_INLINED, "'inline' modifier is not allowed on virtual members. Only private or final members can be inlined");
         MAP.put(OVERRIDE_BY_INLINE, "Override by an inline function");
         MAP.put(REIFIED_TYPE_PARAMETER_IN_OVERRIDE, "Override by a function with reified type parameter");
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/psi/KtClassOrObject.kt b/compiler/frontend/src/org/jetbrains/kotlin/psi/KtClassOrObject.kt
index 5a44bb3ad00..4474e7350db 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/psi/KtClassOrObject.kt
+++ b/compiler/frontend/src/org/jetbrains/kotlin/psi/KtClassOrObject.kt
@@ -23,6 +23,7 @@ import com.intellij.psi.PsiElement
 import com.intellij.psi.PsiWhiteSpace
 import com.intellij.psi.impl.CheckUtil
 import com.intellij.psi.stubs.IStubElementType
+import com.intellij.psi.tree.TokenSet
 import com.intellij.psi.util.PsiTreeUtil
 import org.jetbrains.kotlin.lexer.KtTokens
 import org.jetbrains.kotlin.psi.stubs.KotlinClassOrObjectStub
@@ -110,6 +111,11 @@ abstract class KtClassOrObject :
 
     fun isAnnotation(): Boolean = hasModifier(KtTokens.ANNOTATION_KEYWORD)
 
+    fun getDeclarationKeyword(): PsiElement? =
+            findChildByType(TokenSet.create(
+                    KtTokens.CLASS_KEYWORD, KtTokens.INTERFACE_KEYWORD, KtTokens.OBJECT_KEYWORD
+            ))
+
     override fun delete() {
         CheckUtil.checkWritable(this)
 
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/resolve/inline/InlineAnalyzerExtension.kt b/compiler/frontend/src/org/jetbrains/kotlin/resolve/inline/InlineAnalyzerExtension.kt
index b19253d92bb..fdf6348fd07 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/resolve/inline/InlineAnalyzerExtension.kt
+++ b/compiler/frontend/src/org/jetbrains/kotlin/resolve/inline/InlineAnalyzerExtension.kt
@@ -67,7 +67,7 @@ class InlineAnalyzerExtension(
             }
 
             override fun visitClass(klass: KtClass) {
-                trace.report(Errors.NOT_YET_SUPPORTED_IN_INLINE.on(klass, klass, descriptor))
+                trace.report(Errors.NOT_YET_SUPPORTED_IN_INLINE.on(klass, "Local classes"))
             }
 
             override fun visitNamedFunction(function: KtNamedFunction) {
@@ -75,7 +75,7 @@ class InlineAnalyzerExtension(
                     super.visitNamedFunction(function)
                 }
                 else {
-                    trace.report(Errors.NOT_YET_SUPPORTED_IN_INLINE.on(function, function, descriptor))
+                    trace.report(Errors.NOT_YET_SUPPORTED_IN_INLINE.on(function, "Local functions"))
                 }
             }
         }
@@ -95,7 +95,7 @@ class InlineAnalyzerExtension(
                 val inheritDefaultValues = !parameter.declaresDefaultValue()
                 if (checkInlinableParameter(parameter, ktParameter, functionDescriptor, null) || inheritDefaultValues) {
                     if (inheritDefaultValues || !languageVersionSettings.supportsFeature(LanguageFeature.InlineDefaultFunctionalParameters)) {
-                        trace.report(Errors.NOT_YET_SUPPORTED_IN_INLINE.on(ktParameter, ktParameter, functionDescriptor))
+                        trace.report(Errors.NOT_YET_SUPPORTED_IN_INLINE.on(ktParameter, "Functional parameters with inherited default values"))
                     }
                     else {
                         checkDefaultValue(trace, parameter, ktParameter)
diff --git a/compiler/testData/diagnostics/tests/controlFlowAnalysis/kt10823.kt b/compiler/testData/diagnostics/tests/controlFlowAnalysis/kt10823.kt
index 219b9c33f24..0c003eb202f 100644
--- a/compiler/testData/diagnostics/tests/controlFlowAnalysis/kt10823.kt
+++ b/compiler/testData/diagnostics/tests/controlFlowAnalysis/kt10823.kt
@@ -17,9 +17,9 @@ fun find(): Any? {
 }
 
 fun find4(): Any? {
-    <!NOT_YET_SUPPORTED_IN_INLINE!>inline fun visit(element: Any) {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>inline<!> fun visit(element: Any) {
         <!RETURN_NOT_ALLOWED!>return@find4<!> element
-    }<!>
+    }
     return null
 }
 
diff --git a/compiler/testData/diagnostics/tests/inline/localFun.kt b/compiler/testData/diagnostics/tests/inline/localFun.kt
index 9b121f25570..7746fb034ab 100644
--- a/compiler/testData/diagnostics/tests/inline/localFun.kt
+++ b/compiler/testData/diagnostics/tests/inline/localFun.kt
@@ -1,4 +1,4 @@
 fun main(args: Array<String>) {
-    <!NOT_YET_SUPPORTED_IN_INLINE!>inline fun a(){
-    }<!>
+    <!NOT_YET_SUPPORTED_IN_INLINE!>inline<!> fun a(){
+    }
 }
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/inline/messagesForUnsupportedInInline.kt b/compiler/testData/diagnostics/tests/inline/messagesForUnsupportedInInline.kt
new file mode 100644
index 00000000000..3f4e718028e
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inline/messagesForUnsupportedInInline.kt
@@ -0,0 +1,18 @@
+<!NOTHING_TO_INLINE!>inline<!> fun inlineFun() {
+    <!NOT_YET_SUPPORTED_IN_INLINE(Local functions)!>fun<!> localFun() {}
+    <!NOT_YET_SUPPORTED_IN_INLINE(Local classes)!>class<!> LocalClass {}
+}
+
+fun outerFun() {
+    <!NOT_YET_SUPPORTED_IN_INLINE(Local inline functions)!>inline<!> fun localInlineFun() {}
+}
+
+abstract class Base {
+    abstract fun withDefault(f: () -> Unit = { -> })
+}
+
+class Derived : Base() {
+    <!OVERRIDE_BY_INLINE!>override final inline fun withDefault(
+            <!NOT_YET_SUPPORTED_IN_INLINE(Functional parameters with inherited default values)!>f: () -> Unit<!>
+    )<!> {}
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/inline/messagesForUnsupportedInInline.txt b/compiler/testData/diagnostics/tests/inline/messagesForUnsupportedInInline.txt
new file mode 100644
index 00000000000..b4b0f8fae87
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inline/messagesForUnsupportedInInline.txt
@@ -0,0 +1,20 @@
+package
+
+public inline fun inlineFun(): kotlin.Unit
+public fun outerFun(): kotlin.Unit
+
+public abstract class Base {
+    public constructor Base()
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+    public abstract fun withDefault(/*0*/ f: () -> kotlin.Unit = ...): kotlin.Unit
+}
+
+public final class Derived : Base {
+    public constructor Derived()
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+    public final inline override /*1*/ fun withDefault(/*0*/ f: () -> kotlin.Unit = ...): kotlin.Unit
+}
diff --git a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/localFun.kt b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/localFun.kt
index 6a5e5ecaa4f..412a635203c 100644
--- a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/localFun.kt
+++ b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/localFun.kt
@@ -1,15 +1,15 @@
 // !DIAGNOSTICS: -UNUSED_EXPRESSION -UNUSED_PARAMETER -UNUSED_VARIABLE -NOTHING_TO_INLINE
 
 inline fun <R> inlineFunOnlyLocal(crossinline p: () -> R) {
-    <!NOT_YET_SUPPORTED_IN_INLINE!>fun a() {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>fun<!> a() {
         val z = p()
-    }<!>
+    }
     a()
 }
 
 inline fun <R> inlineFun(p: () -> R) {
-    <!NOT_YET_SUPPORTED_IN_INLINE!>fun a() {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>fun<!> a() {
         <!NON_LOCAL_RETURN_NOT_ALLOWED!>p<!>()
-    }<!>
+    }
     a()
 }
diff --git a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/nonInlinedClass.kt b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/nonInlinedClass.kt
index 1ce9497c5f1..065f8daf4bf 100644
--- a/compiler/testData/diagnostics/tests/inline/nonLocalReturns/nonInlinedClass.kt
+++ b/compiler/testData/diagnostics/tests/inline/nonLocalReturns/nonInlinedClass.kt
@@ -1,23 +1,23 @@
 // !DIAGNOSTICS: -UNUSED_EXPRESSION -UNUSED_PARAMETER -UNUSED_VARIABLE -NOTHING_TO_INLINE
 
 inline fun <R> inlineFunOnlyLocal(crossinline p: () -> R) {
-    <!NOT_YET_SUPPORTED_IN_INLINE!>class A {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>class<!> A {
 
         val z = p()
 
         fun a() {
             p()
         }
-    }<!>
+    }
 }
 
 inline fun <R> inlineFun(p: () -> R) {
-    <!NOT_YET_SUPPORTED_IN_INLINE!>class A {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>class<!> A {
 
         val z = <!NON_LOCAL_RETURN_NOT_ALLOWED!>p<!>()
 
         fun a() {
             <!NON_LOCAL_RETURN_NOT_ALLOWED!>p<!>()
         }
-    }<!>
+    }
 }
diff --git a/compiler/testData/diagnostics/tests/inline/nonPublicMember/localClass2.kt b/compiler/testData/diagnostics/tests/inline/nonPublicMember/localClass2.kt
index c77f9cbccee..182426e82ac 100644
--- a/compiler/testData/diagnostics/tests/inline/nonPublicMember/localClass2.kt
+++ b/compiler/testData/diagnostics/tests/inline/nonPublicMember/localClass2.kt
@@ -6,8 +6,8 @@ public fun test() {
         }
     }
 
-    <!NOT_YET_SUPPORTED_IN_INLINE!>inline fun localFun2() {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>inline<!> fun localFun2() {
         Z().localFun()
-    }<!>
+    }
 
 }
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/inline/nonPublicMember/localFun.kt b/compiler/testData/diagnostics/tests/inline/nonPublicMember/localFun.kt
index ccb0c0e7e93..25e80fb1e92 100644
--- a/compiler/testData/diagnostics/tests/inline/nonPublicMember/localFun.kt
+++ b/compiler/testData/diagnostics/tests/inline/nonPublicMember/localFun.kt
@@ -4,8 +4,8 @@ public fun test() {
 
     }
 
-    <!NOT_YET_SUPPORTED_IN_INLINE!>inline fun localFun2() {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>inline<!> fun localFun2() {
         localFun()
-    }<!>
+    }
 
 }
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/inline/property/unsupportedConstruction.kt b/compiler/testData/diagnostics/tests/inline/property/unsupportedConstruction.kt
index 4c0037fd291..31e0d73998b 100644
--- a/compiler/testData/diagnostics/tests/inline/property/unsupportedConstruction.kt
+++ b/compiler/testData/diagnostics/tests/inline/property/unsupportedConstruction.kt
@@ -3,18 +3,18 @@
 inline val z: Int
     get()  {
 
-    <!NOT_YET_SUPPORTED_IN_INLINE!>class A {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>class<!> A {
         fun a() {
            class AInner {}
         }
-    }<!>
+    }
 
     <!LOCAL_OBJECT_NOT_ALLOWED!>object B<!>{
         <!LOCAL_OBJECT_NOT_ALLOWED!>object BInner<!> {}
     }
 
-    <!NOT_YET_SUPPORTED_IN_INLINE!>fun local() {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>fun<!> local() {
         fun localInner() {}
-    }<!>
+    }
     return 1
 }
diff --git a/compiler/testData/diagnostics/tests/inline/unsupportedConstruction.kt b/compiler/testData/diagnostics/tests/inline/unsupportedConstruction.kt
index 0e9014ba2d9..4b74c687b86 100644
--- a/compiler/testData/diagnostics/tests/inline/unsupportedConstruction.kt
+++ b/compiler/testData/diagnostics/tests/inline/unsupportedConstruction.kt
@@ -3,19 +3,19 @@
 
 inline fun unsupported() {
 
-    <!NOT_YET_SUPPORTED_IN_INLINE!>class A {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>class<!> A {
         fun a() {
            class AInner {}
         }
-    }<!>
+    }
 
     <!LOCAL_OBJECT_NOT_ALLOWED!>object B<!>{
         <!LOCAL_OBJECT_NOT_ALLOWED!>object BInner<!> {}
     }
 
-    <!NOT_YET_SUPPORTED_IN_INLINE!>fun local() {
+    <!NOT_YET_SUPPORTED_IN_INLINE!>fun<!> local() {
         fun localInner() {}
-    }<!>
+    }
 }
 
 inline fun unsupportedDefault(<!NOT_YET_SUPPORTED_IN_INLINE!>s : ()->Unit = {}<!>) {
diff --git a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
index e501f29f573..9c8f883c9d2 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
@@ -11353,6 +11353,12 @@ public class DiagnosticsTestGenerated extends AbstractDiagnosticsTest {
                 doTest(fileName);
             }
 
+            @TestMetadata("messagesForUnsupportedInInline.kt")
+            public void testMessagesForUnsupportedInInline() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/inline/messagesForUnsupportedInInline.kt");
+                doTest(fileName);
+            }
+
             @TestMetadata("nonVirtualMembersWithInline.kt")
             public void testNonVirtualMembersWithInline() throws Exception {
                 String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/inline/nonVirtualMembersWithInline.kt");
diff --git a/compiler/tests/org/jetbrains/kotlin/checkers/javac/DiagnosticsUsingJavacTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/javac/DiagnosticsUsingJavacTestGenerated.java
index 2d9f3e86c19..90893a7d078 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/javac/DiagnosticsUsingJavacTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/javac/DiagnosticsUsingJavacTestGenerated.java
@@ -11353,6 +11353,12 @@ public class DiagnosticsUsingJavacTestGenerated extends AbstractDiagnosticsUsing
                 doTest(fileName);
             }
 
+            @TestMetadata("messagesForUnsupportedInInline.kt")
+            public void testMessagesForUnsupportedInInline() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/inline/messagesForUnsupportedInInline.kt");
+                doTest(fileName);
+            }
+
             @TestMetadata("nonVirtualMembersWithInline.kt")
             public void testNonVirtualMembersWithInline() throws Exception {
                 String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/inline/nonVirtualMembersWithInline.kt");