diff --git a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JavaTypeTransformer.java b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JavaTypeTransformer.java
index 99b75d91ffa..d8bcec9079a 100644
--- a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JavaTypeTransformer.java
+++ b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JavaTypeTransformer.java
@@ -24,6 +24,7 @@ import org.jetbrains.annotations.NotNull;
 import org.jetbrains.jet.lang.descriptors.ClassDescriptor;
 import org.jetbrains.jet.lang.descriptors.TypeParameterDescriptor;
 import org.jetbrains.jet.lang.descriptors.annotations.AnnotationDescriptor;
+import org.jetbrains.jet.lang.resolve.java.resolver.JavaAnnotationResolver;
 import org.jetbrains.jet.lang.resolve.name.FqName;
 import org.jetbrains.jet.lang.types.*;
 import org.jetbrains.jet.lang.types.checker.JetTypeChecker;
@@ -267,4 +268,18 @@ public class JavaTypeTransformer {
         return classType.isRaw() || argumentsExpected && classType.getParameterCount() == 0;
     }
 
+    public static TypeUsage adjustTypeUsageWithMutabilityAnnotations(PsiModifierListOwner owner, TypeUsage originalTypeUsage) {
+        EnumSet<TypeUsage> signatureTypeUsages =
+                EnumSet.of(TypeUsage.MEMBER_SIGNATURE_COVARIANT, TypeUsage.MEMBER_SIGNATURE_CONTRAVARIANT, TypeUsage.MEMBER_SIGNATURE_INVARIANT);
+        if (!signatureTypeUsages.contains(originalTypeUsage)) {
+            return originalTypeUsage;
+        }
+        if (JavaAnnotationResolver.findAnnotationWithExternal(owner, JvmAbi.JETBRAINS_MUTABLE_ANNOTATION.getFqName().getFqName()) != null) {
+            return TypeUsage.MEMBER_SIGNATURE_COVARIANT;
+        }
+        if (JavaAnnotationResolver.findAnnotationWithExternal(owner, JvmAbi.JETBRAINS_READONLY_ANNOTATION.getFqName().getFqName()) != null) {
+            return TypeUsage.MEMBER_SIGNATURE_CONTRAVARIANT;
+        }
+        return originalTypeUsage;
+    }
 }
diff --git a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JvmAbi.java b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JvmAbi.java
index 447c8696a6a..45cc7f668cf 100644
--- a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JvmAbi.java
+++ b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/JvmAbi.java
@@ -46,6 +46,11 @@ public class JvmAbi {
     public static final JvmClassName JETBRAINS_NOT_NULL_ANNOTATION =
             JvmClassName.byFqNameWithoutInnerClasses("org.jetbrains.annotations.NotNull");
 
+    public static final JvmClassName JETBRAINS_MUTABLE_ANNOTATION =
+            JvmClassName.byFqNameWithoutInnerClasses("org.jetbrains.annotations.Mutable");
+    public static final JvmClassName JETBRAINS_READONLY_ANNOTATION =
+            JvmClassName.byFqNameWithoutInnerClasses("org.jetbrains.annotations.ReadOnly");
+
     public static boolean isClassObjectFqName(@NotNull FqName fqName) {
         return fqName.lastSegmentIs(Name.identifier(CLASS_OBJECT_CLASS_NAME));
     }
diff --git a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/JavaFunctionResolver.java b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/JavaFunctionResolver.java
index d7c0cb5b2ed..f04277d464c 100644
--- a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/JavaFunctionResolver.java
+++ b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/JavaFunctionResolver.java
@@ -21,6 +21,7 @@ import com.google.common.collect.Sets;
 import com.intellij.openapi.diagnostic.Logger;
 import com.intellij.psi.PsiClass;
 import com.intellij.psi.PsiMethod;
+import com.intellij.psi.PsiModifierListOwner;
 import com.intellij.psi.PsiType;
 import com.intellij.psi.util.PsiFormatUtil;
 import org.jetbrains.annotations.NotNull;
@@ -45,10 +46,7 @@ import org.jetbrains.jet.lang.types.*;
 import org.jetbrains.jet.lang.types.checker.JetTypeChecker;
 
 import javax.inject.Inject;
-import java.util.Collections;
-import java.util.HashSet;
-import java.util.List;
-import java.util.Set;
+import java.util.*;
 
 import static org.jetbrains.jet.lang.resolve.DescriptorUtils.*;
 import static org.jetbrains.jet.lang.resolve.OverridingUtil.*;
@@ -143,7 +141,6 @@ public final class JavaFunctionResolver {
                                                                                                                        functionDescriptorImpl,
                                                                                                                        context);
 
-
         JavaDescriptorResolver.ValueParameterDescriptors valueParameterDescriptors = parameterResolver
                 .resolveParameterDescriptors(functionDescriptorImpl, method.getParameters(), methodTypeVariableResolver);
         JetType returnType = makeReturnType(returnPsiType, method, methodTypeVariableResolver);
@@ -414,8 +411,8 @@ public final class JavaFunctionResolver {
             transformedType = typeTransformer.transformToType(returnTypeFromAnnotation, typeVariableResolver);
         }
         else {
-            transformedType = typeTransformer.transformToType(
-                    returnType, TypeUsage.MEMBER_SIGNATURE_COVARIANT, typeVariableResolver);
+            TypeUsage typeUsage = JavaTypeTransformer.adjustTypeUsageWithMutabilityAnnotations(method.getPsiMethod(), TypeUsage.MEMBER_SIGNATURE_COVARIANT);
+            transformedType = typeTransformer.transformToType(returnType, typeUsage, typeVariableResolver);
         }
 
         if (JavaAnnotationResolver.findAnnotationWithExternal(method.getPsiMethod(), JvmAbi.JETBRAINS_NOT_NULL_ANNOTATION.getFqName().getFqName()) !=
diff --git a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/JavaValueParameterResolver.java b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/JavaValueParameterResolver.java
index 5c337ef3449..baa581a7593 100644
--- a/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/JavaValueParameterResolver.java
+++ b/compiler/frontend.java/src/org/jetbrains/jet/lang/resolve/java/resolver/JavaValueParameterResolver.java
@@ -71,8 +71,8 @@ public final class JavaValueParameterResolver {
             outType = getTypeTransformer().transformToType(typeFromAnnotation, typeVariableResolver);
         }
         else {
-            outType = getTypeTransformer().transformToType(psiType, TypeUsage.MEMBER_SIGNATURE_CONTRAVARIANT,
-                                                           typeVariableResolver);
+            TypeUsage typeUsage = JavaTypeTransformer.adjustTypeUsageWithMutabilityAnnotations(parameter.getPsiParameter(), TypeUsage.MEMBER_SIGNATURE_CONTRAVARIANT);
+            outType = getTypeTransformer().transformToType(psiType, typeUsage, typeVariableResolver);
         }
 
         JetType varargElementType;