diff --git a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
index a2c6930aae3..b64de99c748 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
@@ -421,8 +421,6 @@ public interface Errors {
     DiagnosticFactory1<KtDeclaration, Collection<KotlinType>> AMBIGUOUS_ANONYMOUS_TYPE_INFERRED =
             DiagnosticFactory1.create(ERROR, DECLARATION_SIGNATURE);
 
-    DiagnosticFactory0<KtNamedDeclaration>
-            KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE = DiagnosticFactory0.create(ERROR, PositioningStrategies.DECLARATION_NAME);
     DiagnosticFactory1<KtNamedDeclaration, TypeParameterDescriptor>
             KCLASS_WITH_NULLABLE_TYPE_PARAMETER_IN_SIGNATURE = DiagnosticFactory1.create(ERROR, PositioningStrategies.DECLARATION_NAME);
 
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 abbcdb9aa1a..0feb8f11de0 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java
@@ -865,9 +865,8 @@ public class DefaultErrorMessages {
         MAP.put(DATA_CLASS_NOT_PROPERTY_PARAMETER, "Data class primary constructor must have only property (val / var) parameters");
 
         MAP.put(AMBIGUOUS_ANONYMOUS_TYPE_INFERRED, "Right-hand side has anonymous type. Please specify type explicitly", TO_STRING);
-        MAP.put(KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE, "Please specify type explicitly");
         MAP.put(KCLASS_WITH_NULLABLE_TYPE_PARAMETER_IN_SIGNATURE,
-                "Please add upper bound Any for type parameter ''{0}'' or specify return type explicitly", NAME);
+                "Declaration has an inconsistent return type. Please add upper bound Any for type parameter ''{0}'' or specify return type explicitly", NAME);
 
         MAP.put(EXTENSION_IN_CLASS_REFERENCE_NOT_ALLOWED,
                 "''{0}'' is a member and an extension at the same time. References to such elements are not allowed", NAME);
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/resolve/checkers/KClassWithIncorrectTypeArgumentChecker.kt b/compiler/frontend/src/org/jetbrains/kotlin/resolve/checkers/KClassWithIncorrectTypeArgumentChecker.kt
index 02439d8dd62..331cd573503 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/resolve/checkers/KClassWithIncorrectTypeArgumentChecker.kt
+++ b/compiler/frontend/src/org/jetbrains/kotlin/resolve/checkers/KClassWithIncorrectTypeArgumentChecker.kt
@@ -24,9 +24,9 @@ import org.jetbrains.kotlin.psi.KtCallableDeclaration
 import org.jetbrains.kotlin.psi.KtDeclaration
 import org.jetbrains.kotlin.resolve.BindingContext
 import org.jetbrains.kotlin.types.UnwrappedType
-import org.jetbrains.kotlin.types.checker.KotlinTypeChecker
 import org.jetbrains.kotlin.types.typeUtil.builtIns
 import org.jetbrains.kotlin.types.typeUtil.contains
+import org.jetbrains.kotlin.types.typeUtil.isSubtypeOf
 
 object KClassWithIncorrectTypeArgumentChecker : SimpleDeclarationChecker {
     override fun check(declaration: KtDeclaration, descriptor: DeclarationDescriptor, diagnosticHolder: DiagnosticSink, bindingContext: BindingContext) {
@@ -40,31 +40,27 @@ object KClassWithIncorrectTypeArgumentChecker : SimpleDeclarationChecker {
         val returnType = descriptor.returnType ?: return
 
         var typeParameterWithoutNotNullableUpperBound: TypeParameterDescriptor? = null
-        val thereIsBadKClassType = returnType.contains {
-            val kClassWithBadArgument = it.isKClassWithBadArgument()
+        returnType.contains { type ->
+            val kClassWithBadArgument = type.isKClassWithBadArgument()
             if (kClassWithBadArgument) {
-                it.arguments.singleOrNull()?.type?.constructor?.declarationDescriptor?.let {
+                type.arguments.singleOrNull()?.type?.constructor?.declarationDescriptor?.let {
                     if (it is TypeParameterDescriptor && it.containingDeclaration == descriptor) {
                         typeParameterWithoutNotNullableUpperBound = it
                     }
                 }
             }
-
             kClassWithBadArgument
         }
 
         if (typeParameterWithoutNotNullableUpperBound != null) {
             diagnosticHolder.report(Errors.KCLASS_WITH_NULLABLE_TYPE_PARAMETER_IN_SIGNATURE.on(declaration, typeParameterWithoutNotNullableUpperBound!!))
         }
-        else if (thereIsBadKClassType) {
-            diagnosticHolder.report(Errors.KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE.on(declaration))
-        }
     }
 
     private fun UnwrappedType.isKClassWithBadArgument(): Boolean {
         val argumentType = arguments.singleOrNull()?.let { if (it.isStarProjection) null else it.type.unwrap() } ?: return false
-        val klass = (constructor.declarationDescriptor as? ClassDescriptor) ?: return false
+        val klass = constructor.declarationDescriptor as? ClassDescriptor ?: return false
 
-        return KotlinBuiltIns.isKClass(klass) && !KotlinTypeChecker.DEFAULT.isSubtypeOf(argumentType, argumentType.builtIns.anyType)
+        return KotlinBuiltIns.isKClass(klass) && !argumentType.isSubtypeOf(argumentType.builtIns.anyType)
     }
-}
\ No newline at end of file
+}
diff --git a/compiler/testData/diagnostics/tests/callableReference/bound/reservedExpressionSyntax.kt b/compiler/testData/diagnostics/tests/callableReference/bound/reservedExpressionSyntax.kt
index 98cc6674839..b16c984c0f8 100644
--- a/compiler/testData/diagnostics/tests/callableReference/bound/reservedExpressionSyntax.kt
+++ b/compiler/testData/diagnostics/tests/callableReference/bound/reservedExpressionSyntax.kt
@@ -23,8 +23,8 @@ class Test {
     fun <T> List<T>.testCallable4(): () -> Unit = <!RESERVED_SYNTAX_IN_CALLABLE_REFERENCE_LHS!>b<T><!>?::<!UNSAFE_CALL!>foo<!>
 
     fun <T> List<T>.testClassLiteral1() = <!RESERVED_SYNTAX_IN_CALLABLE_REFERENCE_LHS!>a<T><!>::class
-    fun <T> List<T>.<!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>testClassLiteral2<!>() = <!RESERVED_SYNTAX_IN_CALLABLE_REFERENCE_LHS, EXPRESSION_OF_NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>b<!>?::class
-    fun <T> List<T>.<!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>testClassLiteral3<!>() = <!RESERVED_SYNTAX_IN_CALLABLE_REFERENCE_LHS, EXPRESSION_OF_NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>b<T, Any><!>::class
+    fun <T> List<T>.testClassLiteral2() = <!RESERVED_SYNTAX_IN_CALLABLE_REFERENCE_LHS, EXPRESSION_OF_NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>b<!>?::class
+    fun <T> List<T>.testClassLiteral3() = <!RESERVED_SYNTAX_IN_CALLABLE_REFERENCE_LHS, EXPRESSION_OF_NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>b<T, Any><!>::class
 
     fun <T> List<T>.testUnresolved1() = <!UNRESOLVED_REFERENCE!>unresolved<!><T>::<!UNRESOLVED_REFERENCE_WRONG_RECEIVER!>foo<!>
     fun <T> List<T>.testUnresolved2() = <!RESERVED_SYNTAX_IN_CALLABLE_REFERENCE_LHS!>a<<!UNRESOLVED_REFERENCE!>unresolved<!>><!>::foo
diff --git a/compiler/testData/diagnostics/tests/classLiteral/nonClassesOnLHS.kt b/compiler/testData/diagnostics/tests/classLiteral/nonClassesOnLHS.kt
index dcd8c279f63..50ed119efa9 100644
--- a/compiler/testData/diagnostics/tests/classLiteral/nonClassesOnLHS.kt
+++ b/compiler/testData/diagnostics/tests/classLiteral/nonClassesOnLHS.kt
@@ -2,11 +2,11 @@
 
 class A
 
-val <!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>a1<!> = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>A?::class<!>
-val <!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>a2<!> = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>A??::class<!>
+val a1 = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>A?::class<!>
+val a2 = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>A??::class<!>
 
-val <!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>l1<!> = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>List<String>?::class<!>
-val <!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>l2<!> = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>List?::class<!>
+val l1 = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>List<String>?::class<!>
+val l2 = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>List?::class<!>
 
 fun <T : Any> foo() {
     val t1 = <!TYPE_PARAMETER_AS_REIFIED!>T::class<!>
diff --git a/compiler/testData/diagnostics/tests/classLiteral/typealiases.kt b/compiler/testData/diagnostics/tests/classLiteral/typealiases.kt
index 49690ecb927..68548f18d1a 100644
--- a/compiler/testData/diagnostics/tests/classLiteral/typealiases.kt
+++ b/compiler/testData/diagnostics/tests/classLiteral/typealiases.kt
@@ -2,7 +2,7 @@ typealias TString = String
 fun f1() = TString::class
 
 typealias TNullableString = String?
-fun <!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>f2<!>() = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>TNullableString::class<!>
+fun f2() = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>TNullableString::class<!>
 
 typealias TNullableTString = TString?
 typealias TTNullableTString = TNullableTString
diff --git a/compiler/testData/diagnostics/tests/declarationChecks/kClassInSignature.kt b/compiler/testData/diagnostics/tests/declarationChecks/kClassInSignature.kt
index 0abcf08f62c..d94409063a6 100644
--- a/compiler/testData/diagnostics/tests/declarationChecks/kClassInSignature.kt
+++ b/compiler/testData/diagnostics/tests/declarationChecks/kClassInSignature.kt
@@ -10,7 +10,7 @@ fun <T> <!KCLASS_WITH_NULLABLE_TYPE_PARAMETER_IN_SIGNATURE!>test5<!>() = listOf(
 
 fun <T> test6(): kotlin.reflect.KClass<<!UPPER_BOUND_VIOLATED!>T<!>> = T::class
 fun <T> test7(): kotlin.reflect.KClass<*> = T::class
-fun <!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>test8<!>() = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>String?::class<!>
+fun test8() = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>String?::class<!>
 
 fun <T> listOf(e: T): List<T> = null!!
 
diff --git a/compiler/testData/diagnostics/tests/sourceCompatibility/noBoundCallableReferences/boundClassLiteral.kt b/compiler/testData/diagnostics/tests/sourceCompatibility/noBoundCallableReferences/boundClassLiteral.kt
index 8ceca51749a..2981e23a27f 100644
--- a/compiler/testData/diagnostics/tests/sourceCompatibility/noBoundCallableReferences/boundClassLiteral.kt
+++ b/compiler/testData/diagnostics/tests/sourceCompatibility/noBoundCallableReferences/boundClassLiteral.kt
@@ -9,6 +9,6 @@ val ok3 = O::class
 
 
 val fail1 = <!UNSUPPORTED_FEATURE!>""<!>::class
-val <!KCLASS_WITH_NULLABLE_ARGUMENT_IN_SIGNATURE!>fail2<!> = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>String?::class<!>
+val fail2 = <!NULLABLE_TYPE_IN_CLASS_LITERAL_LHS!>String?::class<!>
 val fail3 = <!UNSUPPORTED_FEATURE!>(C)<!>::class
 val fail4 = <!UNSUPPORTED_FEATURE!>(C.Companion)<!>::class