diff --git a/compiler/backend/src/org/jetbrains/kotlin/codegen/ClosureCodegen.java b/compiler/backend/src/org/jetbrains/kotlin/codegen/ClosureCodegen.java
index 225df0cf39b..ee31db560c0 100644
--- a/compiler/backend/src/org/jetbrains/kotlin/codegen/ClosureCodegen.java
+++ b/compiler/backend/src/org/jetbrains/kotlin/codegen/ClosureCodegen.java
@@ -63,6 +63,7 @@ import static org.jetbrains.kotlin.codegen.ExpressionCodegen.generateClassLitera
 import static org.jetbrains.kotlin.codegen.JvmCodegenUtil.isConst;
 import static org.jetbrains.kotlin.codegen.binding.CodegenBinding.CLOSURE;
 import static org.jetbrains.kotlin.codegen.binding.CodegenBinding.asmTypeForAnonymousClass;
+import static org.jetbrains.kotlin.codegen.serialization.JvmSerializationBindings.METHOD_FOR_FUNCTION;
 import static org.jetbrains.kotlin.resolve.jvm.AsmTypes.*;
 import static org.jetbrains.kotlin.resolve.jvm.diagnostics.JvmDeclarationOrigin.NO_ORIGIN;
 import static org.jetbrains.org.objectweb.asm.Opcodes.*;
@@ -228,10 +229,15 @@ public class ClosureCodegen extends MemberCodegen<KtElement> {
 
     @Override
     protected void generateKotlinMetadataAnnotation() {
+        FunctionDescriptor freeLambdaDescriptor = createFreeLambdaDescriptor(funDescriptor);
+        Method method = v.getSerializationBindings().get(METHOD_FOR_FUNCTION, funDescriptor);
+        assert method != null : "No method for " + funDescriptor;
+        v.getSerializationBindings().put(METHOD_FOR_FUNCTION, freeLambdaDescriptor, method);
+
         final DescriptorSerializer serializer =
                 DescriptorSerializer.createForLambda(new JvmSerializerExtension(v.getSerializationBindings(), state));
 
-        final ProtoBuf.Function functionProto = serializer.functionProto(funDescriptor).build();
+        final ProtoBuf.Function functionProto = serializer.functionProto(freeLambdaDescriptor).build();
 
         WriteAnnotationUtilKt.writeKotlinMetadata(v, KotlinClassHeader.Kind.SYNTHETIC_CLASS, new Function1<AnnotationVisitor, Unit>() {
             @Override
@@ -242,6 +248,30 @@ public class ClosureCodegen extends MemberCodegen<KtElement> {
         });
     }
 
+    /**
+     * Given a function descriptor, creates another function descriptor with type parameters copied from outer context(s).
+     * This is needed because once we're serializing this to a proto, there's no place to store information about external type parameters.
+     */
+    @NotNull
+    private static FunctionDescriptor createFreeLambdaDescriptor(@NotNull FunctionDescriptor descriptor) {
+        FunctionDescriptor.CopyBuilder<? extends FunctionDescriptor> builder = descriptor.newCopyBuilder();
+        List<TypeParameterDescriptor> typeParameters = new ArrayList<TypeParameterDescriptor>(0);
+        builder.setTypeParameters(typeParameters);
+
+        DeclarationDescriptor container = descriptor.getContainingDeclaration();
+        while (container != null) {
+            if (container instanceof ClassDescriptor) {
+                typeParameters.addAll(((ClassDescriptor) container).getDeclaredTypeParameters());
+            }
+            else if (container instanceof CallableDescriptor && !(container instanceof ConstructorDescriptor)) {
+                typeParameters.addAll(((CallableDescriptor) container).getTypeParameters());
+            }
+            container = container.getContainingDeclaration();
+        }
+
+        return typeParameters.isEmpty() ? descriptor : builder.build();
+    }
+
     @Override
     protected void done() {
         writeOuterClassAndEnclosingMethod();
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/resolve/lazy/descriptors/LazyClassDescriptor.java b/compiler/frontend/src/org/jetbrains/kotlin/resolve/lazy/descriptors/LazyClassDescriptor.java
index 4644e40ccbc..d144f10d240 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/resolve/lazy/descriptors/LazyClassDescriptor.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/resolve/lazy/descriptors/LazyClassDescriptor.java
@@ -273,6 +273,11 @@ public class LazyClassDescriptor extends ClassDescriptorBase implements ClassDes
                 LazyClassDescriptor.this, null, Annotations.Companion.getEMPTY(), Name.special("<init-blocks>"),
                 CallableMemberDescriptor.Kind.SYNTHESIZED, SourceElement.NO_SOURCE
         ) {
+            {
+                initialize(null, null, Collections.<TypeParameterDescriptor>emptyList(), Collections.<ValueParameterDescriptor>emptyList(),
+                           null, Modality.FINAL, Visibilities.PRIVATE);
+            }
+
             @NotNull
             @Override
             protected FunctionDescriptorImpl createSubstitutedCopy(
diff --git a/compiler/testData/codegen/box/functions/functionNtoStringGeneric.kt b/compiler/testData/codegen/box/functions/functionNtoStringGeneric.kt
new file mode 100644
index 00000000000..0ce31a33df0
--- /dev/null
+++ b/compiler/testData/codegen/box/functions/functionNtoStringGeneric.kt
@@ -0,0 +1,23 @@
+// WITH_REFLECT
+
+import kotlin.test.assertEquals
+
+fun <T> bar(): String {
+    return { t: T -> t }.toString()
+}
+
+class Baz<T, V> {
+    fun <V : T> baz(v: V): String {
+        return (fun(t: List<T>): V = v).toString()
+    }
+}
+
+open class Foo<T, U : List<T>>(val lambda: (T) -> U)
+class Bar<T> : Foo<T, List<T>>({ listOf(it) })
+
+fun box(): String {
+    assertEquals("(T) -> T", bar<String>())
+    assertEquals("(kotlin.collections.List<T>) -> V", Baz<String, Int>().baz<String>(""))
+    assertEquals("(T) -> kotlin.collections.List<T>", Bar<Int>().lambda.toString())
+    return "OK"
+}
diff --git a/compiler/tests/org/jetbrains/kotlin/codegen/BlackBoxCodegenTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/codegen/BlackBoxCodegenTestGenerated.java
index d32a9e8bd34..86e5c3b2609 100644
--- a/compiler/tests/org/jetbrains/kotlin/codegen/BlackBoxCodegenTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/codegen/BlackBoxCodegenTestGenerated.java
@@ -6469,6 +6469,12 @@ public class BlackBoxCodegenTestGenerated extends AbstractBlackBoxCodegenTest {
             doTest(fileName);
         }
 
+        @TestMetadata("functionNtoStringGeneric.kt")
+        public void testFunctionNtoStringGeneric() throws Exception {
+            String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/codegen/box/functions/functionNtoStringGeneric.kt");
+            doTest(fileName);
+        }
+
         @TestMetadata("functionNtoStringNoReflect.kt")
         public void testFunctionNtoStringNoReflect() throws Exception {
             String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/codegen/box/functions/functionNtoStringNoReflect.kt");
diff --git a/core/descriptors/src/org/jetbrains/kotlin/descriptors/impl/FunctionDescriptorImpl.java b/core/descriptors/src/org/jetbrains/kotlin/descriptors/impl/FunctionDescriptorImpl.java
index 81435e03cee..44e3a0a4660 100644
--- a/core/descriptors/src/org/jetbrains/kotlin/descriptors/impl/FunctionDescriptorImpl.java
+++ b/core/descriptors/src/org/jetbrains/kotlin/descriptors/impl/FunctionDescriptorImpl.java
@@ -563,21 +563,14 @@ public abstract class FunctionDescriptorImpl extends DeclarationDescriptorNonRoo
                 configuration.newOwner, configuration.original, configuration.kind, configuration.name, resultAnnotations,
                 getSourceToUseForCopy(configuration.preserveSourceElement, configuration.original, configuration.sourceElement));
 
-        List<TypeParameterDescriptor> substitutedTypeParameters;
-        final TypeSubstitutor substitutor;
+        List<TypeParameterDescriptor> unsubstitutedTypeParameters =
+                configuration.newTypeParameters == null ? getTypeParameters() : configuration.newTypeParameters;
 
-        if (configuration.newTypeParameters == null) {
-            List<TypeParameterDescriptor> originalTypeParameters = getTypeParameters();
-            substitutedTypeParameters = new ArrayList<TypeParameterDescriptor>(originalTypeParameters.size());
-            substitutor = DescriptorSubstitutor.substituteTypeParameters(
-                    originalTypeParameters, configuration.substitution, substitutedDescriptor, substitutedTypeParameters
-            );
-        }
-        else {
-            // They should be already substituted
-            substitutedTypeParameters = configuration.newTypeParameters;
-            substitutor = configuration.substitution.buildSubstitutor();
-        }
+        List<TypeParameterDescriptor> substitutedTypeParameters =
+                new ArrayList<TypeParameterDescriptor>(unsubstitutedTypeParameters.size());
+        final TypeSubstitutor substitutor = DescriptorSubstitutor.substituteTypeParameters(
+                unsubstitutedTypeParameters, configuration.substitution, substitutedDescriptor, substitutedTypeParameters
+        );
 
         KotlinType substitutedReceiverParameterType = null;
         if (configuration.newExtensionReceiverParameterType != null) {
diff --git a/core/reflection.jvm/src/kotlin/reflect/jvm/reflectLambda.kt b/core/reflection.jvm/src/kotlin/reflect/jvm/reflectLambda.kt
index 78b3d7b259f..c24f483d36b 100644
--- a/core/reflection.jvm/src/kotlin/reflect/jvm/reflectLambda.kt
+++ b/core/reflection.jvm/src/kotlin/reflect/jvm/reflectLambda.kt
@@ -45,8 +45,8 @@ fun <R> Function<R>.reflect(): KFunction<R>? {
     val proto = ProtoBuf.Function.parseFrom(input, JvmProtoBufUtil.EXTENSION_REGISTRY)
     val moduleData = javaClass.getOrCreateModule()
     val context = DeserializationContext(
-            moduleData.deserialization, nameResolver, moduleData.module,
-            typeTable = TypeTable(proto.typeTable), containerSource = null, parentTypeDeserializer = null, typeParameters = listOf()
+            moduleData.deserialization, nameResolver, moduleData.module, TypeTable(proto.typeTable),
+            containerSource = null, parentTypeDeserializer = null, typeParameters = proto.typeParameterList
     )
     val descriptor = MemberDeserializer(context).loadFunction(proto)
     @Suppress("UNCHECKED_CAST")