diff --git a/idea/src/org/jetbrains/jet/plugin/refactoring/extractFunction/extractFunctionUtils.kt b/idea/src/org/jetbrains/jet/plugin/refactoring/extractFunction/extractFunctionUtils.kt
index 9e4442d0de8..a84dc7d0fdc 100644
--- a/idea/src/org/jetbrains/jet/plugin/refactoring/extractFunction/extractFunctionUtils.kt
+++ b/idea/src/org/jetbrains/jet/plugin/refactoring/extractFunction/extractFunctionUtils.kt
@@ -515,14 +515,19 @@ private fun ExtractionData.inferParametersInfo(
     return null
 }
 
-private fun ExtractionData.checkDeclarationsMovingOutOfScope(controlFlow: ControlFlow): ErrorMessage? {
+private fun ExtractionData.checkDeclarationsMovingOutOfScope(
+        enclosingDeclaration: JetDeclaration,
+        controlFlow: ControlFlow
+): ErrorMessage? {
     val declarationsOutOfScope = HashSet<JetNamedDeclaration>()
     if (controlFlow is JumpBasedControlFlow) {
         controlFlow.elementToInsertAfterCall.accept(
                 object: JetTreeVisitorVoid() {
                     override fun visitSimpleNameExpression(expression: JetSimpleNameExpression) {
                         val target = expression.getReference()?.resolve()
-                        if (target is JetNamedDeclaration && target.isInsideOf(originalElements)) {
+                        if (target is JetNamedDeclaration
+                                && target.isInsideOf(originalElements)
+                                && target.getParentByType(javaClass<JetDeclaration>(), true) == enclosingDeclaration) {
                             declarationsOutOfScope.add(target)
                         }
                     }
@@ -608,7 +613,7 @@ fun ExtractionData.performAnalysis(): AnalysisResult {
         )
     }
 
-    checkDeclarationsMovingOutOfScope(controlFlow)?.let { messages.add(it) }
+    checkDeclarationsMovingOutOfScope(enclosingDeclaration!!, controlFlow)?.let { messages.add(it) }
 
     val functionNameValidator =
             JetNameValidatorImpl(
diff --git a/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInLambdaOnly.kt b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInLambdaOnly.kt
new file mode 100644
index 00000000000..7bf6d2a6765
--- /dev/null
+++ b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInLambdaOnly.kt
@@ -0,0 +1,13 @@
+class T(val n: Int)
+
+// SIBLING:
+fun foo() {
+    <selection>bar { t ->
+        val k = 1
+        t.n + k + 1
+    }</selection>
+}
+
+fun bar(f: (T) -> Int) {
+
+}
\ No newline at end of file
diff --git a/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInLambdaOnly.kt.after b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInLambdaOnly.kt.after
new file mode 100644
index 00000000000..6794746f692
--- /dev/null
+++ b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInLambdaOnly.kt.after
@@ -0,0 +1,17 @@
+class T(val n: Int)
+
+// SIBLING:
+fun foo() {
+    unit()
+}
+
+fun unit() {
+    bar { t ->
+        val k = 1
+        t.n + k + 1
+    }
+}
+
+fun bar(f: (T) -> Int) {
+
+}
\ No newline at end of file
diff --git a/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInNestedBlock.kt b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInNestedBlock.kt
new file mode 100644
index 00000000000..0726614f0a3
--- /dev/null
+++ b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInNestedBlock.kt
@@ -0,0 +1,9 @@
+class T(val n: Int)
+
+// SIBLING:
+fun foo() {
+    <selection>if (true) {
+        val k = 1
+        T().n + k + 1
+    }</selection>
+}
\ No newline at end of file
diff --git a/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInNestedBlock.kt.after b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInNestedBlock.kt.after
new file mode 100644
index 00000000000..ee204246804
--- /dev/null
+++ b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInNestedBlock.kt.after
@@ -0,0 +1,13 @@
+class T(val n: Int)
+
+// SIBLING:
+fun foo() {
+    unit()
+}
+
+fun unit() {
+    if (true) {
+        val k = 1
+        T().n + k + 1
+    }
+}
\ No newline at end of file
diff --git a/idea/tests/org/jetbrains/jet/plugin/refactoring/introduce/introduceVariable/JetExtractionTestGenerated.java b/idea/tests/org/jetbrains/jet/plugin/refactoring/introduce/introduceVariable/JetExtractionTestGenerated.java
index 71a0a0e78f2..7e7b5255bcd 100644
--- a/idea/tests/org/jetbrains/jet/plugin/refactoring/introduce/introduceVariable/JetExtractionTestGenerated.java
+++ b/idea/tests/org/jetbrains/jet/plugin/refactoring/introduce/introduceVariable/JetExtractionTestGenerated.java
@@ -590,6 +590,16 @@ public class JetExtractionTestGenerated extends AbstractJetExtractionTest {
                     doExtractFunctionTest("idea/testData/refactoring/extractFunction/controlFlow/outputValues/singleOutputValueWithWhenElse.kt");
                 }
                 
+                @TestMetadata("valuesUsedInLambdaOnly.kt")
+                public void testValuesUsedInLambdaOnly() throws Exception {
+                    doExtractFunctionTest("idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInLambdaOnly.kt");
+                }
+                
+                @TestMetadata("valuesUsedInNestedBlock.kt")
+                public void testValuesUsedInNestedBlock() throws Exception {
+                    doExtractFunctionTest("idea/testData/refactoring/extractFunction/controlFlow/outputValues/valuesUsedInNestedBlock.kt");
+                }
+                
             }
             
             @TestMetadata("idea/testData/refactoring/extractFunction/controlFlow/throws")