diff --git a/idea/src/org/jetbrains/jet/plugin/formatter/JetLanguageCodeStyleSettingsProvider.java b/idea/src/org/jetbrains/jet/plugin/formatter/JetLanguageCodeStyleSettingsProvider.java
index fb3c93cba6a..9cf68e32449 100644
--- a/idea/src/org/jetbrains/jet/plugin/formatter/JetLanguageCodeStyleSettingsProvider.java
+++ b/idea/src/org/jetbrains/jet/plugin/formatter/JetLanguageCodeStyleSettingsProvider.java
@@ -141,7 +141,8 @@ public class JetLanguageCodeStyleSettingsProvider extends LanguageCodeStyleSetti
                         // "ALIGN_MULTILINE_CHAINED_METHODS",
                         "ALIGN_MULTILINE_PARAMETERS",
                         "ALIGN_MULTILINE_PARAMETERS_IN_CALLS",
-                        "ALIGN_MULTILINE_METHOD_BRACKETS"
+                        "ALIGN_MULTILINE_METHOD_BRACKETS",
+                        "ELSE_ON_NEW_LINE"
                 );
                 consumer.renameStandardOption(CodeStyleSettingsCustomizable.WRAPPING_SWITCH_STATEMENT, "'when' statements");
                 consumer.showCustomOption(JetCodeStyleSettings.class, "ALIGN_IN_COLUMNS_CASE_BRANCH", "Align in columns 'case' branches",
diff --git a/idea/src/org/jetbrains/jet/plugin/formatter/KotlinSpacingBuilder.kt b/idea/src/org/jetbrains/jet/plugin/formatter/KotlinSpacingBuilder.kt
index 0fac52037ce..6cfdc0620e0 100644
--- a/idea/src/org/jetbrains/jet/plugin/formatter/KotlinSpacingBuilder.kt
+++ b/idea/src/org/jetbrains/jet/plugin/formatter/KotlinSpacingBuilder.kt
@@ -186,10 +186,21 @@ fun createSpacingBuilder(settings: CodeStyleSettings): KotlinSpacingBuilder {
             aroundInside(ARROW, FUNCTION_TYPE).spaceIf(jetSettings.SPACE_AROUND_FUNCTION_TYPE_ARROW)
 
             betweenInside(REFERENCE_EXPRESSION, FUNCTION_LITERAL_EXPRESSION, CALL_EXPRESSION).spaces(1)
-
-            beforeInside(ELSE_KEYWORD, IF).spaces(1)
         }
         custom {
+            if (jetCommonSettings.ELSE_ON_NEW_LINE) {
+                inPosition(parent = IF, right = ELSE_KEYWORD)
+                        .lineBreakIfLineBreakInParent(numSpacesOtherwise = 1)
+            }
+            else {
+                inPosition(parent = IF, left = THEN, right = ELSE_KEYWORD).customRule {
+                    parent, left, right ->
+                    // do not remove linebreak if "then" expression is not a block
+                    val expressionOrBlock = left.getNode()!!.getFirstChildNode()
+                    val keepLineBreaks = expressionOrBlock == null || expressionOrBlock.getElementType() != BLOCK
+                    Spacing.createSpacing(1, 1, 0, keepLineBreaks, 0)
+                }
+            }
 
             fun spacingForLeftBrace(block: ASTNode?, blockType: IElementType = BLOCK): Spacing? {
                 if (block != null && block.getElementType() == blockType) {
diff --git a/idea/testData/formatter/ElseOnNewLine.after.inv.kt b/idea/testData/formatter/ElseOnNewLine.after.inv.kt
new file mode 100644
index 00000000000..ca818120398
--- /dev/null
+++ b/idea/testData/formatter/ElseOnNewLine.after.inv.kt
@@ -0,0 +1,28 @@
+fun f() {
+    if (true) {
+    } else if (true) {
+    } else {
+    }
+
+
+    if (true) {
+    } else if (true) {
+    } else {
+    }
+
+    if (a) 3 else 4
+
+    if (a) 5
+    else 5
+
+    if (a) 5
+    else
+        5
+
+    if (a)
+        5
+    else
+        5
+}
+
+// SET_TRUE: ELSE_ON_NEW_LINE
\ No newline at end of file
diff --git a/idea/testData/formatter/ElseOnNewLine.after.kt b/idea/testData/formatter/ElseOnNewLine.after.kt
new file mode 100644
index 00000000000..d2d7b24c5d0
--- /dev/null
+++ b/idea/testData/formatter/ElseOnNewLine.after.kt
@@ -0,0 +1,32 @@
+fun f() {
+    if (true) {
+    }
+    else if (true) {
+    }
+    else {
+    }
+
+
+    if (true) {
+    }
+    else if (true) {
+    }
+    else {
+    }
+
+    if (a) 3 else 4
+
+    if (a) 5
+    else 5
+
+    if (a) 5
+    else
+        5
+
+    if (a)
+        5
+    else
+        5
+}
+
+// SET_TRUE: ELSE_ON_NEW_LINE
\ No newline at end of file
diff --git a/idea/testData/formatter/ElseOnNewLine.kt b/idea/testData/formatter/ElseOnNewLine.kt
new file mode 100644
index 00000000000..3efd2786fbf
--- /dev/null
+++ b/idea/testData/formatter/ElseOnNewLine.kt
@@ -0,0 +1,30 @@
+fun f() {
+    if (true) {
+    }
+    else if (true) {
+    }
+    else {
+    }
+
+
+    if (true) {
+    } else if (true) {
+    } else {
+    }
+
+    if (a) 3 else 4
+
+    if (a) 5
+    else 5
+
+    if (a) 5
+    else
+        5
+
+    if (a)
+        5
+    else
+        5
+}
+
+// SET_TRUE: ELSE_ON_NEW_LINE
\ No newline at end of file
diff --git a/idea/testData/formatter/IfSpacing.after.kt b/idea/testData/formatter/IfSpacing.after.kt
index 92d5b513672..2570789bcdb 100644
--- a/idea/testData/formatter/IfSpacing.after.kt
+++ b/idea/testData/formatter/IfSpacing.after.kt
@@ -7,8 +7,11 @@ fun f() {
     }
 
     if (true) {
+    } else {
     }
-    else {
+
+    if (true) {
+    } else {
     }
 
     if (true) {
@@ -20,14 +23,7 @@ fun f() {
     }
 
     if (true) {
-    }
-    else {
-    }
-
-    if (true) {
-    }
-
-    else
+    } else
         3 > 2
 
     if (true) (3) else (4)
diff --git a/idea/tests/org/jetbrains/jet/formatter/JetFormatterTestGenerated.java b/idea/tests/org/jetbrains/jet/formatter/JetFormatterTestGenerated.java
index f477e26546c..77fa36cc376 100644
--- a/idea/tests/org/jetbrains/jet/formatter/JetFormatterTestGenerated.java
+++ b/idea/tests/org/jetbrains/jet/formatter/JetFormatterTestGenerated.java
@@ -74,6 +74,11 @@ public class JetFormatterTestGenerated extends AbstractJetFormatterTest {
             doTest("idea/testData/formatter/DoWhileSpacing.after.kt");
         }
         
+        @TestMetadata("ElseOnNewLine.after.kt")
+        public void testElseOnNewLine() throws Exception {
+            doTest("idea/testData/formatter/ElseOnNewLine.after.kt");
+        }
+        
         @TestMetadata("EmptyLineAfterPackage.after.kt")
         public void testEmptyLineAfterPackage() throws Exception {
             doTest("idea/testData/formatter/EmptyLineAfterPackage.after.kt");
@@ -382,6 +387,11 @@ public class JetFormatterTestGenerated extends AbstractJetFormatterTest {
             doTestInverted("idea/testData/formatter/DoWhileLineBreak.after.inv.kt");
         }
         
+        @TestMetadata("ElseOnNewLine.after.inv.kt")
+        public void testElseOnNewLine() throws Exception {
+            doTestInverted("idea/testData/formatter/ElseOnNewLine.after.inv.kt");
+        }
+        
         @TestMetadata("ForLineBreak.after.inv.kt")
         public void testForLineBreak() throws Exception {
             doTestInverted("idea/testData/formatter/ForLineBreak.after.inv.kt");
diff --git a/j2k/tests/testData/ast/issues/kt-824-isDir.ide.kt b/j2k/tests/testData/ast/issues/kt-824-isDir.ide.kt
index a9f9714ed46..5acf781d134 100644
--- a/j2k/tests/testData/ast/issues/kt-824-isDir.ide.kt
+++ b/j2k/tests/testData/ast/issues/kt-824-isDir.ide.kt
@@ -14,8 +14,7 @@ public class Test() {
             val result = true
             if (parent.isDirectory()) {
                 return true
-            }
-            else
+            } else
                 return false
         }
     }
diff --git a/j2k/tests/testData/ast/issues/kt-824-isDir.kt b/j2k/tests/testData/ast/issues/kt-824-isDir.kt
index 9a162b3cd0c..f4fbc7809ce 100644
--- a/j2k/tests/testData/ast/issues/kt-824-isDir.kt
+++ b/j2k/tests/testData/ast/issues/kt-824-isDir.kt
@@ -14,8 +14,7 @@ public open class Test() {
             var result: Boolean = true
             if (parent?.isDirectory()!!) {
                 return true
-            }
-            else
+            } else
                 return false
         }
     }