diff --git a/idea/src/org/jetbrains/kotlin/idea/refactoring/inline/KotlinInlineFunctionDialog.kt b/idea/src/org/jetbrains/kotlin/idea/refactoring/inline/KotlinInlineFunctionDialog.kt
index dd194e1614e..ce575b4724f 100644
--- a/idea/src/org/jetbrains/kotlin/idea/refactoring/inline/KotlinInlineFunctionDialog.kt
+++ b/idea/src/org/jetbrains/kotlin/idea/refactoring/inline/KotlinInlineFunctionDialog.kt
@@ -72,8 +72,9 @@ class KotlinInlineFunctionDialog(
 
     public override fun doAction() {
         invokeRefactoring(
-                KotlinInlineFunctionProcessor(project, replacementStrategy, function,
-                                              reference, isInlineThisOnly, !isInlineThisOnly && !isKeepTheDeclaration)
+                KotlinInlineFunctionProcessor(project, replacementStrategy, function, reference,
+                                              inlineThisOnly = isInlineThisOnly || allowInlineThisOnly,
+                                              deleteAfter = !isInlineThisOnly && !isKeepTheDeclaration && !allowInlineThisOnly)
         )
 
         val settings = JavaRefactoringSettings.getInstance()
diff --git a/idea/src/org/jetbrains/kotlin/idea/refactoring/inline/KotlinInlineFunctionHandler.kt b/idea/src/org/jetbrains/kotlin/idea/refactoring/inline/KotlinInlineFunctionHandler.kt
index c2ba916ad59..1267346edae 100644
--- a/idea/src/org/jetbrains/kotlin/idea/refactoring/inline/KotlinInlineFunctionHandler.kt
+++ b/idea/src/org/jetbrains/kotlin/idea/refactoring/inline/KotlinInlineFunctionHandler.kt
@@ -26,9 +26,11 @@ import com.intellij.psi.PsiElement
 import com.intellij.psi.impl.source.resolve.reference.impl.PsiMultiReference
 import com.intellij.refactoring.RefactoringBundle
 import com.intellij.refactoring.util.CommonRefactoringUtil
+import org.jetbrains.kotlin.descriptors.FunctionDescriptor
 import org.jetbrains.kotlin.descriptors.SimpleFunctionDescriptor
 import org.jetbrains.kotlin.idea.KotlinLanguage
 import org.jetbrains.kotlin.idea.analysis.analyzeInContext
+import org.jetbrains.kotlin.idea.caches.resolve.analyzeFullyAndGetResult
 import org.jetbrains.kotlin.idea.caches.resolve.getResolutionFacade
 import org.jetbrains.kotlin.idea.caches.resolve.resolveToDescriptor
 import org.jetbrains.kotlin.idea.codeInliner.CallableUsageReplacementStrategy
@@ -37,10 +39,13 @@ import org.jetbrains.kotlin.idea.core.copied
 import org.jetbrains.kotlin.idea.references.KtSimpleNameReference
 import org.jetbrains.kotlin.idea.util.getResolutionScope
 import org.jetbrains.kotlin.psi.KtBlockExpression
+import org.jetbrains.kotlin.psi.KtExpression
 import org.jetbrains.kotlin.psi.KtNamedFunction
 import org.jetbrains.kotlin.psi.KtReturnExpression
+import org.jetbrains.kotlin.psi.psiUtil.anyDescendantOfType
 import org.jetbrains.kotlin.psi.psiUtil.collectDescendantsOfType
 import org.jetbrains.kotlin.resolve.BindingContext
+import org.jetbrains.kotlin.resolve.calls.callUtil.getResolvedCall
 import org.jetbrains.kotlin.types.TypeUtils
 import org.jetbrains.kotlin.utils.addToStdlib.firstIsInstanceOrNull
 
@@ -102,11 +107,17 @@ class KotlinInlineFunctionHandler: InlineActionHandler() {
             is PsiMultiReference -> reference.references.firstIsInstanceOrNull<KtSimpleNameReference>()
             else -> null
         }
+        val recursive = element.isRecursive()
+        if (recursive && nameReference == null) {
+            val message = RefactoringBundle.getCannotRefactorMessage("Inline recursive function is supported only on references")
+            CommonRefactoringUtil.showErrorHint(project, editor, message, "Inline Function", null)
+            return
+        }
 
         val replacementStrategy = CallableUsageReplacementStrategy(replacement)
 
-        // TODO: allowInlineThisOnly
-        val dialog = KotlinInlineFunctionDialog(project, element, nameReference, replacementStrategy, allowInlineThisOnly = false)
+        val dialog = KotlinInlineFunctionDialog(project, element, nameReference, replacementStrategy,
+                                                allowInlineThisOnly = recursive)
         if (!ApplicationManager.getApplication().isUnitTestMode) {
             dialog.show()
         }
@@ -114,4 +125,16 @@ class KotlinInlineFunctionHandler: InlineActionHandler() {
             dialog.doAction()
         }
     }
+
+    private fun KtNamedFunction.isRecursive(): Boolean {
+        val context = analyzeFullyAndGetResult().bindingContext
+        return bodyExpression?.includesCallOf(context[BindingContext.FUNCTION, this] ?: return false, context) ?: false
+    }
+
+    private fun KtExpression.includesCallOf(descriptor: FunctionDescriptor, context: BindingContext): Boolean {
+        val refDescriptor = getResolvedCall(context)?.resultingDescriptor
+        return descriptor == refDescriptor ||
+               anyDescendantOfType<KtExpression> { it !== this && it.includesCallOf(descriptor, context) }
+    }
+
 }
\ No newline at end of file
diff --git a/idea/testData/refactoring/inline/function/expressionBody/Recursive.kt b/idea/testData/refactoring/inline/function/expressionBody/Recursive.kt
new file mode 100644
index 00000000000..b699fcb6c47
--- /dev/null
+++ b/idea/testData/refactoring/inline/function/expressionBody/Recursive.kt
@@ -0,0 +1 @@
+fun fact(x: Int): Int = if (x < 2) 1 else x * <caret>fact(x - 1)
\ No newline at end of file
diff --git a/idea/testData/refactoring/inline/function/expressionBody/Recursive.kt.after b/idea/testData/refactoring/inline/function/expressionBody/Recursive.kt.after
new file mode 100644
index 00000000000..20a3221e56a
--- /dev/null
+++ b/idea/testData/refactoring/inline/function/expressionBody/Recursive.kt.after
@@ -0,0 +1,4 @@
+fun fact(x: Int): Int = if (x < 2) 1 else {
+    val x1 = x - 1
+    x * if (x1 < 2) 1 else x1 * fact(x1 - 1)
+}
\ No newline at end of file
diff --git a/idea/testData/refactoring/inline/function/returnAtEnd/Recursive.kt b/idea/testData/refactoring/inline/function/returnAtEnd/Recursive.kt
new file mode 100644
index 00000000000..dd18502a332
--- /dev/null
+++ b/idea/testData/refactoring/inline/function/returnAtEnd/Recursive.kt
@@ -0,0 +1,3 @@
+fun fact(x: Int): Int {
+    return if (x < 2) 1 else <caret>fact(x - 1)
+}
\ No newline at end of file
diff --git a/idea/testData/refactoring/inline/function/returnAtEnd/Recursive.kt.after b/idea/testData/refactoring/inline/function/returnAtEnd/Recursive.kt.after
new file mode 100644
index 00000000000..cd02cca3c19
--- /dev/null
+++ b/idea/testData/refactoring/inline/function/returnAtEnd/Recursive.kt.after
@@ -0,0 +1,6 @@
+fun fact(x: Int): Int {
+    return if (x < 2) 1 else {
+        val x1 = x - 1
+        if (x1 < 2) 1 else fact(x1 - 1)
+    }
+}
\ No newline at end of file
diff --git a/idea/tests/org/jetbrains/kotlin/idea/refactoring/inline/InlineTestGenerated.java b/idea/tests/org/jetbrains/kotlin/idea/refactoring/inline/InlineTestGenerated.java
index 17e4cc8236d..4dc14d91ec1 100644
--- a/idea/tests/org/jetbrains/kotlin/idea/refactoring/inline/InlineTestGenerated.java
+++ b/idea/tests/org/jetbrains/kotlin/idea/refactoring/inline/InlineTestGenerated.java
@@ -142,6 +142,12 @@ public class InlineTestGenerated extends AbstractInlineTest {
                 doTest(fileName);
             }
 
+            @TestMetadata("Recursive.kt")
+            public void testRecursive() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("idea/testData/refactoring/inline/function/expressionBody/Recursive.kt");
+                doTest(fileName);
+            }
+
             @TestMetadata("SafeCall.kt")
             public void testSafeCall() throws Exception {
                 String fileName = KotlinTestUtils.navigationMetadata("idea/testData/refactoring/inline/function/expressionBody/SafeCall.kt");
@@ -205,6 +211,12 @@ public class InlineTestGenerated extends AbstractInlineTest {
                 doTest(fileName);
             }
 
+            @TestMetadata("Recursive.kt")
+            public void testRecursive() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("idea/testData/refactoring/inline/function/returnAtEnd/Recursive.kt");
+                doTest(fileName);
+            }
+
             @TestMetadata("ReturnFromLambda.kt")
             public void testReturnFromLambda() throws Exception {
                 String fileName = KotlinTestUtils.navigationMetadata("idea/testData/refactoring/inline/function/returnAtEnd/ReturnFromLambda.kt");