diff --git a/j2k/j2k.iml b/j2k/j2k.iml
index c76077ab780..41c3c2ee98c 100644
--- a/j2k/j2k.iml
+++ b/j2k/j2k.iml
@@ -7,10 +7,10 @@
     </content>
     <orderEntry type="inheritedJdk" />
     <orderEntry type="sourceFolder" forTests="false" />
-    <orderEntry type="library" scope="PROVIDED" name="intellij-core" level="project" />
     <orderEntry type="module" module-name="frontend" />
     <orderEntry type="module" module-name="util" />
     <orderEntry type="module" module-name="descriptor.loader.java" />
+    <orderEntry type="library" name="idea-full" level="project" />
   </component>
 </module>
 
diff --git a/j2k/src/org/jetbrains/jet/j2k/Converter.kt b/j2k/src/org/jetbrains/jet/j2k/Converter.kt
index 793fb9ff3d8..63c20ab46be 100644
--- a/j2k/src/org/jetbrains/jet/j2k/Converter.kt
+++ b/j2k/src/org/jetbrains/jet/j2k/Converter.kt
@@ -221,7 +221,7 @@ public class Converter(val project: Project, val settings: ConverterSettings) {
 
     private fun convertMethod(method: PsiMethod, membersToRemove: MutableSet<PsiMember>): Function {
         methodReturnType = method.getReturnType()
-        val returnType = convertType(method.getReturnType(), method.nullabilityFromAnnotations())
+        val returnType = convertMethodReturnType(method)
 
         val modifiers = convertModifiers(method)
 
@@ -275,6 +275,38 @@ public class Converter(val project: Project, val settings: ConverterSettings) {
         }
     }
 
+    private fun convertMethodReturnType(method: PsiMethod): Type {
+        var nullability = method.nullabilityFromAnnotations()
+
+        if (nullability == Nullability.Default) {
+            var isInAnonymousClass = false
+            method.getBody()?.accept(object: JavaRecursiveElementVisitor() {
+                override fun visitAnonymousClass(aClass: PsiAnonymousClass) {
+                    isInAnonymousClass = true
+                    super.visitAnonymousClass(aClass)
+                    isInAnonymousClass = false
+                }
+
+                override fun visitReturnStatement(statement: PsiReturnStatement) {
+                    if (!isInAnonymousClass && statement.getReturnValue()?.nullability() == Nullability.Nullable) {
+                        nullability = Nullability.Nullable
+                    }
+                }
+            })
+        }
+
+        if (nullability == Nullability.Default) {
+            val scope = searchScope(method)
+            if (scope != null) {
+                if (findMethodCalls(method, scope).any { isNullableFromUsage(it) }) {
+                    nullability = Nullability.Nullable
+                }
+            }
+        }
+
+        return convertType(method.getReturnType(), nullability)
+    }
+
     /**
      * Overrides of methods from Object should not be marked as overrides in Kotlin unless the class itself has java ancestors
      */
@@ -374,7 +406,7 @@ public class Converter(val project: Project, val settings: ConverterSettings) {
     private fun findBackingFieldForConstructorParameter(parameter: PsiParameter, constructor: PsiMethod): Pair<PsiField, PsiStatement>? {
         val body = constructor.getBody() ?: return null
 
-        val refs = findVariableReferences(parameter, body)
+        val refs = findVariableUsages(parameter, body)
 
         if (refs.any { PsiUtil.isAccessedForWriting(it) }) return null
 
@@ -393,7 +425,7 @@ public class Converter(val project: Project, val settings: ConverterSettings) {
             if (statement.getParent() != body) continue
 
             // and no other assignments to field should exist in the constructor
-            if (findVariableReferences(field, body).any { it != assignee && PsiUtil.isAccessedForWriting(it) && isQualifierEmptyOrThis(it) }) continue
+            if (findVariableUsages(field, body).any { it != assignee && PsiUtil.isAccessedForWriting(it) && isQualifierEmptyOrThis(it) }) continue
             //TODO: check access to field before assignment
 
             return field to statement
@@ -486,22 +518,43 @@ public class Converter(val project: Project, val settings: ConverterSettings) {
         }
 
         if (nullability == Nullability.Default) {
-            val scope = usageScope(variable)
+            val scope = searchScope(variable)
             if (scope != null) {
-                if (findVariableReferences(variable, scope).any { isVariableNullableFromUsage(it) }) {
+                if (findVariableUsages(variable, scope).any { isNullableFromUsage(it) }) {
                     nullability = Nullability.Nullable
                 }
             }
         }
 
+        if (nullability == Nullability.Default && variable is PsiParameter) {
+            val method = variable.getDeclarationScope() as? PsiMethod
+            if (method != null) {
+                val scope = searchScope(method)
+                if (scope != null) {
+                    val parameters = method.getParameterList().getParameters()
+                    val parameterIndex = parameters.indexOf(variable)
+                    for (call in findMethodCalls(method, scope)) {
+                        val args = call.getArgumentList().getExpressions()
+                        if (args.size == parameters.size) {
+                            if (args[parameterIndex].nullability() == Nullability.Nullable) {
+                                nullability = Nullability.Nullable
+                                break
+                            }
+                        }
+                    }
+                }
+            }
+        }
+
         return convertType(variable.getType(), nullability)
     }
 
-    private fun usageScope(variable: PsiVariable): PsiElement? {
-        return when(variable) {
-            is PsiParameter -> variable.getDeclarationScope()
-            is PsiField -> if (variable.hasModifierProperty(PsiModifier.PRIVATE)) variable.getContainingClass() else variable.getContainingFile()
-            is PsiLocalVariable -> variable.getContainingMethod()
+    private fun searchScope(element: PsiElement): PsiElement? {
+        return when(element) {
+            is PsiParameter -> element.getDeclarationScope()
+            is PsiField -> if (element.hasModifierProperty(PsiModifier.PRIVATE)) element.getContainingClass() else element.getContainingFile()
+            is PsiMethod -> if (element.hasModifierProperty(PsiModifier.PRIVATE)) element.getContainingClass() else element.getContainingFile()
+            is PsiLocalVariable -> element.getContainingMethod()
             else -> null
         }
     }
@@ -529,15 +582,15 @@ public class Converter(val project: Project, val settings: ConverterSettings) {
         }
     }
 
-    private fun isVariableNullableFromUsage(ref: PsiReferenceExpression): Boolean {
-        val parent = ref.getParent() ?: return false
-        if (parent is PsiAssignmentExpression && parent.getOperationTokenType() == JavaTokenType.EQ && ref == parent.getLExpression()) {
+    private fun isNullableFromUsage(usage: PsiExpression): Boolean {
+        val parent = usage.getParent() ?: return false
+        if (parent is PsiAssignmentExpression && parent.getOperationTokenType() == JavaTokenType.EQ && usage == parent.getLExpression()) {
             return parent.getRExpression()?.nullability() == Nullability.Nullable
         }
         else if (parent is PsiBinaryExpression) {
             val operationType = parent.getOperationTokenType()
             if (operationType == JavaTokenType.EQEQ || operationType == JavaTokenType.NE) {
-                val otherOperand = if (ref == parent.getLOperand()) parent.getROperand() else parent.getLOperand()
+                val otherOperand = if (usage == parent.getLOperand()) parent.getROperand() else parent.getLOperand()
                 return otherOperand?.nullability() == Nullability.Nullable
             }
         }
diff --git a/j2k/src/org/jetbrains/jet/j2k/Utils.kt b/j2k/src/org/jetbrains/jet/j2k/Utils.kt
index 3ae7152d322..f2a968372f5 100644
--- a/j2k/src/org/jetbrains/jet/j2k/Utils.kt
+++ b/j2k/src/org/jetbrains/jet/j2k/Utils.kt
@@ -19,32 +19,32 @@ package org.jetbrains.jet.j2k
 import org.jetbrains.jet.j2k.ast.Identifier
 import org.jetbrains.jet.j2k.ast.Field
 import org.jetbrains.jet.lang.types.expressions.OperatorConventions
-import java.util.ArrayList
 import org.jetbrains.jet.j2k.ast.Nullability
 import com.intellij.psi.*
 import com.intellij.psi.util.PsiUtil
+import com.intellij.psi.search.LocalSearchScope
+import com.intellij.psi.search.searches.ReferencesSearch
 
 fun quoteKeywords(packageName: String): String = packageName.split("\\.").map { Identifier(it).toKotlin() }.makeString(".")
 
-fun findVariableReferences(variable: PsiVariable, scope: PsiElement): Collection<PsiReferenceExpression> {
-    class Visitor : JavaRecursiveElementVisitor() {
-        val refs = ArrayList<PsiReferenceExpression>()
+fun findVariableUsages(variable: PsiVariable, scope: PsiElement): Collection<PsiReferenceExpression> {
+    return ReferencesSearch.search(variable, LocalSearchScope(scope)).findAll().filterIsInstance(javaClass<PsiReferenceExpression>())
+}
 
-        override fun visitReferenceExpression(expression: PsiReferenceExpression) {
-            super.visitReferenceExpression(expression)
-            if (expression.isReferenceTo(variable)) {
-                refs.add(expression)
-            }
+fun findMethodCalls(method: PsiMethod, scope: PsiElement): Collection<PsiMethodCallExpression> {
+    return ReferencesSearch.search(method, LocalSearchScope(scope)).findAll().map {
+        if (it is PsiReferenceExpression) {
+            val methodCall = it.getParent() as? PsiMethodCallExpression
+            if (methodCall?.getMethodExpression() == it) methodCall else null
         }
-    }
-
-    val visitor = Visitor()
-    scope.accept(visitor)
-    return visitor.refs
+        else {
+            null
+        }
+    }.filterNotNull()
 }
 
 fun PsiVariable.countWriteAccesses(scope: PsiElement?): Int
-        = if (scope != null) findVariableReferences(this, scope).count { PsiUtil.isAccessedForWriting(it) } else 0
+        = if (scope != null) findVariableUsages(this, scope).count { PsiUtil.isAccessedForWriting(it) } else 0
 
 fun PsiModifierListOwner.nullabilityFromAnnotations(): Nullability {
     val annotations = getModifierList()?.getAnnotations() ?: return Nullability.Default
diff --git a/j2k/tests/test/org/jetbrains/jet/j2k/test/JavaToKotlinConverterTestGenerated.java b/j2k/tests/test/org/jetbrains/jet/j2k/test/JavaToKotlinConverterTestGenerated.java
index d5abbf8f57b..6b74bb3104b 100644
--- a/j2k/tests/test/org/jetbrains/jet/j2k/test/JavaToKotlinConverterTestGenerated.java
+++ b/j2k/tests/test/org/jetbrains/jet/j2k/test/JavaToKotlinConverterTestGenerated.java
@@ -1810,6 +1810,41 @@ public class JavaToKotlinConverterTestGenerated extends AbstractJavaToKotlinConv
             doTest("j2k/tests/testData/ast/nullability/FieldInitializedWithNull.java");
         }
         
+        @TestMetadata("MethodInvokedWithNullArg.java")
+        public void testMethodInvokedWithNullArg() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg.java");
+        }
+        
+        @TestMetadata("MethodInvokedWithNullArg2.java")
+        public void testMethodInvokedWithNullArg2() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg2.java");
+        }
+        
+        @TestMetadata("MethodInvokedWithTernaryNullArg.java")
+        public void testMethodInvokedWithTernaryNullArg() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/MethodInvokedWithTernaryNullArg.java");
+        }
+        
+        @TestMetadata("MethodResultComparedWithNull.java")
+        public void testMethodResultComparedWithNull() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/MethodResultComparedWithNull.java");
+        }
+        
+        @TestMetadata("MethodReturnsNull.java")
+        public void testMethodReturnsNull() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/MethodReturnsNull.java");
+        }
+        
+        @TestMetadata("MethodReturnsNullInAnonymousClass.java")
+        public void testMethodReturnsNullInAnonymousClass() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/MethodReturnsNullInAnonymousClass.java");
+        }
+        
+        @TestMetadata("MethodReturnsTernaryNull.java")
+        public void testMethodReturnsTernaryNull() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/MethodReturnsTernaryNull.java");
+        }
+        
         @TestMetadata("ParameterComparedWithNull.java")
         public void testParameterComparedWithNull() throws Exception {
             doTest("j2k/tests/testData/ast/nullability/ParameterComparedWithNull.java");
diff --git a/j2k/tests/testData/ast/kotlinExclusion/kt-656.kt b/j2k/tests/testData/ast/kotlinExclusion/kt-656.kt
index c01283f0bc7..c937addb228 100644
--- a/j2k/tests/testData/ast/kotlinExclusion/kt-656.kt
+++ b/j2k/tests/testData/ast/kotlinExclusion/kt-656.kt
@@ -1,7 +1,7 @@
 package demo
 
 class Test() : java.lang.Iterable<String> {
-    override fun iterator(): java.util.Iterator<String> {
+    override fun iterator(): java.util.Iterator<String>? {
         return null
     }
 
@@ -12,7 +12,7 @@ class Test() : java.lang.Iterable<String> {
 }
 
 class FullTest() : java.lang.Iterable<String> {
-    override fun iterator(): java.util.Iterator<String> {
+    override fun iterator(): java.util.Iterator<String>? {
         return null
     }
 
diff --git a/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg.java b/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg.java
new file mode 100644
index 00000000000..3e616176614
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg.java
@@ -0,0 +1,8 @@
+//file
+class C {
+    private void foo(String s){}
+
+    void bar() {
+        foo(null)
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg.kt b/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg.kt
new file mode 100644
index 00000000000..2b784988bc6
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg.kt
@@ -0,0 +1,8 @@
+class C() {
+    private fun foo(s: String?) {
+    }
+
+    fun bar() {
+        foo(null)
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg2.java b/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg2.java
new file mode 100644
index 00000000000..51d580f53d9
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg2.java
@@ -0,0 +1,10 @@
+//file
+class C {
+    public void foo(String s){}
+}
+
+class D {
+    void bar(C c) {
+        c.foo(null);
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg2.kt b/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg2.kt
new file mode 100644
index 00000000000..9d8c3d6d0d9
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodInvokedWithNullArg2.kt
@@ -0,0 +1,10 @@
+class C() {
+    public fun foo(s: String?) {
+    }
+}
+
+class D() {
+    fun bar(c: C) {
+        c.foo(null)
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodInvokedWithTernaryNullArg.java b/j2k/tests/testData/ast/nullability/MethodInvokedWithTernaryNullArg.java
new file mode 100644
index 00000000000..d3e65b101b5
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodInvokedWithTernaryNullArg.java
@@ -0,0 +1,8 @@
+//file
+class C {
+    private void foo(String s){}
+
+    void bar(boolean b) {
+        foo(b ? "a" : null)
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodInvokedWithTernaryNullArg.kt b/j2k/tests/testData/ast/nullability/MethodInvokedWithTernaryNullArg.kt
new file mode 100644
index 00000000000..7718cd50010
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodInvokedWithTernaryNullArg.kt
@@ -0,0 +1,11 @@
+class C() {
+    private fun foo(s: String?) {
+    }
+
+    fun bar(b: Boolean) {
+        foo((if (b)
+            "a"
+        else
+            null))
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodResultComparedWithNull.java b/j2k/tests/testData/ast/nullability/MethodResultComparedWithNull.java
new file mode 100644
index 00000000000..7a439558d6b
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodResultComparedWithNull.java
@@ -0,0 +1,12 @@
+//file
+interface I {
+    String getString();
+}
+
+class C {
+    void foo(I i) {
+        if (i.getString() == null) {
+            println("null")
+        }
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodResultComparedWithNull.kt b/j2k/tests/testData/ast/nullability/MethodResultComparedWithNull.kt
new file mode 100644
index 00000000000..ed9ed55a8d3
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodResultComparedWithNull.kt
@@ -0,0 +1,11 @@
+trait I {
+    public fun getString(): String?
+}
+
+class C() {
+    fun foo(i: I) {
+        if (i.getString() == null) {
+            println("null")
+        }
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodReturnsNull.java b/j2k/tests/testData/ast/nullability/MethodReturnsNull.java
new file mode 100644
index 00000000000..44478fdb1d6
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodReturnsNull.java
@@ -0,0 +1,11 @@
+//file
+class C {
+    String foo(boolean b) {
+        if (b) {
+            return "abc"
+        }
+        else {
+            return null
+        }
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodReturnsNull.kt b/j2k/tests/testData/ast/nullability/MethodReturnsNull.kt
new file mode 100644
index 00000000000..69986554f46
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodReturnsNull.kt
@@ -0,0 +1,9 @@
+class C() {
+    fun foo(b: Boolean): String? {
+        if (b) {
+            return "abc"
+        } else {
+            return null
+        }
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodReturnsNullInAnonymousClass.java b/j2k/tests/testData/ast/nullability/MethodReturnsNullInAnonymousClass.java
new file mode 100644
index 00000000000..4d0a1cbab02
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodReturnsNullInAnonymousClass.java
@@ -0,0 +1,19 @@
+import java.lang.Override;
+import java.lang.String;
+
+//file
+interface Getter {
+    String get()
+}
+
+class C {
+    String foo(boolean b) {
+        Getter getter = new Getter() {
+            @Override
+            public String get() {
+                return null;
+            }
+        };
+        return "";
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodReturnsNullInAnonymousClass.kt b/j2k/tests/testData/ast/nullability/MethodReturnsNullInAnonymousClass.kt
new file mode 100644
index 00000000000..9acea5f077a
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodReturnsNullInAnonymousClass.kt
@@ -0,0 +1,16 @@
+import java.lang.Override
+
+trait Getter {
+    public fun get(): String
+}
+
+class C() {
+    fun foo(b: Boolean): String {
+        val getter = object : Getter() {
+            override fun get(): String? {
+                return null
+            }
+        }
+        return ""
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodReturnsTernaryNull.java b/j2k/tests/testData/ast/nullability/MethodReturnsTernaryNull.java
new file mode 100644
index 00000000000..57e25579403
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodReturnsTernaryNull.java
@@ -0,0 +1,6 @@
+//file
+class C {
+    String foo(boolean b) {
+        return b ? "abc" : null
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/MethodReturnsTernaryNull.kt b/j2k/tests/testData/ast/nullability/MethodReturnsTernaryNull.kt
new file mode 100644
index 00000000000..607a860bcab
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/MethodReturnsTernaryNull.kt
@@ -0,0 +1,8 @@
+class C() {
+    fun foo(b: Boolean): String? {
+        return (if (b)
+            "abc"
+        else
+            null)
+    }
+}
\ No newline at end of file