diff --git a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosticCompilerTestFE10TestdataTestGenerated.java b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosticCompilerTestFE10TestdataTestGenerated.java
index 88f185e2f51..e295187410f 100644
--- a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosticCompilerTestFE10TestdataTestGenerated.java
+++ b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosticCompilerTestFE10TestdataTestGenerated.java
@@ -18173,6 +18173,12 @@ public class DiagnosticCompilerTestFE10TestdataTestGenerated extends AbstractDia
                     runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/multirecursion.kt");
                 }
 
+                @Test
+                @TestMetadata("nestedClassesWithSelfTypes.kt")
+                public void testNestedClassesWithSelfTypes() throws Exception {
+                    runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.kt");
+                }
+
                 @Test
                 @TestMetadata("recursiveInIn.kt")
                 public void testRecursiveInIn() throws Exception {
diff --git a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated.java b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated.java
index b5fab902fc4..399ea461967 100644
--- a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated.java
+++ b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated.java
@@ -18173,6 +18173,12 @@ public class LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated
                     runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/multirecursion.kt");
                 }
 
+                @Test
+                @TestMetadata("nestedClassesWithSelfTypes.kt")
+                public void testNestedClassesWithSelfTypes() throws Exception {
+                    runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.kt");
+                }
+
                 @Test
                 @TestMetadata("recursiveInIn.kt")
                 public void testRecursiveInIn() throws Exception {
diff --git a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirLightTreeOldFrontendDiagnosticsTestGenerated.java b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirLightTreeOldFrontendDiagnosticsTestGenerated.java
index 590b448b9dd..b4d0c1ec4e3 100644
--- a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirLightTreeOldFrontendDiagnosticsTestGenerated.java
+++ b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirLightTreeOldFrontendDiagnosticsTestGenerated.java
@@ -18173,6 +18173,12 @@ public class FirLightTreeOldFrontendDiagnosticsTestGenerated extends AbstractFir
                     runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/multirecursion.kt");
                 }
 
+                @Test
+                @TestMetadata("nestedClassesWithSelfTypes.kt")
+                public void testNestedClassesWithSelfTypes() throws Exception {
+                    runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.kt");
+                }
+
                 @Test
                 @TestMetadata("recursiveInIn.kt")
                 public void testRecursiveInIn() throws Exception {
diff --git a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirPsiOldFrontendDiagnosticsTestGenerated.java b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirPsiOldFrontendDiagnosticsTestGenerated.java
index 8d32b06430d..aa3d0b5df52 100644
--- a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirPsiOldFrontendDiagnosticsTestGenerated.java
+++ b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirPsiOldFrontendDiagnosticsTestGenerated.java
@@ -18179,6 +18179,12 @@ public class FirPsiOldFrontendDiagnosticsTestGenerated extends AbstractFirPsiDia
                     runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/multirecursion.kt");
                 }
 
+                @Test
+                @TestMetadata("nestedClassesWithSelfTypes.kt")
+                public void testNestedClassesWithSelfTypes() throws Exception {
+                    runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.kt");
+                }
+
                 @Test
                 @TestMetadata("recursiveInIn.kt")
                 public void testRecursiveInIn() throws Exception {
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.fir.kt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.fir.kt
new file mode 100644
index 00000000000..d0194354cfe
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.fir.kt
@@ -0,0 +1,22 @@
+// ISSUE: KT-61459
+
+interface Alarm {
+    interface Builder<Self : Builder<Self>> {
+        fun build(): Alarm
+    }
+}
+
+abstract class AbstractAlarm<Self : AbstractAlarm<Self, Builder>, Builder : AbstractAlarm.Builder<Builder, Self>>(
+    val identifier: String,
+) : Alarm {
+    abstract class Builder<Self : Builder<!TYPE_ARGUMENTS_NOT_ALLOWED!><Self, Built><!>, Built : AbstractAlarm<Built, <!UPPER_BOUND_VIOLATED!>Self<!>>> : Alarm.Builder<<!UPPER_BOUND_VIOLATED!>Self<!>> {
+        private var identifier: String = ""
+
+        fun setIdentifier(text: String): Self {
+            this.identifier = text
+            return this <!UNCHECKED_CAST!>as Self<!>
+        }
+
+        final override fun build(): Built = TODO()
+    }
+}
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.kt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.kt
new file mode 100644
index 00000000000..57caabf91ae
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.kt
@@ -0,0 +1,22 @@
+// ISSUE: KT-61459
+
+interface Alarm {
+    interface Builder<Self : Builder<Self>> {
+        fun build(): Alarm
+    }
+}
+
+abstract class AbstractAlarm<Self : AbstractAlarm<Self, Builder>, Builder : AbstractAlarm.Builder<Builder, Self>>(
+    val identifier: String,
+) : Alarm {
+    abstract class Builder<Self : Builder<Self, Built>, Built : AbstractAlarm<Built, Self>> : Alarm.Builder<Self> {
+        private var identifier: String = ""
+
+        fun setIdentifier(text: String): Self {
+            this.identifier = text
+            return this <!UNCHECKED_CAST!>as Self<!>
+        }
+
+        final override fun build(): Built = TODO()
+    }
+}
diff --git a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
index 1323bc11e66..063b330d03e 100644
--- a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
+++ b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
@@ -18179,6 +18179,12 @@ public class DiagnosticTestGenerated extends AbstractDiagnosticTest {
                     runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/multirecursion.kt");
                 }
 
+                @Test
+                @TestMetadata("nestedClassesWithSelfTypes.kt")
+                public void testNestedClassesWithSelfTypes() throws Exception {
+                    runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/nestedClassesWithSelfTypes.kt");
+                }
+
                 @Test
                 @TestMetadata("recursiveInIn.kt")
                 public void testRecursiveInIn() throws Exception {