diff --git a/js/js.tests/test/org/jetbrains/kotlin/js/test/semantics/BoxJsTestGenerated.java b/js/js.tests/test/org/jetbrains/kotlin/js/test/semantics/BoxJsTestGenerated.java
index efe446bc8c5..81ec777e818 100644
--- a/js/js.tests/test/org/jetbrains/kotlin/js/test/semantics/BoxJsTestGenerated.java
+++ b/js/js.tests/test/org/jetbrains/kotlin/js/test/semantics/BoxJsTestGenerated.java
@@ -5528,6 +5528,12 @@ public class BoxJsTestGenerated extends AbstractBoxJsTest {
             doTest(fileName);
         }
 
+        @TestMetadata("localFunctionInLambda.kt")
+        public void testLocalFunctionInLambda() throws Exception {
+            String fileName = KotlinTestUtils.navigationMetadata("js/js.translator/testData/box/nameClashes/localFunctionInLambda.kt");
+            doTest(fileName);
+        }
+
         @TestMetadata("methodAndPrivateProperty.kt")
         public void testMethodAndPrivateProperty() throws Exception {
             String fileName = KotlinTestUtils.navigationMetadata("js/js.translator/testData/box/nameClashes/methodAndPrivateProperty.kt");
diff --git a/js/js.translator/src/org/jetbrains/kotlin/js/translate/expression/FunctionTranslator.java b/js/js.translator/src/org/jetbrains/kotlin/js/translate/expression/FunctionTranslator.java
index b49e4a323e9..881e71165fc 100644
--- a/js/js.translator/src/org/jetbrains/kotlin/js/translate/expression/FunctionTranslator.java
+++ b/js/js.translator/src/org/jetbrains/kotlin/js/translate/expression/FunctionTranslator.java
@@ -26,7 +26,6 @@ import org.jetbrains.kotlin.js.translate.context.AliasingContext;
 import org.jetbrains.kotlin.js.translate.context.Namer;
 import org.jetbrains.kotlin.js.translate.context.TranslationContext;
 import org.jetbrains.kotlin.js.translate.general.AbstractTranslator;
-import org.jetbrains.kotlin.js.translate.utils.JsAstUtils;
 import org.jetbrains.kotlin.js.translate.utils.TranslationUtils;
 import org.jetbrains.kotlin.psi.KtDeclarationWithBody;
 import org.jetbrains.kotlin.psi.KtLambdaExpression;
@@ -70,8 +69,9 @@ public final class FunctionTranslator extends AbstractTranslator {
         this.descriptor = getFunctionDescriptor(context.bindingContext(), functionDeclaration);
         this.functionDeclaration = functionDeclaration;
         this.functionObject = function;
-        assert this.functionObject.getParameters().isEmpty()
-                : message(descriptor, "Function " + functionDeclaration.getText() + " processed for the second time.");
+        if (!this.functionObject.getParameters().isEmpty()) {
+            throw new AssertionError(message(descriptor, "Function " + functionDeclaration.getText() + " processed for the second time."));
+        }
         //NOTE: it's important we compute the context before we start the computation
         this.functionBodyContext = getFunctionBodyContext();
         MetadataProperties.setFunctionDescriptor(functionObject, descriptor);
@@ -88,18 +88,8 @@ public final class FunctionTranslator extends AbstractTranslator {
             aliases.put(expectedReceiverDescriptor, extensionFunctionReceiverName.makeRef());
         }
 
-        LocalFunctionCollector functionCollector = new LocalFunctionCollector(context().bindingContext());
-        functionDeclaration.acceptChildren(functionCollector, null);
-        for (FunctionDescriptor localFunction : functionCollector.getFunctions()) {
-            String localIdent = localFunction.getName().isSpecial() ? "lambda" : localFunction.getName().asString();
-            JsName localName = functionObject.getScope().getParent().declareTemporaryName(localIdent);
-            JsExpression alias = JsAstUtils.pureFqn(localName, null);
-            aliases.put(localFunction, alias);
-        }
-
         AliasingContext aliasingContext = !aliases.isEmpty() ? context().aliasingContext().withDescriptorsAliased(aliases) : null;
 
-
         return context().newFunctionBody(functionObject, aliasingContext, descriptor);
     }
 
diff --git a/js/js.translator/src/org/jetbrains/kotlin/js/translate/utils/FunctionBodyTranslator.java b/js/js.translator/src/org/jetbrains/kotlin/js/translate/utils/FunctionBodyTranslator.java
index a9334e9c0c2..52da5ec5039 100644
--- a/js/js.translator/src/org/jetbrains/kotlin/js/translate/utils/FunctionBodyTranslator.java
+++ b/js/js.translator/src/org/jetbrains/kotlin/js/translate/utils/FunctionBodyTranslator.java
@@ -21,10 +21,12 @@ import com.google.dart.compiler.backend.js.ast.metadata.MetadataProperties;
 import org.jetbrains.annotations.NotNull;
 import org.jetbrains.kotlin.builtins.KotlinBuiltIns;
 import org.jetbrains.kotlin.descriptors.ConstructorDescriptor;
+import org.jetbrains.kotlin.descriptors.DeclarationDescriptor;
 import org.jetbrains.kotlin.descriptors.FunctionDescriptor;
 import org.jetbrains.kotlin.descriptors.ValueParameterDescriptor;
 import org.jetbrains.kotlin.js.translate.context.Namer;
 import org.jetbrains.kotlin.js.translate.context.TranslationContext;
+import org.jetbrains.kotlin.js.translate.expression.LocalFunctionCollector;
 import org.jetbrains.kotlin.js.translate.general.AbstractTranslator;
 import org.jetbrains.kotlin.js.translate.general.Translation;
 import org.jetbrains.kotlin.js.translate.utils.mutator.Mutator;
@@ -34,7 +36,9 @@ import org.jetbrains.kotlin.resolve.descriptorUtil.DescriptorUtilsKt;
 import org.jetbrains.kotlin.types.KotlinType;
 
 import java.util.ArrayList;
+import java.util.HashMap;
 import java.util.List;
+import java.util.Map;
 
 import static org.jetbrains.kotlin.js.translate.utils.BindingUtils.getDefaultArgument;
 import static org.jetbrains.kotlin.js.translate.utils.JsAstUtils.*;
@@ -43,9 +47,26 @@ import static org.jetbrains.kotlin.js.translate.utils.mutator.LastExpressionMuta
 public final class FunctionBodyTranslator extends AbstractTranslator {
 
     @NotNull
-    public static JsBlock translateFunctionBody(@NotNull FunctionDescriptor descriptor,
-                                                @NotNull KtDeclarationWithBody declarationWithBody,
-                                                @NotNull TranslationContext functionBodyContext) {
+    public static JsBlock translateFunctionBody(
+            @NotNull FunctionDescriptor descriptor,
+            @NotNull KtDeclarationWithBody declarationWithBody,
+            @NotNull TranslationContext functionBodyContext
+    ) {
+        Map<DeclarationDescriptor, JsExpression> aliases = new HashMap<DeclarationDescriptor, JsExpression>();
+        LocalFunctionCollector functionCollector = new LocalFunctionCollector(functionBodyContext.bindingContext());
+        declarationWithBody.acceptChildren(functionCollector, null);
+
+        for (FunctionDescriptor localFunction : functionCollector.getFunctions()) {
+            String localIdent = localFunction.getName().isSpecial() ? "lambda" : localFunction.getName().asString();
+            JsName localName = functionBodyContext.scope().getParent().declareTemporaryName(localIdent);
+            JsExpression alias = JsAstUtils.pureFqn(localName, null);
+            aliases.put(localFunction, alias);
+        }
+
+        if (!aliases.isEmpty()) {
+            functionBodyContext = functionBodyContext.innerContextWithDescriptorsAliased(aliases);
+        }
+
         return (new FunctionBodyTranslator(descriptor, declarationWithBody, functionBodyContext)).translate();
     }
 
diff --git a/js/js.translator/testData/box/nameClashes/localFunctionInLambda.kt b/js/js.translator/testData/box/nameClashes/localFunctionInLambda.kt
new file mode 100644
index 00000000000..47a7f93c0ad
--- /dev/null
+++ b/js/js.translator/testData/box/nameClashes/localFunctionInLambda.kt
@@ -0,0 +1,18 @@
+// MODULE: lib
+// FILE: lib.kt
+package lib
+
+fun String.bar() = this
+
+// MODULE: main(lib)
+// FILE: main.kt
+package foo
+
+import lib.*
+
+object O
+
+fun box(): String = {
+    fun O.bar() = "O"
+    O.bar() + "K".bar()
+}()
\ No newline at end of file