diff --git a/compiler/frontend/src/org/jetbrains/kotlin/parsing/KotlinExpressionParsing.java b/compiler/frontend/src/org/jetbrains/kotlin/parsing/KotlinExpressionParsing.java
index ffd17253398..fa536ccdfb8 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/parsing/KotlinExpressionParsing.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/parsing/KotlinExpressionParsing.java
@@ -1484,7 +1484,8 @@ public class KotlinExpressionParsing extends AbstractKotlinParsing {
         }
         thenBranch.done(THEN);
 
-        if (at(ELSE_KEYWORD)) {
+        // lookahead for arrow is needed to prevent capturing of whenEntry like "else -> "
+        if (at(ELSE_KEYWORD) && lookahead(1) != ARROW) {
             advance(); // ELSE_KEYWORD
 
             PsiBuilder.Marker elseBranch = mark();
diff --git a/compiler/testData/psi/When.kt b/compiler/testData/psi/When.kt
index 268723bf3ed..4d709cfb8fc 100644
--- a/compiler/testData/psi/When.kt
+++ b/compiler/testData/psi/When.kt
@@ -67,3 +67,10 @@ fun whenWithoutCondition(i : Int) {
     else -> 2
   }
 }
+
+fun ifDoesntCaptureElse(x : Int) {
+  when (x) {
+    2 -> if(1) 3
+    else -> 6
+  }
+}
\ No newline at end of file
diff --git a/compiler/testData/psi/When.txt b/compiler/testData/psi/When.txt
index a9128723eb5..c3f79f49ebe 100644
--- a/compiler/testData/psi/When.txt
+++ b/compiler/testData/psi/When.txt
@@ -755,3 +755,64 @@ JetFile: When.kt
         PsiElement(RBRACE)('}')
       PsiWhiteSpace('\n')
       PsiElement(RBRACE)('}')
+  PsiWhiteSpace('\n\n')
+  FUN
+    PsiElement(fun)('fun')
+    PsiWhiteSpace(' ')
+    PsiElement(IDENTIFIER)('ifDoesntCaptureElse')
+    VALUE_PARAMETER_LIST
+      PsiElement(LPAR)('(')
+      VALUE_PARAMETER
+        PsiElement(IDENTIFIER)('x')
+        PsiWhiteSpace(' ')
+        PsiElement(COLON)(':')
+        PsiWhiteSpace(' ')
+        TYPE_REFERENCE
+          USER_TYPE
+            REFERENCE_EXPRESSION
+              PsiElement(IDENTIFIER)('Int')
+      PsiElement(RPAR)(')')
+    PsiWhiteSpace(' ')
+    BLOCK
+      PsiElement(LBRACE)('{')
+      PsiWhiteSpace('\n  ')
+      WHEN
+        PsiElement(when)('when')
+        PsiWhiteSpace(' ')
+        PsiElement(LPAR)('(')
+        REFERENCE_EXPRESSION
+          PsiElement(IDENTIFIER)('x')
+        PsiElement(RPAR)(')')
+        PsiWhiteSpace(' ')
+        PsiElement(LBRACE)('{')
+        PsiWhiteSpace('\n    ')
+        WHEN_ENTRY
+          WHEN_CONDITION_WITH_EXPRESSION
+            INTEGER_CONSTANT
+              PsiElement(INTEGER_LITERAL)('2')
+          PsiWhiteSpace(' ')
+          PsiElement(ARROW)('->')
+          PsiWhiteSpace(' ')
+          IF
+            PsiElement(if)('if')
+            PsiElement(LPAR)('(')
+            CONDITION
+              INTEGER_CONSTANT
+                PsiElement(INTEGER_LITERAL)('1')
+            PsiElement(RPAR)(')')
+            PsiWhiteSpace(' ')
+            THEN
+              INTEGER_CONSTANT
+                PsiElement(INTEGER_LITERAL)('3')
+        PsiWhiteSpace('\n    ')
+        WHEN_ENTRY
+          PsiElement(else)('else')
+          PsiWhiteSpace(' ')
+          PsiElement(ARROW)('->')
+          PsiWhiteSpace(' ')
+          INTEGER_CONSTANT
+            PsiElement(INTEGER_LITERAL)('6')
+        PsiWhiteSpace('\n  ')
+        PsiElement(RBRACE)('}')
+      PsiWhiteSpace('\n')
+      PsiElement(RBRACE)('}')
\ No newline at end of file