diff --git a/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/AnnotationProcessorWrapper.kt b/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/AnnotationProcessorWrapper.kt
index dec2c68a12c..4f38d40eb30 100644
--- a/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/AnnotationProcessorWrapper.kt
+++ b/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/AnnotationProcessorWrapper.kt
@@ -108,8 +108,8 @@ public abstract class AnnotationProcessorWrapper(
     override fun process(annotations: MutableSet<out TypeElement>?, roundEnv: RoundEnvironment): Boolean {
         roundCounter += 1
 
-        val annotatedKotlinElements = kotlinAnnotationsProvider.annotatedKotlinElements
-        val roundEnvironmentWrapper = RoundEnvironmentWrapper(processingEnv, roundEnv, roundCounter, annotatedKotlinElements)
+        val roundEnvironmentWrapper = RoundEnvironmentWrapper(
+                processingEnv, roundEnv, roundCounter, kotlinAnnotationsProvider)
         processor.process(annotations, roundEnvironmentWrapper)
         return false
     }
diff --git a/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/KotlinAnnotationProvider.kt b/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/KotlinAnnotationProvider.kt
index d4b44b19089..bd7fe065133 100644
--- a/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/KotlinAnnotationProvider.kt
+++ b/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/KotlinAnnotationProvider.kt
@@ -20,7 +20,6 @@ import java.io.File
 import java.io.Reader
 import java.io.StringReader
 import javax.tools.FileObject
-import kotlin.properties.Delegates
 
 public abstract class KotlinAnnotationProvider {
 
@@ -31,12 +30,22 @@ public abstract class KotlinAnnotationProvider {
 
         val SHORTENED_ANNOTATION = "a"
         val SHORTENED_PACKAGE_NAME = "p"
+
+        val CLASS_DECLARATION = "d"
     }
 
-    public val annotatedKotlinElements: Map<String, Set<AnnotatedElementDescriptor>> by Delegates.lazy {
+    public val annotatedKotlinElements: Map<String, Set<AnnotatedElementDescriptor>> by lazy {
         readAnnotations()
     }
 
+    private val kotlinClassesInternal = hashSetOf<String>()
+
+    public val kotlinClasses: Set<String>
+        get() = kotlinClassesInternal
+
+    public val supportInheritedAnnotations: Boolean
+        get() = kotlinClassesInternal.isNotEmpty()
+
     protected abstract val serializedAnnotations: Reader
 
     private fun readAnnotations(): MutableMap<String, MutableSet<AnnotatedElementDescriptor>> {
@@ -65,6 +74,10 @@ public abstract class KotlinAnnotationProvider {
                 when (type) {
                     SHORTENED_ANNOTATION -> handleShortenedName(shortenedAnnotationCache, lineParts)
                     SHORTENED_PACKAGE_NAME -> handleShortenedName(shortenedPackageNameCache, lineParts)
+                    CLASS_DECLARATION -> {
+                        val classFqName = expandClassName(lineParts[1]).replace('$', '.')
+                        kotlinClassesInternal.add(classFqName)
+                    }
 
                     ANNOTATED_CLASS, ANNOTATED_FIELD, ANNOTATED_METHOD -> {
                         val annotationName = expandAnnotation(lineParts[1])
diff --git a/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/RoundEnvironmentWrapper.kt b/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/RoundEnvironmentWrapper.kt
index c6571d1dc52..3c02d7d1325 100644
--- a/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/RoundEnvironmentWrapper.kt
+++ b/libraries/tools/kotlin-annotation-processing/src/main/kotlin/org/jetbrains/kotlin/annotation/RoundEnvironmentWrapper.kt
@@ -1,16 +1,19 @@
 package org.jetbrains.kotlin.annotation
 
+import java.lang.annotation.Inherited
 import javax.annotation.processing.ProcessingEnvironment
 import javax.annotation.processing.RoundEnvironment
 import javax.lang.model.element.Element
 import javax.lang.model.element.ElementKind
 import javax.lang.model.element.TypeElement
+import javax.lang.model.type.NoType
+import javax.lang.model.type.TypeVisitor
 
 private class RoundEnvironmentWrapper(
         val processingEnv: ProcessingEnvironment,
         val parent: RoundEnvironment,
         val roundNumber: Int,
-        val annotatedElementDescriptors: Map<String, Set<AnnotatedElementDescriptor>>
+        val kotlinAnnotationsProvider: KotlinAnnotationProvider
 ) : RoundEnvironment {
 
     override fun getRootElements(): MutableSet<out Element>? {
@@ -45,11 +48,23 @@ private class RoundEnvironmentWrapper(
         return getAnnotationMirrors().any { annotationFqName == it.getAnnotationType().asElement().toString() }
     }
 
+    private fun TypeElement.hasInheritedAnnotation(annotationFqName: String): Boolean {
+        if (hasAnnotation(annotationFqName)) return true
+
+        val superclassMirror = getSuperclass()
+        if (superclassMirror is NoType) return false
+
+        val superClass = processingEnv.getTypeUtils().asElement(superclassMirror)
+        if (superClass !is TypeElement) return false
+
+        return superClass.hasInheritedAnnotation(annotationFqName)
+    }
+
     private fun resolveKotlinElements(annotationFqName: String): Set<Element> {
         if (roundNumber > 1) return setOf()
 
-        val descriptors = annotatedElementDescriptors.get(annotationFqName) ?: setOf()
-        return descriptors.fold(hashSetOf<Element>()) { set, descriptor ->
+        val descriptors = kotlinAnnotationsProvider.annotatedKotlinElements.get(annotationFqName) ?: setOf()
+        val descriptorsWithKotlin = descriptors.fold(hashSetOf<Element>()) { set, descriptor ->
             val clazz = processingEnv.getElementUtils().getTypeElement(descriptor.classFqName) ?: return@fold set
             when (descriptor) {
                 is AnnotatedClassDescriptor -> set.add(clazz)
@@ -68,5 +83,21 @@ private class RoundEnvironmentWrapper(
             }
             set
         }
+
+        if (kotlinAnnotationsProvider.supportInheritedAnnotations) {
+            val isInherited = processingEnv.getElementUtils().getTypeElement(annotationFqName)
+                    ?.hasAnnotation(javaClass<Inherited>().getCanonicalName()) ?: false
+
+            if (isInherited) {
+                kotlinAnnotationsProvider.kotlinClasses.forEach { classFqName ->
+                    val clazz = processingEnv.getElementUtils().getTypeElement(classFqName) ?: return@forEach
+                    if (clazz.hasInheritedAnnotation(annotationFqName)) {
+                        descriptorsWithKotlin.add(clazz)
+                    }
+                }
+            }
+        }
+
+        return descriptorsWithKotlin
     }
 }