diff --git a/compiler/frontend/src/org/jetbrains/kotlin/parsing/KotlinExpressionParsing.java b/compiler/frontend/src/org/jetbrains/kotlin/parsing/KotlinExpressionParsing.java
index cd6102462b8..caffeedc21c 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/parsing/KotlinExpressionParsing.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/parsing/KotlinExpressionParsing.java
@@ -764,9 +764,24 @@ public class KotlinExpressionParsing extends AbstractKotlinParsing {
 
             advance(); // LONG_TEMPLATE_ENTRY_START
 
-            parseExpression();
+            while (!eof()) {
+                int offset = myBuilder.getCurrentOffset();
+
+                parseExpression();
+
+                if (_at(LONG_TEMPLATE_ENTRY_END)) {
+                    advance();
+                    break;
+                }
+                else {
+                    error("Expecting '}'");
+                    if (offset == myBuilder.getCurrentOffset()) {
+                        // Prevent hang if can't advance with parseExpression()
+                        advance();
+                    }
+                }
+            }
 
-            expect(LONG_TEMPLATE_ENTRY_END, "Expecting '}'", TokenSet.create(CLOSING_QUOTE, DANGLING_NEWLINE, REGULAR_STRING_PART, ESCAPE_SEQUENCE, SHORT_TEMPLATE_ENTRY_START));
             longTemplateEntry.done(LONG_STRING_TEMPLATE_ENTRY);
         }
         else {
diff --git a/compiler/testData/psi/recovery/lambdaExpressionInString_1.kt b/compiler/testData/psi/recovery/lambdaExpressionInString_1.kt
new file mode 100644
index 00000000000..7b96f7230fe
--- /dev/null
+++ b/compiler/testData/psi/recovery/lambdaExpressionInString_1.kt
@@ -0,0 +1,6 @@
+fun some1() {
+    {
+        """${dM$ { "$a -> $"  }}
+
+           """}
+}
\ No newline at end of file
diff --git a/compiler/testData/psi/recovery/lambdaExpressionInString_1.txt b/compiler/testData/psi/recovery/lambdaExpressionInString_1.txt
new file mode 100644
index 00000000000..05306c3a48f
--- /dev/null
+++ b/compiler/testData/psi/recovery/lambdaExpressionInString_1.txt
@@ -0,0 +1,60 @@
+JetFile: lambdaExpressionInString_1.kt
+  PACKAGE_DIRECTIVE
+    <empty list>
+  IMPORT_LIST
+    <empty list>
+  FUN
+    PsiElement(fun)('fun')
+    PsiWhiteSpace(' ')
+    PsiElement(IDENTIFIER)('some1')
+    VALUE_PARAMETER_LIST
+      PsiElement(LPAR)('(')
+      PsiElement(RPAR)(')')
+    PsiWhiteSpace(' ')
+    BLOCK
+      PsiElement(LBRACE)('{')
+      PsiWhiteSpace('\n    ')
+      LAMBDA_EXPRESSION
+        FUNCTION_LITERAL
+          PsiElement(LBRACE)('{')
+          PsiWhiteSpace('\n        ')
+          BLOCK
+            STRING_TEMPLATE
+              PsiElement(OPEN_QUOTE)('"""')
+              LONG_STRING_TEMPLATE_ENTRY
+                PsiElement(LONG_TEMPLATE_ENTRY_START)('${')
+                REFERENCE_EXPRESSION
+                  PsiElement(IDENTIFIER)('dM')
+                PsiErrorElement:Expecting '}'
+                  <empty list>
+                PsiElement(BAD_CHARACTER)('$')
+                PsiWhiteSpace(' ')
+                LAMBDA_EXPRESSION
+                  FUNCTION_LITERAL
+                    PsiElement(LBRACE)('{')
+                    PsiWhiteSpace(' ')
+                    BLOCK
+                      STRING_TEMPLATE
+                        PsiElement(OPEN_QUOTE)('"')
+                        SHORT_STRING_TEMPLATE_ENTRY
+                          PsiElement(SHORT_TEMPLATE_ENTRY_START)('$')
+                          REFERENCE_EXPRESSION
+                            PsiElement(IDENTIFIER)('a')
+                        LITERAL_STRING_TEMPLATE_ENTRY
+                          PsiElement(REGULAR_STRING_PART)(' -> ')
+                        LITERAL_STRING_TEMPLATE_ENTRY
+                          PsiElement(REGULAR_STRING_PART)('$')
+                        PsiElement(CLOSING_QUOTE)('"')
+                    PsiWhiteSpace('  ')
+                    PsiElement(RBRACE)('}')
+                PsiElement(LONG_TEMPLATE_ENTRY_END)('}')
+              LITERAL_STRING_TEMPLATE_ENTRY
+                PsiElement(REGULAR_STRING_PART)('\n')
+              LITERAL_STRING_TEMPLATE_ENTRY
+                PsiElement(REGULAR_STRING_PART)('\n')
+              LITERAL_STRING_TEMPLATE_ENTRY
+                PsiElement(REGULAR_STRING_PART)('           ')
+              PsiElement(CLOSING_QUOTE)('"""')
+          PsiElement(RBRACE)('}')
+      PsiWhiteSpace('\n')
+      PsiElement(RBRACE)('}')
\ No newline at end of file
diff --git a/compiler/testData/psi/recovery/lambdaExpressionInString_2.kt b/compiler/testData/psi/recovery/lambdaExpressionInString_2.kt
new file mode 100644
index 00000000000..aff8ecc05c0
--- /dev/null
+++ b/compiler/testData/psi/recovery/lambdaExpressionInString_2.kt
@@ -0,0 +1,4 @@
+fun main(args: Array<String>) {
+  { "${"}
+  { "" }
+}
\ No newline at end of file
diff --git a/compiler/testData/psi/recovery/lambdaExpressionInString_2.txt b/compiler/testData/psi/recovery/lambdaExpressionInString_2.txt
new file mode 100644
index 00000000000..36a5be6974e
--- /dev/null
+++ b/compiler/testData/psi/recovery/lambdaExpressionInString_2.txt
@@ -0,0 +1,66 @@
+JetFile: lambdaExpressionInString_2.kt
+  PACKAGE_DIRECTIVE
+    <empty list>
+  IMPORT_LIST
+    <empty list>
+  FUN
+    PsiElement(fun)('fun')
+    PsiWhiteSpace(' ')
+    PsiElement(IDENTIFIER)('main')
+    VALUE_PARAMETER_LIST
+      PsiElement(LPAR)('(')
+      VALUE_PARAMETER
+        PsiElement(IDENTIFIER)('args')
+        PsiElement(COLON)(':')
+        PsiWhiteSpace(' ')
+        TYPE_REFERENCE
+          USER_TYPE
+            REFERENCE_EXPRESSION
+              PsiElement(IDENTIFIER)('Array')
+            TYPE_ARGUMENT_LIST
+              PsiElement(LT)('<')
+              TYPE_PROJECTION
+                TYPE_REFERENCE
+                  USER_TYPE
+                    REFERENCE_EXPRESSION
+                      PsiElement(IDENTIFIER)('String')
+              PsiElement(GT)('>')
+      PsiElement(RPAR)(')')
+    PsiWhiteSpace(' ')
+    BLOCK
+      PsiElement(LBRACE)('{')
+      PsiWhiteSpace('\n  ')
+      LAMBDA_EXPRESSION
+        FUNCTION_LITERAL
+          PsiElement(LBRACE)('{')
+          PsiWhiteSpace(' ')
+          BLOCK
+            STRING_TEMPLATE
+              PsiElement(OPEN_QUOTE)('"')
+              LONG_STRING_TEMPLATE_ENTRY
+                PsiElement(LONG_TEMPLATE_ENTRY_START)('${')
+                STRING_TEMPLATE
+                  PsiElement(OPEN_QUOTE)('"')
+                  LITERAL_STRING_TEMPLATE_ENTRY
+                    PsiElement(REGULAR_STRING_PART)('}')
+                  PsiErrorElement:Expecting '"'
+                    <empty list>
+                PsiErrorElement:Expecting '}'
+                  <empty list>
+                PsiWhiteSpace('\n  ')
+                LAMBDA_EXPRESSION
+                  FUNCTION_LITERAL
+                    PsiElement(LBRACE)('{')
+                    PsiWhiteSpace(' ')
+                    BLOCK
+                      STRING_TEMPLATE
+                        PsiElement(OPEN_QUOTE)('"')
+                        PsiElement(CLOSING_QUOTE)('"')
+                    PsiWhiteSpace(' ')
+                    PsiElement(RBRACE)('}')
+                PsiWhiteSpace('\n')
+                PsiElement(LONG_TEMPLATE_ENTRY_END)('}')
+              PsiErrorElement:Expecting '"'
+                <empty list>
+      PsiErrorElement:Expecting '}'
+        <empty list>
\ No newline at end of file
diff --git a/compiler/tests/org/jetbrains/kotlin/parsing/ParsingTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/parsing/ParsingTestGenerated.java
index 5267ee6eef0..e02553f97d4 100644
--- a/compiler/tests/org/jetbrains/kotlin/parsing/ParsingTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/parsing/ParsingTestGenerated.java
@@ -2305,6 +2305,18 @@ public class ParsingTestGenerated extends AbstractParsingTest {
                 doParsingTest(fileName);
             }
 
+            @TestMetadata("lambdaExpressionInString_1.kt")
+            public void testLambdaExpressionInString_1() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/psi/recovery/lambdaExpressionInString_1.kt");
+                doParsingTest(fileName);
+            }
+
+            @TestMetadata("lambdaExpressionInString_2.kt")
+            public void testLambdaExpressionInString_2() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/psi/recovery/lambdaExpressionInString_2.kt");
+                doParsingTest(fileName);
+            }
+
             @TestMetadata("MissingCommaInConstructorValueParameterList.kt")
             public void testMissingCommaInConstructorValueParameterList() throws Exception {
                 String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/psi/recovery/MissingCommaInConstructorValueParameterList.kt");