diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/cfg/pseudocode/pseudocodeUtil.kt b/compiler/frontend/src/org/jetbrains/jet/lang/cfg/pseudocode/pseudocodeUtil.kt
index ab32f035953..5d4f12dcd11 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/cfg/pseudocode/pseudocodeUtil.kt
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/cfg/pseudocode/pseudocodeUtil.kt
@@ -161,4 +161,18 @@ private fun Instruction.calcSideEffectFree(): Boolean {
 
         else -> false
     }
+}
+
+fun Pseudocode.getElementValuesRecursively(element: JetElement): List<PseudoValue> {
+    val results = ArrayList<PseudoValue>()
+
+    fun Pseudocode.collectValues() {
+        getElementValue(element)?.let { results.add(it) }
+        for (localFunction in getLocalDeclarations()) {
+            localFunction.body.collectValues()
+        }
+    }
+
+    collectValues()
+    return results
 }
\ No newline at end of file
diff --git a/idea/src/org/jetbrains/jet/plugin/refactoring/extractFunction/extractableAnalysisUtil.kt b/idea/src/org/jetbrains/jet/plugin/refactoring/extractFunction/extractableAnalysisUtil.kt
index 8854488131b..41af055c18c 100644
--- a/idea/src/org/jetbrains/jet/plugin/refactoring/extractFunction/extractableAnalysisUtil.kt
+++ b/idea/src/org/jetbrains/jet/plugin/refactoring/extractFunction/extractableAnalysisUtil.kt
@@ -556,7 +556,7 @@ private fun ExtractionData.inferParametersInfo(
                 if (!parameterType.processTypeIfExtractable(info.typeParameters, info.nonDenotableTypes)) continue
 
                 val parameterTypePredicate =
-                        pseudocode.getElementValue(originalRef)?.let { getExpectedTypePredicate(it, bindingContext) } ?: AllTypes
+                        and(pseudocode.getElementValuesRecursively(originalRef).map { getExpectedTypePredicate(it, bindingContext) })
 
                 val parameter = extractedDescriptorToParameter.getOrPut(descriptorToExtract) {
                     val parameterName =
diff --git a/idea/testData/refactoring/extractFunction/controlFlow/outputValues/outputValueWithSingleLineExpression.kt b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/outputValueWithSingleLineExpression.kt
new file mode 100644
index 00000000000..dceab27b2df
--- /dev/null
+++ b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/outputValueWithSingleLineExpression.kt
@@ -0,0 +1,14 @@
+// WITH_RUNTIME
+// PARAM_TYPES: kotlin.Int
+// PARAM_TYPES: kotlin.Int
+// PARAM_DESCRIPTOR: value-parameter val a: kotlin.Int defined in foo
+// PARAM_DESCRIPTOR: var b: kotlin.Int defined in foo
+// SIBLING:
+fun foo(a: Int): Int {
+    var b: Int = 1
+
+    val t = <selection> { b += a; b }() </selection>
+    println(b)
+
+    return t
+}
\ No newline at end of file
diff --git a/idea/testData/refactoring/extractFunction/controlFlow/outputValues/outputValueWithSingleLineExpression.kt.after b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/outputValueWithSingleLineExpression.kt.after
new file mode 100644
index 00000000000..58eda2ca8d1
--- /dev/null
+++ b/idea/testData/refactoring/extractFunction/controlFlow/outputValues/outputValueWithSingleLineExpression.kt.after
@@ -0,0 +1,21 @@
+// WITH_RUNTIME
+// PARAM_TYPES: kotlin.Int
+// PARAM_TYPES: kotlin.Int
+// PARAM_DESCRIPTOR: value-parameter val a: kotlin.Int defined in foo
+// PARAM_DESCRIPTOR: var b: kotlin.Int defined in foo
+// SIBLING:
+fun foo(a: Int): Int {
+    var b: Int = 1
+
+    val pair = pair(a, b)
+    b = pair.second
+    val t = pair.first
+    println(b)
+
+    return t
+}
+
+private fun pair(a: Int, b: Int): Pair<Int, Int> {
+    var b1 = b
+    return Pair({ b1 += a; b1 }(), b1)
+}
\ No newline at end of file
diff --git a/idea/tests/org/jetbrains/jet/plugin/refactoring/introduce/introduceVariable/JetExtractionTestGenerated.java b/idea/tests/org/jetbrains/jet/plugin/refactoring/introduce/introduceVariable/JetExtractionTestGenerated.java
index 3a159a12730..b5e47ede5dd 100644
--- a/idea/tests/org/jetbrains/jet/plugin/refactoring/introduce/introduceVariable/JetExtractionTestGenerated.java
+++ b/idea/tests/org/jetbrains/jet/plugin/refactoring/introduce/introduceVariable/JetExtractionTestGenerated.java
@@ -745,6 +745,11 @@ public class JetExtractionTestGenerated extends AbstractJetExtractionTest {
                     doExtractFunctionTest(fileName);
                 }
                 
+                @TestMetadata("outputValueWithSingleLineExpression.kt")
+                public void testOutputValueWithSingleLineExpression() throws Exception {
+                    doExtractFunctionTest("idea/testData/refactoring/extractFunction/controlFlow/outputValues/outputValueWithSingleLineExpression.kt");
+                }
+                
                 @TestMetadata("outputValuesWithExpression.kt")
                 public void testOutputValuesWithExpression() throws Exception {
                     String fileName = JetTestUtils.navigationMetadata("idea/testData/refactoring/extractFunction/controlFlow/outputValues/outputValuesWithExpression.kt");