diff --git a/compiler/testData/diagnostics/tests/typealias/localTypeAliasConstructor.kt b/compiler/testData/diagnostics/tests/typealias/localTypeAliasConstructor.kt
new file mode 100644
index 00000000000..39dfb06c5dc
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/typealias/localTypeAliasConstructor.kt
@@ -0,0 +1,11 @@
+// !DIAGNOSTICS: -UNUSED_VARIABLE -UNUSED_PARAMETER
+
+class Cell<TC>(val x: TC)
+
+fun <T> id(x: T): T {
+    typealias C = Cell<T>
+    class Local(val cell: C)
+    val cx = C(x)
+    val c: C = Local(cx).cell
+    return c.x
+}
diff --git a/compiler/testData/diagnostics/tests/typealias/localTypeAliasConstructor.txt b/compiler/testData/diagnostics/tests/typealias/localTypeAliasConstructor.txt
new file mode 100644
index 00000000000..cc56abd4752
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/typealias/localTypeAliasConstructor.txt
@@ -0,0 +1,11 @@
+package
+
+public fun </*0*/ T> id(/*0*/ x: T): T
+
+public final class Cell</*0*/ TC> {
+    public constructor Cell</*0*/ TC>(/*0*/ x: TC)
+    public final val x: TC
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+}
diff --git a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
index 1b4ff469d14..b8505575af5 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
@@ -19539,6 +19539,12 @@ public class DiagnosticsTestGenerated extends AbstractDiagnosticsTest {
                 doTest(fileName);
             }
 
+            @TestMetadata("localTypeAliasConstructor.kt")
+            public void testLocalTypeAliasConstructor() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/typealias/localTypeAliasConstructor.kt");
+                doTest(fileName);
+            }
+
             @TestMetadata("nested.kt")
             public void testNested() throws Exception {
                 String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/typealias/nested.kt");
diff --git a/core/descriptors/src/org/jetbrains/kotlin/descriptors/impl/TypeAliasConstructorDescriptor.kt b/core/descriptors/src/org/jetbrains/kotlin/descriptors/impl/TypeAliasConstructorDescriptor.kt
index 0b281c7561c..f94c1a48348 100644
--- a/core/descriptors/src/org/jetbrains/kotlin/descriptors/impl/TypeAliasConstructorDescriptor.kt
+++ b/core/descriptors/src/org/jetbrains/kotlin/descriptors/impl/TypeAliasConstructorDescriptor.kt
@@ -95,7 +95,7 @@ class TypeAliasConstructorDescriptorImpl private constructor(
                     FunctionDescriptorImpl.getSubstitutedValueParameters(typeAliasConstructor, valueParameters, substitutor, false)
                     ?: return null
 
-            typeAliasConstructor.initialize(valueParameters, visibility, typeAliasDescriptor.typeConstructor.parameters)
+            typeAliasConstructor.initialize(valueParameters, visibility, typeAliasDescriptor.declaredTypeParameters)
 
             typeAliasConstructor.returnType = substitutor.substitute(returnType, Variance.OUT_VARIANCE) ?: return null