diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/Psi2IrTranslator.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/Psi2IrTranslator.kt
new file mode 100644
index 00000000000..2284bdee2e9
--- /dev/null
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/Psi2IrTranslator.kt
@@ -0,0 +1,45 @@
+/*
+ * Copyright 2010-2016 JetBrains s.r.o.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+package org.jetbrains.kotlin.psi2ir
+
+import org.jetbrains.kotlin.descriptors.ModuleDescriptor
+import org.jetbrains.kotlin.ir.IrElement
+import org.jetbrains.kotlin.ir.declarations.IrModule
+import org.jetbrains.kotlin.ir.declarations.IrModuleImpl
+import org.jetbrains.kotlin.psi.KtFile
+import org.jetbrains.kotlin.psi2ir.generators.IrGeneratorContext
+import org.jetbrains.kotlin.psi2ir.generators.IrModuleGenerator
+import org.jetbrains.kotlin.psi2ir.transformations.collapseDesugaredBlocks
+import org.jetbrains.kotlin.resolve.BindingContext
+
+class Psi2IrTranslator(val configuration: Configuration = Configuration()) {
+    class Configuration(
+            val shouldCollapseDesugaredBlocks: Boolean = true
+    )
+
+    fun generateModule(moduleDescriptor: ModuleDescriptor, ktFiles: List<KtFile>, bindingContext: BindingContext): IrModule {
+        val irModule = IrModuleImpl(moduleDescriptor)
+        val irGeneratorContext = IrGeneratorContext(ktFiles, irModule, bindingContext)
+        IrModuleGenerator(irGeneratorContext).generateModuleContent()
+        postprocess(irModule)
+        return irModule
+    }
+
+    private fun postprocess(irElement: IrElement) {
+        if (configuration.shouldCollapseDesugaredBlocks) collapseDesugaredBlocks(irElement)
+    }
+}
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrCallGenerator.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrCallGenerator.kt
similarity index 99%
rename from compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrCallGenerator.kt
rename to compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrCallGenerator.kt
index f89fc54546a..6c477e7b6ae 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrCallGenerator.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrCallGenerator.kt
@@ -14,7 +14,7 @@
  * limitations under the License.
  */
 
-package org.jetbrains.kotlin.psi2ir
+package org.jetbrains.kotlin.psi2ir.generators
 
 import org.jetbrains.kotlin.descriptors.*
 import org.jetbrains.kotlin.ir.expressions.*
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrDeclarationFactory.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrDeclarationFactory.kt
similarity index 99%
rename from compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrDeclarationFactory.kt
rename to compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrDeclarationFactory.kt
index d8dde51b1f3..40b4e8d80a7 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrDeclarationFactory.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrDeclarationFactory.kt
@@ -14,7 +14,7 @@
  * limitations under the License.
  */
 
-package org.jetbrains.kotlin.psi2ir
+package org.jetbrains.kotlin.psi2ir.generators
 
 import org.jetbrains.kotlin.descriptors.*
 import org.jetbrains.kotlin.ir.declarations.*
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrDeclarationGenerator.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrDeclarationGenerator.kt
similarity index 99%
rename from compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrDeclarationGenerator.kt
rename to compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrDeclarationGenerator.kt
index 8b68069f818..faa7f180678 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrDeclarationGenerator.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrDeclarationGenerator.kt
@@ -14,7 +14,7 @@
  * limitations under the License.
  */
 
-package org.jetbrains.kotlin.psi2ir
+package org.jetbrains.kotlin.psi2ir.generators
 
 import org.jetbrains.kotlin.descriptors.DeclarationDescriptor
 import org.jetbrains.kotlin.descriptors.PropertyDescriptor
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrFileGenerator.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrFileGenerator.kt
similarity index 96%
rename from compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrFileGenerator.kt
rename to compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrFileGenerator.kt
index e1aedf8f1c4..0031b340956 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrFileGenerator.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrFileGenerator.kt
@@ -14,7 +14,7 @@
  * limitations under the License.
  */
 
-package org.jetbrains.kotlin.psi2ir
+package org.jetbrains.kotlin.psi2ir.generators
 
 import org.jetbrains.kotlin.ir.declarations.IrDeclaration
 import org.jetbrains.kotlin.ir.declarations.IrFile
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrGenerator.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrGenerator.kt
similarity index 97%
rename from compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrGenerator.kt
rename to compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrGenerator.kt
index 648e8e4a0bf..99c2f25ea9c 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrGenerator.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrGenerator.kt
@@ -14,7 +14,7 @@
  * limitations under the License.
  */
 
-package org.jetbrains.kotlin.psi2ir
+package org.jetbrains.kotlin.psi2ir.generators
 
 import org.jetbrains.kotlin.descriptors.CallableDescriptor
 import org.jetbrains.kotlin.psi.KtExpression
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrGeneratorContext.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrGeneratorContext.kt
similarity index 92%
rename from compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrGeneratorContext.kt
rename to compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrGeneratorContext.kt
index f376ce89a54..de130152a88 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrGeneratorContext.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrGeneratorContext.kt
@@ -14,12 +14,13 @@
  * limitations under the License.
  */
 
-package org.jetbrains.kotlin.psi2ir
+package org.jetbrains.kotlin.psi2ir.generators
 
 import org.jetbrains.kotlin.builtins.KotlinBuiltIns
 import org.jetbrains.kotlin.descriptors.ModuleDescriptor
 import org.jetbrains.kotlin.ir.declarations.IrModuleImpl
 import org.jetbrains.kotlin.psi.KtFile
+import org.jetbrains.kotlin.psi2ir.PsiSourceManager
 import org.jetbrains.kotlin.resolve.BindingContext
 
 class IrGeneratorContext(
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrModuleGenerator.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrModuleGenerator.kt
similarity index 97%
rename from compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrModuleGenerator.kt
rename to compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrModuleGenerator.kt
index a19587a602e..65867e52474 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrModuleGenerator.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrModuleGenerator.kt
@@ -14,7 +14,7 @@
  * limitations under the License.
  */
 
-package org.jetbrains.kotlin.psi2ir
+package org.jetbrains.kotlin.psi2ir.generators
 
 import org.jetbrains.kotlin.ir.declarations.IrFileImpl
 import org.jetbrains.kotlin.resolve.BindingContext
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrStatementGenerator.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrStatementGenerator.kt
similarity index 99%
rename from compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrStatementGenerator.kt
rename to compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrStatementGenerator.kt
index 94e15bf4390..f64d305403f 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/IrStatementGenerator.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/IrStatementGenerator.kt
@@ -14,7 +14,7 @@
  * limitations under the License.
  */
 
-package org.jetbrains.kotlin.psi2ir
+package org.jetbrains.kotlin.psi2ir.generators
 
 import org.jetbrains.kotlin.descriptors.CallableDescriptor
 import org.jetbrains.kotlin.descriptors.ClassDescriptor
@@ -26,6 +26,7 @@ import org.jetbrains.kotlin.ir.expressions.*
 import org.jetbrains.kotlin.psi.*
 import org.jetbrains.kotlin.psi.psiUtil.endOffset
 import org.jetbrains.kotlin.psi.psiUtil.startOffset
+import org.jetbrains.kotlin.psi2ir.deparenthesize
 import org.jetbrains.kotlin.resolve.BindingContext
 import org.jetbrains.kotlin.resolve.DescriptorUtils
 import org.jetbrains.kotlin.resolve.calls.model.VariableAsFunctionResolvedCall
diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/transformations/CollapseDesugaredBlocks.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/transformations/CollapseDesugaredBlocks.kt
new file mode 100644
index 00000000000..8711ef9df69
--- /dev/null
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/transformations/CollapseDesugaredBlocks.kt
@@ -0,0 +1,53 @@
+/*
+ * Copyright 2010-2016 JetBrains s.r.o.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+package org.jetbrains.kotlin.psi2ir.transformations
+
+import org.jetbrains.kotlin.ir.IrElement
+import org.jetbrains.kotlin.ir.detach
+import org.jetbrains.kotlin.ir.expressions.IrBlockExpression
+import org.jetbrains.kotlin.ir.expressions.IrBlockExpressionImpl
+import org.jetbrains.kotlin.ir.replaceWith
+import org.jetbrains.kotlin.ir.visitors.IrElementVisitor
+
+fun collapseDesugaredBlocks(element: IrElement) {
+    element.accept(CollapseDesugaredBlocks(), null)
+}
+
+class CollapseDesugaredBlocks : IrElementVisitor<Unit, Nothing?> {
+    override fun visitElement(element: IrElement, data: Nothing?) {
+        element.acceptChildren(this, data)
+    }
+
+    override fun visitBlockExpression(expression: IrBlockExpression, data: Nothing?) {
+        val transformedBlock = IrBlockExpressionImpl(
+                expression.startOffset, expression.endOffset, expression.type,
+                expression.hasResult, expression.isDesugared
+        )
+        for (statement in expression.statements) {
+            statement.accept(this, data)
+            if (statement is IrBlockExpression && statement.isDesugared) {
+                statement.statements.forEach {
+                    transformedBlock.addStatement(it.detach())
+                }
+            }
+            else {
+                transformedBlock.addStatement(statement.detach())
+            }
+        }
+        expression.replaceWith(transformedBlock)
+    }
+}
diff --git a/compiler/ir/ir.tests/tests/org/jetbrains/kotlin/ir/AbstractIrGeneratorTestCase.kt b/compiler/ir/ir.tests/tests/org/jetbrains/kotlin/ir/AbstractIrGeneratorTestCase.kt
index 666a197ad66..184ea41917e 100644
--- a/compiler/ir/ir.tests/tests/org/jetbrains/kotlin/ir/AbstractIrGeneratorTestCase.kt
+++ b/compiler/ir/ir.tests/tests/org/jetbrains/kotlin/ir/AbstractIrGeneratorTestCase.kt
@@ -19,8 +19,10 @@ package org.jetbrains.kotlin.ir
 import org.jetbrains.kotlin.codegen.CodegenTestCase
 import org.jetbrains.kotlin.ir.declarations.IrFile
 import org.jetbrains.kotlin.ir.declarations.IrModuleImpl
-import org.jetbrains.kotlin.psi2ir.IrGeneratorContext
-import org.jetbrains.kotlin.psi2ir.IrModuleGenerator
+import org.jetbrains.kotlin.psi2ir.Psi2IrTranslator
+import org.jetbrains.kotlin.psi2ir.generators.IrGeneratorContext
+import org.jetbrains.kotlin.psi2ir.generators.IrModuleGenerator
+import org.jetbrains.kotlin.psi2ir.transformations.collapseDesugaredBlocks
 import org.jetbrains.kotlin.resolve.AnalyzingUtils
 import org.jetbrains.kotlin.resolve.lazy.JvmResolveUtil
 import org.jetbrains.kotlin.test.ConfigurationKind
@@ -41,9 +43,8 @@ abstract class AbstractIrGeneratorTestCase : CodegenTestCase() {
         val analysisResult = JvmResolveUtil.analyzeAndCheckForErrors(myFiles.psiFiles, myEnvironment)
         analysisResult.throwIfError()
         AnalyzingUtils.throwExceptionOnErrors(analysisResult.bindingContext)
-        val irModule = IrModuleImpl(analysisResult.moduleDescriptor)
-        val irGeneratorContext = IrGeneratorContext(myFiles.psiFiles, irModule, analysisResult.bindingContext)
-        IrModuleGenerator(irGeneratorContext).generateModuleContent()
+        val psi2ir = Psi2IrTranslator()
+        val irModule = psi2ir.generateModule(analysisResult.moduleDescriptor, myFiles.psiFiles, analysisResult.bindingContext)
         return testFiles.filter { it.name.endsWith(".kt") }.zip(irModule.files).toMap()
     }
 }
diff --git a/compiler/ir/ir.tree/src/org/jetbrains/kotlin/ir/IrElement.kt b/compiler/ir/ir.tree/src/org/jetbrains/kotlin/ir/IrElement.kt
index a1fa5828272..5a1d9248740 100644
--- a/compiler/ir/ir.tree/src/org/jetbrains/kotlin/ir/IrElement.kt
+++ b/compiler/ir/ir.tree/src/org/jetbrains/kotlin/ir/IrElement.kt
@@ -44,12 +44,13 @@ abstract class IrElementBase(override val startOffset: Int, override val endOffs
     }
 }
 
-fun IrElement?.detach() {
+fun <T : IrElement?> T.detach(): T {
     this?.setTreeLocation(null, DETACHED_SLOT)
+    return this
 }
 
 fun IrElement.replaceWith(otherElement: IrElement) {
-    parent?.replaceChild(slot, otherElement)
+    parent?.run { replaceChild(slot, otherElement.detach()) } ?: throw AssertionError("Can't replace a non-root element $this")
 }
 
 fun IrElement.assertChild(child: IrElement) {
diff --git a/compiler/testData/ir/irText/callWithReorderedArguments.txt b/compiler/testData/ir/irText/callWithReorderedArguments.txt
index 5270eac507d..24d3cbbad5e 100644
--- a/compiler/testData/ir/irText/callWithReorderedArguments.txt
+++ b/compiler/testData/ir/irText/callWithReorderedArguments.txt
@@ -28,11 +28,10 @@ IrFile /callWithReorderedArguments.kt
         CALL .foo type=kotlin.Unit operator=
           a: CALL .noReorder1 type=kotlin.Int operator=
           b: CALL .noReorder2 type=kotlin.Int operator=
-        BLOCK type=kotlin.Unit hasResult=false isDesugared=true
-          VAR val tmp0: kotlin.Int
-            CALL .reordered1 type=kotlin.Int operator=
-          VAR val tmp1: kotlin.Int
-            CALL .reordered2 type=kotlin.Int operator=
-          CALL .foo type=kotlin.Unit operator=
-            a: GET_VAR tmp1 type=kotlin.Int
-            b: GET_VAR tmp0 type=kotlin.Int
+        VAR val tmp0: kotlin.Int
+          CALL .reordered1 type=kotlin.Int operator=
+        VAR val tmp1: kotlin.Int
+          CALL .reordered2 type=kotlin.Int operator=
+        CALL .foo type=kotlin.Unit operator=
+          a: GET_VAR tmp1 type=kotlin.Int
+          b: GET_VAR tmp0 type=kotlin.Int
diff --git a/compiler/testData/ir/irText/destructuring1.txt b/compiler/testData/ir/irText/destructuring1.txt
index a490a107101..de386acb978 100644
--- a/compiler/testData/ir/irText/destructuring1.txt
+++ b/compiler/testData/ir/irText/destructuring1.txt
@@ -1,14 +1,13 @@
 IrFunction public fun B.test(): kotlin.Unit
   IrExpressionBody
     BLOCK type=kotlin.Unit hasResult=false isDesugared=false
-      BLOCK type=kotlin.Unit hasResult=false isDesugared=true
-        VAR val tmp0: A
-          GET_VAR A type=A
-        VAR val x: kotlin.Int
-          CALL .component1 type=kotlin.Int operator=COMPONENT_N(index=1)
-            $this: $RECEIVER of: test type=B
-            $receiver: GET_VAR tmp0 type=A
-        VAR val y: kotlin.Int
-          CALL .component2 type=kotlin.Int operator=COMPONENT_N(index=2)
-            $this: $RECEIVER of: test type=B
-            $receiver: GET_VAR tmp0 type=A
+      VAR val tmp0: A
+        GET_VAR A type=A
+      VAR val x: kotlin.Int
+        CALL .component1 type=kotlin.Int operator=COMPONENT_N(index=1)
+          $this: $RECEIVER of: test type=B
+          $receiver: GET_VAR tmp0 type=A
+      VAR val y: kotlin.Int
+        CALL .component2 type=kotlin.Int operator=COMPONENT_N(index=2)
+          $this: $RECEIVER of: test type=B
+          $receiver: GET_VAR tmp0 type=A