diff --git a/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationErrors.java b/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationErrors.java
index 544e220addb..9d9add41cd5 100644
--- a/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationErrors.java
+++ b/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationErrors.java
@@ -1,5 +1,5 @@
 /*
- * Copyright 2010-2020 JetBrains s.r.o. and Kotlin Programming Language contributors.
+ * Copyright 2010-2021 JetBrains s.r.o. and Kotlin Programming Language contributors.
  * Use of this source code is governed by the Apache 2.0 license that can be found in the license/LICENSE.txt file.
  */
 
@@ -16,6 +16,7 @@ import static org.jetbrains.kotlin.diagnostics.Severity.WARNING;
 public interface SerializationErrors {
     DiagnosticFactory2<PsiElement, String, String> INLINE_CLASSES_NOT_SUPPORTED = DiagnosticFactory2.create(ERROR);
     DiagnosticFactory0<PsiElement> PLUGIN_IS_NOT_ENABLED = DiagnosticFactory0.create(WARNING);
+    DiagnosticFactory0<PsiElement> LOCAL_CLASSES_NOT_SUPPORTED = DiagnosticFactory0.create(ERROR);
 
     DiagnosticFactory0<PsiElement> EXPLICIT_SERIALIZABLE_IS_REQUIRED = DiagnosticFactory0.create(WARNING);
 
diff --git a/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationPluginDeclarationChecker.kt b/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationPluginDeclarationChecker.kt
index 9d9458fd1f0..59d86c30b7d 100644
--- a/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationPluginDeclarationChecker.kt
+++ b/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationPluginDeclarationChecker.kt
@@ -1,5 +1,5 @@
 /*
- * Copyright 2010-2020 JetBrains s.r.o. and Kotlin Programming Language contributors.
+ * Copyright 2010-2021 JetBrains s.r.o. and Kotlin Programming Language contributors.
  * Use of this source code is governed by the Apache 2.0 license that can be found in the license/LICENSE.txt file.
  */
 
@@ -13,16 +13,10 @@ import org.jetbrains.kotlin.descriptors.annotations.Annotated
 import org.jetbrains.kotlin.diagnostics.DiagnosticFactory0
 import org.jetbrains.kotlin.js.resolve.diagnostics.findPsi
 import org.jetbrains.kotlin.psi.*
-import org.jetbrains.kotlin.resolve.BindingTrace
+import org.jetbrains.kotlin.resolve.*
 import org.jetbrains.kotlin.resolve.checkers.DeclarationChecker
 import org.jetbrains.kotlin.resolve.checkers.DeclarationCheckerContext
-import org.jetbrains.kotlin.resolve.descriptorUtil.fqNameSafe
-import org.jetbrains.kotlin.resolve.descriptorUtil.getSuperClassOrAny
-import org.jetbrains.kotlin.resolve.descriptorUtil.getSuperInterfaces
-import org.jetbrains.kotlin.resolve.descriptorUtil.module
-import org.jetbrains.kotlin.resolve.hasBackingField
-import org.jetbrains.kotlin.resolve.isInlineClass
-import org.jetbrains.kotlin.resolve.isInlineClassType
+import org.jetbrains.kotlin.resolve.descriptorUtil.*
 import org.jetbrains.kotlin.resolve.jvm.annotations.TRANSIENT_ANNOTATION_FQ_NAME
 import org.jetbrains.kotlin.resolve.lazy.descriptors.LazyAnnotationDescriptor
 import org.jetbrains.kotlin.resolve.source.getPsi
@@ -123,6 +117,12 @@ open class SerializationPluginDeclarationChecker : DeclarationChecker {
             return false
         }
 
+
+        if (DescriptorUtils.isLocal(descriptor)) {
+            trace.reportOnSerializableAnnotation(descriptor, SerializationErrors.LOCAL_CLASSES_NOT_SUPPORTED)
+            return false
+        }
+
         if (descriptor.isInlineClass() && !canSupportInlineClasses(descriptor.module, trace)) {
             descriptor.onSerializableAnnotation {
                 trace.report(
diff --git a/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationPluginErrorsRendering.kt b/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationPluginErrorsRendering.kt
index 30e1a185f61..f65ad68ab40 100644
--- a/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationPluginErrorsRendering.kt
+++ b/plugins/kotlin-serialization/kotlin-serialization-compiler/src/org/jetbrains/kotlinx/serialization/compiler/diagnostic/SerializationPluginErrorsRendering.kt
@@ -1,5 +1,5 @@
 /*
- * Copyright 2010-2020 JetBrains s.r.o. and Kotlin Programming Language contributors.
+ * Copyright 2010-2021 JetBrains s.r.o. and Kotlin Programming Language contributors.
  * Use of this source code is governed by the Apache 2.0 license that can be found in the license/LICENSE.txt file.
  */
 
@@ -25,6 +25,10 @@ object SerializationPluginErrorsRendering : DefaultErrorMessages.Extension {
             "kotlinx.serialization compiler plugin is not applied to the module, so this annotation would not be processed. " +
                     "Make sure that you've setup your buildscript correctly and re-import project."
         )
+        MAP.put(
+            SerializationErrors.LOCAL_CLASSES_NOT_SUPPORTED,
+            "Local class and anonymous objects can not be serializable"
+        )
         MAP.put(
             SerializationErrors.EXPLICIT_SERIALIZABLE_IS_REQUIRED,
             "Explicit @Serializable annotation on enum class is required when @SerialName or @SerialInfo annotations are used on its members."
diff --git a/plugins/kotlin-serialization/kotlin-serialization-compiler/test/org/jetbrains/kotlinx/serialization/SerializationPluginDiagnosticTestGenerated.java b/plugins/kotlin-serialization/kotlin-serialization-compiler/test/org/jetbrains/kotlinx/serialization/SerializationPluginDiagnosticTestGenerated.java
index aea196ded15..dce54ff1bf9 100644
--- a/plugins/kotlin-serialization/kotlin-serialization-compiler/test/org/jetbrains/kotlinx/serialization/SerializationPluginDiagnosticTestGenerated.java
+++ b/plugins/kotlin-serialization/kotlin-serialization-compiler/test/org/jetbrains/kotlinx/serialization/SerializationPluginDiagnosticTestGenerated.java
@@ -49,6 +49,11 @@ public class SerializationPluginDiagnosticTestGenerated extends AbstractSerializ
         runTest("plugins/kotlin-serialization/kotlin-serialization-compiler/testData/diagnostics/LazyRecursionBug.kt");
     }
 
+    @TestMetadata("LocalAndAnonymous.kt")
+    public void testLocalAndAnonymous() throws Exception {
+        runTest("plugins/kotlin-serialization/kotlin-serialization-compiler/testData/diagnostics/LocalAndAnonymous.kt");
+    }
+
     @TestMetadata("NoSuitableCtorInParent.kt")
     public void testNoSuitableCtorInParent() throws Exception {
         runTest("plugins/kotlin-serialization/kotlin-serialization-compiler/testData/diagnostics/NoSuitableCtorInParent.kt");
diff --git a/plugins/kotlin-serialization/kotlin-serialization-compiler/testData/diagnostics/LocalAndAnonymous.kt b/plugins/kotlin-serialization/kotlin-serialization-compiler/testData/diagnostics/LocalAndAnonymous.kt
new file mode 100644
index 00000000000..81dcf9afeb5
--- /dev/null
+++ b/plugins/kotlin-serialization/kotlin-serialization-compiler/testData/diagnostics/LocalAndAnonymous.kt
@@ -0,0 +1,18 @@
+// !DIAGNOSTICS: -UNUSED_PARAMETER,-UNUSED_VARIABLE
+// WITH_RUNTIME
+// SKIP_TXT
+
+import kotlinx.serialization.*
+
+fun container() {
+    <!LOCAL_CLASSES_NOT_SUPPORTED!>@Serializable<!>
+    class X
+
+    val y = <!LOCAL_CLASSES_NOT_SUPPORTED!>@Serializable<!> object {}
+}
+
+val topLevelAnon = <!LOCAL_CLASSES_NOT_SUPPORTED!>@Serializable<!> object {}
+
+@Serializable class A {
+    @Serializable class B // nesting classes are allowed
+}
\ No newline at end of file