diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/resolve/DescriptorResolver.java b/compiler/frontend/src/org/jetbrains/jet/lang/resolve/DescriptorResolver.java
index 86710ab25c9..5fae6c49bcf 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/resolve/DescriptorResolver.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/resolve/DescriptorResolver.java
@@ -264,7 +264,7 @@ public class DescriptorResolver {
                 type = typeResolver.resolveType(parameterScope, typeReference, trace, true);
             }
 
-            ValueParameterDescriptor valueParameterDescriptor = resolveValueParameterDescriptor(functionDescriptor, valueParameter, i, type, trace);
+            ValueParameterDescriptor valueParameterDescriptor = resolveValueParameterDescriptor(parameterScope, functionDescriptor, valueParameter, i, type, trace);
             parameterScope.addVariableDescriptor(valueParameterDescriptor);
             result.add(valueParameterDescriptor);
         }
@@ -272,7 +272,7 @@ public class DescriptorResolver {
     }
 
     @NotNull
-    public MutableValueParameterDescriptor resolveValueParameterDescriptor(DeclarationDescriptor declarationDescriptor, JetParameter valueParameter, int index, JetType type, BindingTrace trace) {
+    public MutableValueParameterDescriptor resolveValueParameterDescriptor(JetScope scope, DeclarationDescriptor declarationDescriptor, JetParameter valueParameter, int index, JetType type, BindingTrace trace) {
         JetType varargElementType = null;
         JetType variableType = type;
         if (valueParameter.hasModifier(JetTokens.VARARG_KEYWORD)) {
@@ -282,7 +282,7 @@ public class DescriptorResolver {
         MutableValueParameterDescriptor valueParameterDescriptor = new ValueParameterDescriptorImpl(
                 declarationDescriptor,
                 index,
-                annotationResolver.createAnnotationStubs(valueParameter.getModifierList(), trace),
+                annotationResolver.resolveAnnotations(scope, valueParameter.getModifierList(), trace),
                 JetPsiUtil.safeName(valueParameter.getName()),
                 valueParameter.isMutable(),
                 variableType,
@@ -735,7 +735,7 @@ public class DescriptorResolver {
                     }
                 }
 
-                MutableValueParameterDescriptor valueParameterDescriptor = resolveValueParameterDescriptor(setterDescriptor, parameter, 0, type, trace);
+                MutableValueParameterDescriptor valueParameterDescriptor = resolveValueParameterDescriptor(scope, setterDescriptor, parameter, 0, type, trace);
                 setterDescriptor.initialize(valueParameterDescriptor);
             }
             else {
diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/types/expressions/ClosureExpressionsTypingVisitor.java b/compiler/frontend/src/org/jetbrains/jet/lang/types/expressions/ClosureExpressionsTypingVisitor.java
index 8ea9a700549..c0a400931f8 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/types/expressions/ClosureExpressionsTypingVisitor.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/types/expressions/ClosureExpressionsTypingVisitor.java
@@ -195,7 +195,8 @@ public class ClosureExpressionsTypingVisitor extends ExpressionTypingVisitor {
                         type = ErrorUtils.createErrorType("Cannot be inferred");
                     }
                 }
-                ValueParameterDescriptor valueParameterDescriptor = context.expressionTypingServices.getDescriptorResolver().resolveValueParameterDescriptor(functionDescriptor, declaredParameter, i, type, context.trace);
+                ValueParameterDescriptor valueParameterDescriptor = context.expressionTypingServices.getDescriptorResolver().resolveValueParameterDescriptor(
+                        context.scope, functionDescriptor, declaredParameter, i, type, context.trace);
                 valueParameterDescriptors.add(valueParameterDescriptor);
             }
         }
diff --git a/compiler/testData/diagnostics/tests/annotations/kt1860-negative.jet b/compiler/testData/diagnostics/tests/annotations/kt1860-negative.jet
new file mode 100644
index 00000000000..620011f493a
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/annotations/kt1860-negative.jet
@@ -0,0 +1,9 @@
+fun foo(<!UNRESOLVED_REFERENCE!>varargs<!> <!UNUSED_PARAMETER!>f<!> : Int) {}
+
+var bar : Int = 1
+  set(<!UNRESOLVED_REFERENCE!>varargs<!> v) {}
+
+val x : (Int) -> Int = {([<!UNRESOLVED_REFERENCE!>varargs<!>] x : Int) -> x}
+
+class Hello(<!UNRESOLVED_REFERENCE!>varargs<!> args: Any) {
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/annotations/kt1860-positive.jet b/compiler/testData/diagnostics/tests/annotations/kt1860-positive.jet
new file mode 100644
index 00000000000..bf00815f64a
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/annotations/kt1860-positive.jet
@@ -0,0 +1,11 @@
+annotation class test {}
+
+fun foo(test <!UNUSED_PARAMETER!>f<!> : Int) {}
+
+var bar : Int = 1
+    set(test v) {}
+
+val x : (Int) -> Int = {([test] x : Int) -> x}
+
+class Hello(test args: Any) {
+}
\ No newline at end of file