diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/psi/JetPsiUtil.java b/compiler/frontend/src/org/jetbrains/jet/lang/psi/JetPsiUtil.java
index a35cf47b33f..088a1c8f70d 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/psi/JetPsiUtil.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/psi/JetPsiUtil.java
@@ -536,6 +536,10 @@ public class JetPsiUtil {
         return statements.isEmpty() ? null : statements.get(statements.size() - 1);
     }
 
+    public static boolean isLocalClass(@NotNull JetClassOrObject classOrObject) {
+        return getOutermostClassOrObject(classOrObject) == null;
+    }
+
     @Nullable
     public static JetClassOrObject getOutermostClassOrObject(@NotNull JetClassOrObject classOrObject) {
         JetClassOrObject current = classOrObject;
diff --git a/compiler/testData/psiUtil/isLocalClass.kt b/compiler/testData/psiUtil/isLocalClass.kt
new file mode 100644
index 00000000000..fc68f742e33
--- /dev/null
+++ b/compiler/testData/psiUtil/isLocalClass.kt
@@ -0,0 +1,21 @@
+class A {
+  class B
+  object G
+
+  class object {
+    class C
+    object H
+
+    fun foo() {
+      class DLocal
+      object KLocal
+    }
+  }
+
+  fun foo2() {
+    class ELocal {
+      class FLocal
+    }
+    object LLocal
+  }
+}
diff --git a/compiler/tests/org/jetbrains/jet/lang/psi/JetPsiUtilTest.java b/compiler/tests/org/jetbrains/jet/lang/psi/JetPsiUtilTest.java
index d1d52eaa002..e58f05676cf 100644
--- a/compiler/tests/org/jetbrains/jet/lang/psi/JetPsiUtilTest.java
+++ b/compiler/tests/org/jetbrains/jet/lang/psi/JetPsiUtilTest.java
@@ -16,6 +16,7 @@
 
 package org.jetbrains.jet.lang.psi;
 
+import com.intellij.openapi.util.io.FileUtil;
 import com.intellij.psi.util.PsiTreeUtil;
 import junit.framework.Assert;
 import org.jetbrains.jet.JetLiteFixture;
@@ -25,8 +26,11 @@ import org.jetbrains.jet.lang.resolve.ImportPath;
 import org.jetbrains.jet.lang.resolve.name.FqName;
 import org.jetbrains.jet.lang.resolve.name.Name;
 
+import java.io.File;
+import java.io.IOException;
+import java.util.Collection;
+
 public class JetPsiUtilTest extends JetLiteFixture {
-    
     public void testUnquotedIdentifier() {
         Assert.assertEquals("", JetPsiUtil.unquoteIdentifier(""));
         Assert.assertEquals("a2", JetPsiUtil.unquoteIdentifier("a2"));
@@ -63,6 +67,24 @@ public class JetPsiUtilTest extends JetLiteFixture {
         Assert.assertNotSame(new ImportPath(new FqName("some.test"), false), getImportPathFromParsed("import some.Test"));
     }
 
+    public void testIsLocalClass() throws IOException {
+        String text = FileUtil.loadFile(new File(getTestDataPath() + "/psiUtil/isLocalClass.kt"));
+        JetClass aClass = JetPsiFactory.createClass(getProject(), text);
+
+        @SuppressWarnings("unchecked")
+        Collection<JetClassOrObject> classOrObjects = PsiTreeUtil.collectElementsOfType(aClass, JetClassOrObject.class);
+
+        for (JetClassOrObject classOrObject : classOrObjects) {
+            String classOrObjectName = classOrObject.getName();
+            if (classOrObjectName != null && classOrObjectName.contains("Local")) {
+                assertTrue("JetPsiUtil.isLocalClass should return true for " + classOrObjectName, JetPsiUtil.isLocalClass(classOrObject));
+            }
+            else {
+                assertFalse("JetPsiUtil.isLocalClass should return false for " + classOrObjectName, JetPsiUtil.isLocalClass(classOrObject));
+            }
+        }
+    }
+
     @Override
     protected JetCoreEnvironment createEnvironment() {
         return new JetCoreEnvironment(getTestRootDisposable(), new CompilerConfiguration());