diff --git a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
index 0f38fa61194..088fa89e36e 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/Errors.java
@@ -892,6 +892,7 @@ public interface Errors {
 
     DiagnosticFactory1<PsiElement, ClassDescriptor> INACCESSIBLE_OUTER_CLASS_EXPRESSION = DiagnosticFactory1.create(ERROR);
     DiagnosticFactory0<KtClass> NESTED_CLASS_NOT_ALLOWED = DiagnosticFactory0.create(ERROR, DECLARATION_NAME);
+    DiagnosticFactory0<KtObjectDeclaration> NESTED_OBJECT_NOT_ALLOWED = DiagnosticFactory0.create(ERROR, DECLARATION_NAME);
 
     //Inline and inlinable parameters
     DiagnosticFactory2<KtElement, DeclarationDescriptor, DeclarationDescriptor> NON_PUBLIC_CALL_FROM_PUBLIC_INLINE = DiagnosticFactory2.create(ERROR, CALL_ELEMENT);
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java
index ae9f3d2c8aa..e94d6d2634c 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/diagnostics/rendering/DefaultErrorMessages.java
@@ -437,6 +437,7 @@ public class DefaultErrorMessages {
 
         MAP.put(INACCESSIBLE_OUTER_CLASS_EXPRESSION, "Expression is inaccessible from a nested class ''{0}'', use ''inner'' keyword to make the class inner", NAME);
         MAP.put(NESTED_CLASS_NOT_ALLOWED, "Nested class is not allowed here, use 'inner' keyword to make the class inner");
+        MAP.put(NESTED_OBJECT_NOT_ALLOWED, "Objects inside inner classes are prohibited");
 
         MAP.put(HAS_NEXT_MISSING, "hasNext() cannot be called on iterator() of type ''{0}''", RENDER_TYPE);
         MAP.put(HAS_NEXT_FUNCTION_AMBIGUITY, "hasNext() is ambiguous for iterator() of type ''{0}''", RENDER_TYPE);
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/resolve/ModifiersChecker.java b/compiler/frontend/src/org/jetbrains/kotlin/resolve/ModifiersChecker.java
index 68716898525..e63e8c0b2c8 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/resolve/ModifiersChecker.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/resolve/ModifiersChecker.java
@@ -36,6 +36,7 @@ import org.jetbrains.kotlin.resolve.checkers.UnderscoreChecker;
 import java.util.*;
 
 import static org.jetbrains.kotlin.diagnostics.Errors.NESTED_CLASS_NOT_ALLOWED;
+import static org.jetbrains.kotlin.diagnostics.Errors.NESTED_OBJECT_NOT_ALLOWED;
 import static org.jetbrains.kotlin.lexer.KtTokens.*;
 import static org.jetbrains.kotlin.psi.KtStubbedPsiUtil.getContainingDeclaration;
 
@@ -219,10 +220,20 @@ public class ModifiersChecker {
 
         public void checkModifiersForDeclaration(@NotNull KtDeclaration modifierListOwner, @NotNull MemberDescriptor descriptor) {
             checkNestedClassAllowed(modifierListOwner, descriptor);
+            checkObjectInsideInnerClass(modifierListOwner, descriptor);
             checkTypeParametersModifiers(modifierListOwner);
             checkModifierListCommon(modifierListOwner, descriptor);
         }
 
+        private void checkObjectInsideInnerClass(@NotNull KtDeclaration modifierListOwner, @NotNull MemberDescriptor descriptor) {
+            if (modifierListOwner instanceof KtObjectDeclaration) {
+                KtObjectDeclaration ktObject = (KtObjectDeclaration) modifierListOwner;
+                if (!ktObject.isLocal() && !ktObject.isCompanion() && isIllegalNestedClass(descriptor)) {
+                    trace.report(NESTED_OBJECT_NOT_ALLOWED.on(ktObject));
+                }
+            }
+        }
+
         private void checkModifierListCommon(@NotNull KtDeclaration modifierListOwner, @NotNull DeclarationDescriptor descriptor) {
             AnnotationUseSiteTargetChecker.INSTANCE.check(modifierListOwner, descriptor, trace);
             runDeclarationCheckers(modifierListOwner, descriptor);
diff --git a/compiler/testData/diagnostics/tests/inner/nestedObject.kt b/compiler/testData/diagnostics/tests/inner/nestedObject.kt
new file mode 100644
index 00000000000..c1f8c0fbf24
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inner/nestedObject.kt
@@ -0,0 +1,12 @@
+// SKIP_TXT
+class Outer {
+    inner class Inner1 {
+        <!NESTED_OBJECT_NOT_ALLOWED!>object Obj1<!>
+
+        <!WRONG_MODIFIER_CONTAINING_DECLARATION!>companion<!> object Obj2
+
+        inner class Inner2 {
+            <!NESTED_OBJECT_NOT_ALLOWED!>object Obj3<!>
+        }
+    }
+}
diff --git a/compiler/testData/diagnostics/tests/modifiers/const/applicability.kt b/compiler/testData/diagnostics/tests/modifiers/const/applicability.kt
index 8f2e23cd075..d343f2ea051 100644
--- a/compiler/testData/diagnostics/tests/modifiers/const/applicability.kt
+++ b/compiler/testData/diagnostics/tests/modifiers/const/applicability.kt
@@ -61,7 +61,7 @@ enum class MyEnum {
 
 class Outer {
     inner class Inner {
-        object C {
+        <!NESTED_OBJECT_NOT_ALLOWED!>object C<!> {
             const val a = 18
         }
     }
diff --git a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
index e2cf60e5579..26afe498131 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
@@ -11425,6 +11425,12 @@ public class DiagnosticsTestGenerated extends AbstractDiagnosticsTest {
                 doTest(fileName);
             }
 
+            @TestMetadata("nestedObject.kt")
+            public void testNestedObject() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/inner/nestedObject.kt");
+                doTest(fileName);
+            }
+
             @TestMetadata("nestedVsInnerAccessOuterMember.kt")
             public void testNestedVsInnerAccessOuterMember() throws Exception {
                 String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/inner/nestedVsInnerAccessOuterMember.kt");