diff --git a/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/components/KtFirPsiTypeProvider.kt b/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/components/KtFirPsiTypeProvider.kt
index 58d9df37470..2be53e8d10d 100644
--- a/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/components/KtFirPsiTypeProvider.kt
+++ b/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/components/KtFirPsiTypeProvider.kt
@@ -73,26 +73,34 @@ private fun ConeKotlinType.simplifyType(
         currentType = currentType.fullyExpandedType(session)
         currentType = currentType.upperBoundIfFlexible()
         currentType = substitutor.substituteOrSelf(currentType)
-        if (shouldHideLocalType(visibilityForApproximation, isInlineFunction)) {
-            val localTypes: List<ConeKotlinType> = if (isLocal(session)) listOf(this) else {
-                typeArguments.mapNotNull {
-                    if (it is ConeKotlinTypeProjection && it.type.isLocal(session)) {
-                        it.type
-                    } else null
-                }
-            }
-            val unavailableLocalTypes = localTypes.filterNot { it.isLocalButAvailableAtPosition(session, useSitePosition) }
-            // Need to approximate if there are local types that are not available in this scope
-            val needsApproximation = localTypes.isNotEmpty() && unavailableLocalTypes.isNotEmpty()
-            if (needsApproximation) {
-                // TODO: can we approximate local types in type arguments *selectively* ?
-                currentType = PublicTypeApproximator.approximateTypeToPublicDenotable(currentType, session) ?: currentType
-            }
-        }
+        val needLocalTypeApproximation = needLocalTypeApproximation(visibilityForApproximation, isInlineFunction, session, useSitePosition)
+        // TODO: can we approximate local types in type arguments *selectively* ?
+        currentType = PublicTypeApproximator.approximateTypeToPublicDenotable(currentType, session, needLocalTypeApproximation)
+            ?: currentType
+
     } while (oldType !== currentType)
     return currentType
 }
 
+private fun ConeKotlinType.needLocalTypeApproximation(
+    visibilityForApproximation: Visibility,
+    isInlineFunction: Boolean,
+    session: FirSession,
+    useSitePosition: PsiElement
+): Boolean {
+    if (!shouldHideLocalType(visibilityForApproximation, isInlineFunction)) return false
+    val localTypes: List<ConeKotlinType> = if (isLocal(session)) listOf(this) else {
+        typeArguments.mapNotNull {
+            if (it is ConeKotlinTypeProjection && it.type.isLocal(session)) {
+                it.type
+            } else null
+        }
+    }
+    val unavailableLocalTypes = localTypes.filterNot { it.isLocalButAvailableAtPosition(session, useSitePosition) }
+    // Need to approximate if there are local types that are not available in this scope
+    return localTypes.isNotEmpty() && unavailableLocalTypes.isNotEmpty()
+}
+
 // Mimic FirDeclaration.visibilityForApproximation
 private val PsiElement.visibilityForApproximation: Visibility
     get() {
diff --git a/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/components/KtFirTypeProvider.kt b/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/components/KtFirTypeProvider.kt
index 7f609781ea4..207259868b6 100644
--- a/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/components/KtFirTypeProvider.kt
+++ b/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/components/KtFirTypeProvider.kt
@@ -59,7 +59,8 @@ internal class KtFirTypeProvider(
         val coneType = type.coneType
         val approximatedConeType = PublicTypeApproximator.approximateTypeToPublicDenotable(
             coneType,
-            rootModuleSession
+            rootModuleSession,
+            approximateLocalTypes = true,
         )
 
         return approximatedConeType?.asKtType()
diff --git a/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/renderer/FirIdeRenderer.kt b/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/renderer/FirIdeRenderer.kt
index 801f9fa2c36..8b968812e6f 100644
--- a/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/renderer/FirIdeRenderer.kt
+++ b/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/renderer/FirIdeRenderer.kt
@@ -50,7 +50,7 @@ internal class FirIdeRenderer private constructor(
         require(firRef is FirResolvedTypeRef)
 
         val approximatedIfNeeded = approximate.ifTrue {
-            PublicTypeApproximator.approximateTypeToPublicDenotable(firRef.coneType, session)
+            PublicTypeApproximator.approximateTypeToPublicDenotable(firRef.coneType, session, approximateLocalTypes = true)
         } ?: firRef.coneType
         val annotations = if (RendererModifier.ANNOTATIONS in options.modifiers) {
             firRef.annotations
diff --git a/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/types/PublicTypeApproximator.kt b/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/types/PublicTypeApproximator.kt
index 4f0637139bc..0dc48f3274a 100644
--- a/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/types/PublicTypeApproximator.kt
+++ b/analysis/analysis-api-fir/src/org/jetbrains/kotlin/analysis/api/fir/types/PublicTypeApproximator.kt
@@ -14,17 +14,19 @@ internal object PublicTypeApproximator {
     fun approximateTypeToPublicDenotable(
         type: ConeKotlinType,
         session: FirSession,
+        approximateLocalTypes: Boolean
     ): ConeKotlinType? {
         val approximator = session.typeApproximator
-        return approximator.approximateToSuperType(type, PublicApproximatorConfiguration)
+        return approximator.approximateToSuperType(type, PublicApproximatorConfiguration(approximateLocalTypes))
     }
 
-    private object PublicApproximatorConfiguration : TypeApproximatorConfiguration.AllFlexibleSameValue() {
+    private class PublicApproximatorConfiguration(
+        override val localTypes: Boolean
+    ) : TypeApproximatorConfiguration.AllFlexibleSameValue() {
         override val allFlexible: Boolean get() = false
         override val errorType: Boolean get() = true
         override val definitelyNotNullType: Boolean get() = false
         override val integerLiteralType: Boolean get() = true
         override val intersectionTypesInContravariantPositions: Boolean get() = true
-        override val localTypes: Boolean get() = true
     }
 }