diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/diagnostics/Errors.java b/compiler/frontend/src/org/jetbrains/jet/lang/diagnostics/Errors.java
index 512286da2ea..170bdb50f36 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/diagnostics/Errors.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/diagnostics/Errors.java
@@ -116,6 +116,8 @@ public interface Errors {
     DiagnosticFactory0<PsiElement> ANNOTATION_CLASS_WITH_BODY = DiagnosticFactory0.create(ERROR);
     DiagnosticFactory0<JetTypeReference> INVALID_TYPE_OF_ANNOTATION_MEMBER = DiagnosticFactory0.create(ERROR);
     DiagnosticFactory0<JetTypeReference> NULLABLE_TYPE_OF_ANNOTATION_MEMBER = DiagnosticFactory0.create(ERROR);
+    DiagnosticFactory0<JetModifierListOwner> ILLEGAL_ANNOTATION_KEYWORD = DiagnosticFactory0
+            .create(ERROR, modifierSetPosition(JetTokens.ANNOTATION_KEYWORD));
 
     // Classes and traits
 
diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/diagnostics/rendering/DefaultErrorMessages.java b/compiler/frontend/src/org/jetbrains/jet/lang/diagnostics/rendering/DefaultErrorMessages.java
index f3124bddb83..babddf27d93 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/diagnostics/rendering/DefaultErrorMessages.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/diagnostics/rendering/DefaultErrorMessages.java
@@ -436,6 +436,7 @@ public class DefaultErrorMessages {
         MAP.put(ANNOTATION_CLASS_WITH_BODY, "Body is not allowed for annotation class");
         MAP.put(INVALID_TYPE_OF_ANNOTATION_MEMBER, "Invalid type of annotation member");
         MAP.put(NULLABLE_TYPE_OF_ANNOTATION_MEMBER, "An annotation parameter cannot be nullable");
+        MAP.put(ILLEGAL_ANNOTATION_KEYWORD, "''annotation'' keyword is only applicable for class");
 
         MAP.put(DEFAULT_VALUE_NOT_ALLOWED_IN_OVERRIDE, "An overriding function is not allowed to specify default values for its parameters");
 
diff --git a/compiler/frontend/src/org/jetbrains/jet/lang/resolve/DeclarationsChecker.java b/compiler/frontend/src/org/jetbrains/jet/lang/resolve/DeclarationsChecker.java
index 8e152184462..53db624a27f 100644
--- a/compiler/frontend/src/org/jetbrains/jet/lang/resolve/DeclarationsChecker.java
+++ b/compiler/frontend/src/org/jetbrains/jet/lang/resolve/DeclarationsChecker.java
@@ -90,14 +90,17 @@ public class DeclarationsChecker {
 
     }
 
-    private void reportErrorIfHasEnumModifier(JetModifierListOwner declaration) {
+    private void reportErrorIfHasIllegalModifier(JetModifierListOwner declaration) {
         if (declaration.hasModifier(JetTokens.ENUM_KEYWORD)) {
             trace.report(ILLEGAL_ENUM_ANNOTATION.on(declaration));
         }
+        if (declaration.hasModifier(JetTokens.ANNOTATION_KEYWORD)) {
+            trace.report(ILLEGAL_ANNOTATION_KEYWORD.on(declaration));
+        }
     }
     
     private void checkObject(JetObjectDeclaration declaration) {
-        reportErrorIfHasEnumModifier(declaration);
+        reportErrorIfHasIllegalModifier(declaration);
     }
 
     private void checkClass(JetClass aClass, MutableClassDescriptor classDescriptor) {
@@ -114,7 +117,7 @@ public class DeclarationsChecker {
     }
 
     private void checkTraitModifiers(JetClass aClass) {
-        reportErrorIfHasEnumModifier(aClass);
+        reportErrorIfHasIllegalModifier(aClass);
         JetModifierList modifierList = aClass.getModifierList();
         if (modifierList == null) return;
         if (modifierList.hasModifier(JetTokens.FINAL_KEYWORD)) {
@@ -140,7 +143,7 @@ public class DeclarationsChecker {
     }
 
     private void checkProperty(JetProperty property, PropertyDescriptor propertyDescriptor) {
-        reportErrorIfHasEnumModifier(property);
+        reportErrorIfHasIllegalModifier(property);
         DeclarationDescriptor containingDeclaration = propertyDescriptor.getContainingDeclaration();
         if (containingDeclaration instanceof ClassDescriptor) {
             checkPropertyAbstractness(property, propertyDescriptor, (ClassDescriptor) containingDeclaration);
@@ -270,7 +273,7 @@ public class DeclarationsChecker {
     }
 
     protected void checkFunction(JetNamedFunction function, SimpleFunctionDescriptor functionDescriptor) {
-        reportErrorIfHasEnumModifier(function);
+        reportErrorIfHasIllegalModifier(function);
         DeclarationDescriptor containingDescriptor = functionDescriptor.getContainingDeclaration();
         boolean hasAbstractModifier = function.hasModifier(JetTokens.ABSTRACT_KEYWORD);
         checkDeclaredTypeInPublicMember(function, functionDescriptor);
diff --git a/compiler/testData/diagnostics/tests/annotations/annotationModifier.kt b/compiler/testData/diagnostics/tests/annotations/annotationModifier.kt
new file mode 100644
index 00000000000..5327b8ef680
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/annotations/annotationModifier.kt
@@ -0,0 +1,15 @@
+annotation class B
+
+class A {
+   <!ILLEGAL_ANNOTATION_KEYWORD!>annotation<!> class object {}
+}
+
+<!ILLEGAL_ANNOTATION_KEYWORD!>annotation<!> object O {}
+
+<!ILLEGAL_ANNOTATION_KEYWORD!>annotation<!> trait T {}
+
+<!ILLEGAL_ANNOTATION_KEYWORD!>annotation<!> fun f() = 0
+
+<!ILLEGAL_ANNOTATION_KEYWORD!>annotation<!> val x = 0
+
+<!ILLEGAL_ANNOTATION_KEYWORD!>annotation<!> var y = 0
diff --git a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
index 530f0bbe8a7..0fdc118a9c7 100644
--- a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
@@ -550,6 +550,11 @@ public class JetDiagnosticsTestGenerated extends AbstractDiagnosticsTestWithEage
                 doTest("compiler/testData/diagnostics/tests/annotations/AnnotationForObject.kt");
             }
             
+            @TestMetadata("annotationModifier.kt")
+            public void testAnnotationModifier() throws Exception {
+                doTest("compiler/testData/diagnostics/tests/annotations/annotationModifier.kt");
+            }
+            
             @TestMetadata("AnnotationsForClasses.kt")
             public void testAnnotationsForClasses() throws Exception {
                 doTest("compiler/testData/diagnostics/tests/annotations/AnnotationsForClasses.kt");