diff --git a/compiler/testData/diagnostics/tests/subtyping/localAnonymousObjects.kt b/compiler/testData/diagnostics/tests/subtyping/localAnonymousObjects.kt
new file mode 100644
index 00000000000..50474190430
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/subtyping/localAnonymousObjects.kt
@@ -0,0 +1,5 @@
+// !DIAGNOSTICS: -ASSIGNED_BUT_NEVER_ACCESSED_VARIABLE -UNUSED_VALUE
+fun test() {
+    var x = object {}
+    x = <!TYPE_MISMATCH!>object<!> {}
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/subtyping/localClasses.kt b/compiler/testData/diagnostics/tests/subtyping/localClasses.kt
new file mode 100644
index 00000000000..cba517113e2
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/subtyping/localClasses.kt
@@ -0,0 +1,22 @@
+// !DIAGNOSTICS: -ASSIGNED_BUT_NEVER_ACCESSED_VARIABLE -UNUSED_VALUE -UNUSED_PARAMETER
+
+package p
+
+fun run<T>(f: () -> T): T {
+    return f()
+}
+
+fun foo(a: Int) = run {
+    class A
+    A()
+}
+
+fun foo() = run {
+    class A
+    A()
+}
+
+fun test() {
+    var x = foo(1)
+    x = <!TYPE_MISMATCH!>foo()<!>
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/subtyping/memberAnonymousObjects.kt b/compiler/testData/diagnostics/tests/subtyping/memberAnonymousObjects.kt
new file mode 100644
index 00000000000..63539f6e7aa
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/subtyping/memberAnonymousObjects.kt
@@ -0,0 +1,6 @@
+class Test {
+    private var x = object {};
+    {
+        x = <!TYPE_MISMATCH!>object<!> {}
+    }
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/subtyping/nestedIntoLocalClasses.kt b/compiler/testData/diagnostics/tests/subtyping/nestedIntoLocalClasses.kt
new file mode 100644
index 00000000000..29a83e8f77d
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/subtyping/nestedIntoLocalClasses.kt
@@ -0,0 +1,26 @@
+// !DIAGNOSTICS: -ASSIGNED_BUT_NEVER_ACCESSED_VARIABLE -UNUSED_VALUE -UNUSED_PARAMETER
+
+package p
+
+fun run<T>(f: () -> T): T {
+    return f()
+}
+
+fun foo(a: Int) = run {
+    object {
+        inner class A
+        fun foo() = A()
+    }.foo()
+}
+
+fun foo() = run {
+    object {
+        inner class A
+        fun foo() = A()
+    }.foo()
+}
+
+fun test() {
+    var x = foo(1)
+    x = <!TYPE_MISMATCH!>foo()<!>
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/subtyping/nestedLocalClasses.kt b/compiler/testData/diagnostics/tests/subtyping/nestedLocalClasses.kt
new file mode 100644
index 00000000000..61f73e2d348
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/subtyping/nestedLocalClasses.kt
@@ -0,0 +1,26 @@
+// !DIAGNOSTICS: -ASSIGNED_BUT_NEVER_ACCESSED_VARIABLE -UNUSED_VALUE -UNUSED_PARAMETER
+
+package p
+
+fun run<T>(f: () -> T): T {
+    return f()
+}
+
+fun foo(a: Int) = run {
+    class A {
+        inner class B
+    }
+    A().B()
+}
+
+fun foo() = run {
+    class A {
+        inner class B
+    }
+    A().B()
+}
+
+fun test() {
+    var x = foo(1)
+    x = <!TYPE_MISMATCH!>foo()<!>
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/subtyping/topLevelAnonymousObjects.kt b/compiler/testData/diagnostics/tests/subtyping/topLevelAnonymousObjects.kt
new file mode 100644
index 00000000000..ffb3be8356c
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/subtyping/topLevelAnonymousObjects.kt
@@ -0,0 +1,6 @@
+private var x = object {}
+
+fun test() {
+    // No error, because the type of x is normalized to Any
+    x = object {}
+}
\ No newline at end of file
diff --git a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
index 3b1ba774e8d..efb95e3e568 100644
--- a/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/jet/checkers/JetDiagnosticsTestGenerated.java
@@ -6917,6 +6917,36 @@ public class JetDiagnosticsTestGenerated extends AbstractJetDiagnosticsTest {
                 doTest("compiler/testData/diagnostics/tests/subtyping/kt-1457.kt");
             }
             
+            @TestMetadata("localAnonymousObjects.kt")
+            public void testLocalAnonymousObjects() throws Exception {
+                doTest("compiler/testData/diagnostics/tests/subtyping/localAnonymousObjects.kt");
+            }
+            
+            @TestMetadata("localClasses.kt")
+            public void testLocalClasses() throws Exception {
+                doTest("compiler/testData/diagnostics/tests/subtyping/localClasses.kt");
+            }
+            
+            @TestMetadata("memberAnonymousObjects.kt")
+            public void testMemberAnonymousObjects() throws Exception {
+                doTest("compiler/testData/diagnostics/tests/subtyping/memberAnonymousObjects.kt");
+            }
+            
+            @TestMetadata("nestedIntoLocalClasses.kt")
+            public void testNestedIntoLocalClasses() throws Exception {
+                doTest("compiler/testData/diagnostics/tests/subtyping/nestedIntoLocalClasses.kt");
+            }
+            
+            @TestMetadata("nestedLocalClasses.kt")
+            public void testNestedLocalClasses() throws Exception {
+                doTest("compiler/testData/diagnostics/tests/subtyping/nestedLocalClasses.kt");
+            }
+            
+            @TestMetadata("topLevelAnonymousObjects.kt")
+            public void testTopLevelAnonymousObjects() throws Exception {
+                doTest("compiler/testData/diagnostics/tests/subtyping/topLevelAnonymousObjects.kt");
+            }
+            
         }
         
         @TestMetadata("compiler/testData/diagnostics/tests/suppress")
diff --git a/core/descriptors/src/org/jetbrains/jet/lang/resolve/DescriptorUtils.java b/core/descriptors/src/org/jetbrains/jet/lang/resolve/DescriptorUtils.java
index 9205806bb2c..304d417863b 100644
--- a/core/descriptors/src/org/jetbrains/jet/lang/resolve/DescriptorUtils.java
+++ b/core/descriptors/src/org/jetbrains/jet/lang/resolve/DescriptorUtils.java
@@ -101,6 +101,20 @@ public class DescriptorUtils {
         return false;
     }
 
+    /**
+     * descriptor may be local itself or have a local ancestor
+     */
+    public static boolean isLocal(@NotNull DeclarationDescriptor descriptor) {
+        DeclarationDescriptor current = descriptor;
+        while (current instanceof MemberDescriptor) {
+            if (isAnonymousObject(current) || ((DeclarationDescriptorWithVisibility) current).getVisibility() == Visibilities.LOCAL) {
+                return true;
+            }
+            current = current.getContainingDeclaration();
+        }
+        return false;
+    }
+
     @NotNull
     public static FqNameUnsafe getFqName(@NotNull DeclarationDescriptor descriptor) {
         FqName safe = getFqNameSafeIfPossible(descriptor);
diff --git a/core/descriptors/src/org/jetbrains/jet/lang/types/AbstractClassTypeConstructor.java b/core/descriptors/src/org/jetbrains/jet/lang/types/AbstractClassTypeConstructor.java
index 6bb5ffe86e0..2def3268254 100644
--- a/core/descriptors/src/org/jetbrains/jet/lang/types/AbstractClassTypeConstructor.java
+++ b/core/descriptors/src/org/jetbrains/jet/lang/types/AbstractClassTypeConstructor.java
@@ -41,8 +41,8 @@ public abstract class AbstractClassTypeConstructor implements TypeConstructor {
         ClassifierDescriptor otherDescriptor = ((TypeConstructor) other).getDeclarationDescriptor();
 
         // All error types have the same descriptor
-        if (myDescriptor != null && ErrorUtils.isError(myDescriptor)
-            || otherDescriptor != null && ErrorUtils.isError(otherDescriptor)) {
+        if (myDescriptor != null && !hasMeaningfulFqName(myDescriptor) ||
+            otherDescriptor != null && !hasMeaningfulFqName(otherDescriptor)) {
             return me == other;
         }
 
@@ -65,4 +65,9 @@ public abstract class AbstractClassTypeConstructor implements TypeConstructor {
         }
         return System.identityHashCode(me);
     }
+
+    private static boolean hasMeaningfulFqName(@NotNull ClassifierDescriptor descriptor) {
+        return !ErrorUtils.isError(descriptor) &&
+               !DescriptorUtils.isLocal(descriptor);
+    }
 }