diff --git a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosticCompilerTestFE10TestdataTestGenerated.java b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosticCompilerTestFE10TestdataTestGenerated.java
index 7be124c467a..2e97c95dbb8 100644
--- a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosticCompilerTestFE10TestdataTestGenerated.java
+++ b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosticCompilerTestFE10TestdataTestGenerated.java
@@ -3838,6 +3838,12 @@ public class DiagnosticCompilerTestFE10TestdataTestGenerated extends AbstractDia
                 KtTestUtil.assertAllTestsPresentByMetadataWithExcluded(this.getClass(), new File("compiler/testData/diagnostics/tests/builderInference"), Pattern.compile("^(.+)\\.(kt|kts)$"), Pattern.compile("^(.+)\\.(reversed|fir|ll)\\.kts?$"), true);
             }
 
+            @Test
+            @TestMetadata("overloadResolutionByLambdaReturnType.kt")
+            public void testOverloadResolutionByLambdaReturnType() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.kt");
+            }
+
             @Nested
             @TestMetadata("compiler/testData/diagnostics/tests/builderInference/issues")
             @TestDataPath("$PROJECT_ROOT")
diff --git a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated.java b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated.java
index 81ee01406e2..d9d6e8fb92b 100644
--- a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated.java
+++ b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated.java
@@ -3838,6 +3838,12 @@ public class LLFirPreresolvedReversedDiagnosticCompilerFE10TestDataTestGenerated
                 KtTestUtil.assertAllTestsPresentByMetadataWithExcluded(this.getClass(), new File("compiler/testData/diagnostics/tests/builderInference"), Pattern.compile("^(.+)\\.(kt|kts)$"), Pattern.compile("^(.+)\\.(reversed|fir|ll)\\.kts?$"), true);
             }
 
+            @Test
+            @TestMetadata("overloadResolutionByLambdaReturnType.kt")
+            public void testOverloadResolutionByLambdaReturnType() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.kt");
+            }
+
             @Nested
             @TestMetadata("compiler/testData/diagnostics/tests/builderInference/issues")
             @TestDataPath("$PROJECT_ROOT")
diff --git a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirLightTreeOldFrontendDiagnosticsTestGenerated.java b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirLightTreeOldFrontendDiagnosticsTestGenerated.java
index e646045f8c0..d9e61555e70 100644
--- a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirLightTreeOldFrontendDiagnosticsTestGenerated.java
+++ b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirLightTreeOldFrontendDiagnosticsTestGenerated.java
@@ -3832,6 +3832,12 @@ public class FirLightTreeOldFrontendDiagnosticsTestGenerated extends AbstractFir
                 KtTestUtil.assertAllTestsPresentByMetadataWithExcluded(this.getClass(), new File("compiler/testData/diagnostics/tests/builderInference"), Pattern.compile("^(.+)\\.kt$"), Pattern.compile("^(.+)\\.(reversed|fir|ll)\\.kts?$"), true, "multiplatform");
             }
 
+            @Test
+            @TestMetadata("overloadResolutionByLambdaReturnType.kt")
+            public void testOverloadResolutionByLambdaReturnType() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.kt");
+            }
+
             @Nested
             @TestMetadata("compiler/testData/diagnostics/tests/builderInference/issues")
             @TestDataPath("$PROJECT_ROOT")
diff --git a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirPsiOldFrontendDiagnosticsTestGenerated.java b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirPsiOldFrontendDiagnosticsTestGenerated.java
index 055f6576689..c9bbe53a75a 100644
--- a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirPsiOldFrontendDiagnosticsTestGenerated.java
+++ b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirPsiOldFrontendDiagnosticsTestGenerated.java
@@ -3838,6 +3838,12 @@ public class FirPsiOldFrontendDiagnosticsTestGenerated extends AbstractFirPsiDia
                 KtTestUtil.assertAllTestsPresentByMetadataWithExcluded(this.getClass(), new File("compiler/testData/diagnostics/tests/builderInference"), Pattern.compile("^(.*)\\.kts?$"), Pattern.compile("^(.+)\\.(reversed|fir|ll)\\.kts?$"), true, "multiplatform");
             }
 
+            @Test
+            @TestMetadata("overloadResolutionByLambdaReturnType.kt")
+            public void testOverloadResolutionByLambdaReturnType() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.kt");
+            }
+
             @Nested
             @TestMetadata("compiler/testData/diagnostics/tests/builderInference/issues")
             @TestDataPath("$PROJECT_ROOT")
diff --git a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/FirOverloadByLambdaReturnTypeResolver.kt b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/FirOverloadByLambdaReturnTypeResolver.kt
index 74a476c881e..cbe7016f4a1 100644
--- a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/FirOverloadByLambdaReturnTypeResolver.kt
+++ b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/FirOverloadByLambdaReturnTypeResolver.kt
@@ -118,6 +118,7 @@ class FirOverloadByLambdaReturnTypeResolver(
                 firstAtom,
                 firstCandidate,
                 forOverloadByLambdaReturnType = true,
+                // we explicitly decided not to use PCLA in that case because this case didn't work before in K1
                 withPCLASession = false,
             )
             while (iterator.hasNext()) {
diff --git a/compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.fir.kt b/compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.fir.kt
new file mode 100644
index 00000000000..bad9c381be5
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.fir.kt
@@ -0,0 +1,17 @@
+// WITH_STDLIB
+
+import kotlin.experimental.ExperimentalTypeInference
+
+@OptIn(ExperimentalTypeInference::class)
+@OverloadResolutionByLambdaReturnType
+fun <E1> buildL(x: MutableList<E1>.() -> Int): Int = 1
+@OptIn(ExperimentalTypeInference::class)
+@OverloadResolutionByLambdaReturnType
+fun <E2> buildL(x: MutableList<E2>.() -> String): String = ""
+
+fun main() {
+    <!OVERLOAD_RESOLUTION_AMBIGUITY!>buildL<!> {
+        <!UNRESOLVED_REFERENCE!>add<!>("")
+        ""
+    }
+}
diff --git a/compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.kt b/compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.kt
new file mode 100644
index 00000000000..812b37503b2
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.kt
@@ -0,0 +1,17 @@
+// WITH_STDLIB
+
+import kotlin.experimental.ExperimentalTypeInference
+
+@OptIn(ExperimentalTypeInference::class)
+@OverloadResolutionByLambdaReturnType
+fun <E1> buildL(x: MutableList<E1>.() -> Int): Int = 1
+@OptIn(ExperimentalTypeInference::class)
+@OverloadResolutionByLambdaReturnType
+fun <E2> buildL(x: MutableList<E2>.() -> String): String = ""
+
+fun main() {
+    <!NONE_APPLICABLE!>buildL<!> {
+        <!UNRESOLVED_REFERENCE!>add<!>("")
+        ""
+    }
+}
diff --git a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
index bb1433acff6..77638b596ba 100644
--- a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
+++ b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
@@ -3838,6 +3838,12 @@ public class DiagnosticTestGenerated extends AbstractDiagnosticTest {
                 KtTestUtil.assertAllTestsPresentByMetadataWithExcluded(this.getClass(), new File("compiler/testData/diagnostics/tests/builderInference"), Pattern.compile("^(.*)\\.kts?$"), Pattern.compile("^(.+)\\.(reversed|fir|ll)\\.kts?$"), true);
             }
 
+            @Test
+            @TestMetadata("overloadResolutionByLambdaReturnType.kt")
+            public void testOverloadResolutionByLambdaReturnType() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/builderInference/overloadResolutionByLambdaReturnType.kt");
+            }
+
             @Nested
             @TestMetadata("compiler/testData/diagnostics/tests/builderInference/issues")
             @TestDataPath("$PROJECT_ROOT")