diff --git a/j2k/newSrc/org/jetbrains/kotlin/j2k/ConversionsRunner.kt b/j2k/newSrc/org/jetbrains/kotlin/j2k/ConversionsRunner.kt
index 9f357c63b12..f6e670c45d9 100644
--- a/j2k/newSrc/org/jetbrains/kotlin/j2k/ConversionsRunner.kt
+++ b/j2k/newSrc/org/jetbrains/kotlin/j2k/ConversionsRunner.kt
@@ -32,6 +32,7 @@ object ConversionsRunner {
             AssignmentStatementOperatorConversion().runConversion(it, context)
             JavaMethodToKotlinFunctionConversion().runConversion(it, context)
             LiteralConversion().runConversion(it, context)
+            InnerClassConversion().runConversion(it, context)
             ModifiersConversion().runConversion(it, context)
             PolyadicExpressionConversion().runConversion(it, context)
             BinaryExpressionConversion().runConversion(it, context)
diff --git a/j2k/newSrc/org/jetbrains/kotlin/j2k/conversions/InnerClassConversion.kt b/j2k/newSrc/org/jetbrains/kotlin/j2k/conversions/InnerClassConversion.kt
new file mode 100644
index 00000000000..5ed97cd68c8
--- /dev/null
+++ b/j2k/newSrc/org/jetbrains/kotlin/j2k/conversions/InnerClassConversion.kt
@@ -0,0 +1,34 @@
+/*
+ * Copyright 2010-2018 JetBrains s.r.o. Use of this source code is governed by the Apache 2.0 license
+ * that can be found in the license/LICENSE.txt file.
+ */
+
+package org.jetbrains.kotlin.j2k.conversions
+
+import org.jetbrains.kotlin.j2k.tree.*
+import org.jetbrains.kotlin.j2k.tree.JKKtModifier.KtModifierType.INNER
+import org.jetbrains.kotlin.j2k.tree.impl.JKKtModifierImpl
+
+class InnerClassConversion : RecursiveApplicableConversionBase() {
+    override fun applyToElement(element: JKTreeElement): JKTreeElement {
+        if (element !is JKClass) return recurse(element)
+        return recurseArmed(element, element)
+    }
+
+    private fun recurseArmed(element: JKTreeElement, outer: JKClass): JKTreeElement {
+        return applyRecursive(element, outer, ::applyArmed)
+    }
+
+    private fun applyArmed(element: JKTreeElement, outer: JKClass): JKTreeElement {
+        if (element !is JKClass) return recurseArmed(element, outer)
+
+        val static = element.modifierList.modifiers.find { it is JKJavaModifier && it.type == JKJavaModifier.JavaModifierType.STATIC }
+        if (static != null) {
+            element.modifierList.modifiers -= static
+        } else if (element.classKind != JKClass.ClassKind.INTERFACE && outer.classKind != JKClass.ClassKind.INTERFACE) {
+            element.modifierList.modifiers += JKKtModifierImpl(INNER)
+        }
+        return recurseArmed(element, element)
+    }
+
+}
\ No newline at end of file
diff --git a/j2k/newSrc/org/jetbrains/kotlin/j2k/conversions/MatchBasedConversion.kt b/j2k/newSrc/org/jetbrains/kotlin/j2k/conversions/MatchBasedConversion.kt
index ffc6eed2e90..6bd340f4bfc 100644
--- a/j2k/newSrc/org/jetbrains/kotlin/j2k/conversions/MatchBasedConversion.kt
+++ b/j2k/newSrc/org/jetbrains/kotlin/j2k/conversions/MatchBasedConversion.kt
@@ -10,16 +10,16 @@ import org.jetbrains.kotlin.j2k.tree.impl.JKBranchElementBase
 
 abstract class MatchBasedConversion : BaseConversion() {
 
-    fun applyRecursive(element: JKTreeElement, func: (JKTreeElement) -> JKTreeElement): JKTreeElement {
+    fun <T> applyRecursive(element: JKTreeElement, data: T, func: (JKTreeElement, T) -> JKTreeElement): JKTreeElement {
         if (element is JKBranchElementBase) {
             val iter = element.children.listIterator()
             while (iter.hasNext()) {
                 val child = iter.next()
 
                 if (child is List<*>) {
-                    iter.set(applyRecursiveToList(element, child as List<JKTreeElement>, iter, func))
+                    iter.set(applyRecursiveToList(element, child as List<JKTreeElement>, iter, data, func))
                 } else if (child is JKTreeElement) {
-                    val newChild = func(child)
+                    val newChild = func(child, data)
                     if (child !== newChild) {
                         child.detach(element)
                         iter.set(newChild)
@@ -34,15 +34,20 @@ abstract class MatchBasedConversion : BaseConversion() {
         return element
     }
 
-    private inline fun applyRecursiveToList(
+    inline fun applyRecursive(element: JKTreeElement, crossinline func: (JKTreeElement) -> JKTreeElement): JKTreeElement {
+        return applyRecursive(element, null) { it, _ -> func(it) }
+    }
+
+    private inline fun <T> applyRecursiveToList(
         element: JKTreeElement,
         child: List<JKTreeElement>,
         iter: MutableListIterator<Any>,
-        func: (JKTreeElement) -> JKTreeElement
+        data: T,
+        func: (JKTreeElement, T) -> JKTreeElement
     ): List<JKTreeElement> {
 
         val newChild = child.map {
-            func(it)
+            func(it, data)
         }
 
         child.forEach { it.detach(element) }