diff --git a/compiler/frontend/src/org/jetbrains/kotlin/types/expressions/ControlStructureTypingVisitor.java b/compiler/frontend/src/org/jetbrains/kotlin/types/expressions/ControlStructureTypingVisitor.java
index abd9ae834d4..f1e582641c7 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/types/expressions/ControlStructureTypingVisitor.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/types/expressions/ControlStructureTypingVisitor.java
@@ -470,9 +470,11 @@ public class ControlStructureTypingVisitor extends ExpressionTypingVisitor {
         List<KtCatchClause> catchClauses = expression.getCatchClauses();
         KtFinallySection finallyBlock = expression.getFinallyBlock();
         List<KotlinType> types = new ArrayList<KotlinType>();
+        boolean nothingInAllCatchBranches = true;
         for (KtCatchClause catchClause : catchClauses) {
             KtParameter catchParameter = catchClause.getCatchParameter();
             KtExpression catchBody = catchClause.getCatchBody();
+            boolean nothingInCatchBranch = false;
             if (catchParameter != null) {
                 components.identifierChecker.checkDeclaration(catchParameter, context.trace);
                 ModifiersChecker.ModifiersCheckingProcedure modifiersChecking = components.modifiersChecker.withTrace(context.trace);
@@ -494,18 +496,28 @@ public class ControlStructureTypingVisitor extends ExpressionTypingVisitor {
                     KotlinType type = facade.getTypeInfo(catchBody, context.replaceScope(catchScope)).getType();
                     if (type != null) {
                         types.add(type);
+                        if (KotlinBuiltIns.isNothing(type)) {
+                            nothingInCatchBranch = true;
+                        }
                     }
                 }
             }
+            if (!nothingInCatchBranch) {
+                nothingInAllCatchBranches =  false;
+            }
         }
 
         KotlinTypeInfo result = TypeInfoFactoryKt.noTypeInfo(context);
+        KotlinTypeInfo tryResult = facade.getTypeInfo(tryBlock, context);
         if (finallyBlock != null) {
             result = facade.getTypeInfo(finallyBlock.getFinalExpression(),
                                         context.replaceExpectedType(NO_EXPECTED_TYPE));
         }
+        else if (nothingInAllCatchBranches) {
+            result = tryResult;
+        }
 
-        KotlinType type = facade.getTypeInfo(tryBlock, context).getType();
+        KotlinType type = tryResult.getType();
         if (type != null) {
             types.add(type);
         }
diff --git a/compiler/testData/diagnostics/tests/smartCasts/varnotnull/initInTryReturnInCatch.kt b/compiler/testData/diagnostics/tests/smartCasts/varnotnull/initInTryReturnInCatch.kt
new file mode 100644
index 00000000000..8ef22d30b74
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/smartCasts/varnotnull/initInTryReturnInCatch.kt
@@ -0,0 +1,80 @@
+// See also KT-10735
+fun test() {
+    var a: Int?
+    try {
+        a = 3
+    }
+    catch (e: Exception) {
+        return
+    }
+    <!DEBUG_INFO_SMARTCAST!>a<!>.hashCode() // a is never null here
+}
+class A: Exception()
+class B: Exception()
+fun test2() {
+    var a: Int?
+    try {
+        a = 4
+    }
+    catch (e: A) {
+        return
+    }
+    catch (e: B) {
+        return
+    }
+    <!DEBUG_INFO_SMARTCAST!>a<!>.hashCode() // a is never null here
+}
+fun test3() {
+    var a: Int? = null
+    try {
+        a = 5
+    }
+    catch (e: A) {
+        // do nothing
+    }
+    catch (e: B) {
+        return
+    }
+    a<!UNSAFE_CALL!>.<!>hashCode() // a is nullable here
+}
+fun test4() {
+    var a: Int? = null
+    try {
+        // do nothing
+    }
+    catch (e: A) {
+        return
+    }
+    catch (e: B) {
+        return
+    }
+    a<!UNSAFE_CALL!>.<!>hashCode() // a is nullable here
+}
+fun test5() {
+    var a: Int?// = null
+    try {
+        <!UNUSED_VALUE!>a =<!> 3
+    }
+    catch (e: Exception) {
+        return
+    }
+    finally {
+        // Error: KT-9825
+        <!UNUSED_VALUE!>a =<!> 5
+    }
+    <!DEBUG_INFO_SMARTCAST!>a<!>.hashCode() // a is never null here
+}
+fun test6() {
+    var a: Int?// = null
+    try {
+        <!UNUSED_VALUE!>a =<!> 3
+    }
+    catch (e: Exception) {
+        return
+    }
+    finally {
+        // Error: KT-9825
+        <!UNUSED_VALUE!>a =<!> null
+    }
+    <!DEBUG_INFO_CONSTANT!>a<!><!UNSAFE_CALL!>.<!>hashCode() // a is null here
+}
diff --git a/compiler/testData/diagnostics/tests/smartCasts/varnotnull/initInTryReturnInCatch.txt b/compiler/testData/diagnostics/tests/smartCasts/varnotnull/initInTryReturnInCatch.txt
new file mode 100644
index 00000000000..917a26e2ab0
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/smartCasts/varnotnull/initInTryReturnInCatch.txt
@@ -0,0 +1,26 @@
+package
+
+public fun test(): kotlin.Unit
+public fun test2(): kotlin.Unit
+public fun test3(): kotlin.Unit
+public fun test4(): kotlin.Unit
+public fun test5(): kotlin.Unit
+public fun test6(): kotlin.Unit
+
+public final class A : java.lang.Exception {
+    public constructor A()
+    public final override /*1*/ /*fake_override*/ val cause: kotlin.Throwable?
+    public final override /*1*/ /*fake_override*/ val message: kotlin.String?
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+}
+
+public final class B : java.lang.Exception {
+    public constructor B()
+    public final override /*1*/ /*fake_override*/ val cause: kotlin.Throwable?
+    public final override /*1*/ /*fake_override*/ val message: kotlin.String?
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+}
diff --git a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
index 03f4139b9e1..f3a1405035b 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
@@ -17066,6 +17066,12 @@ public class DiagnosticsTestGenerated extends AbstractDiagnosticsTest {
                     doTest(fileName);
                 }
 
+                @TestMetadata("initInTryReturnInCatch.kt")
+                public void testInitInTryReturnInCatch() throws Exception {
+                    String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/smartCasts/varnotnull/initInTryReturnInCatch.kt");
+                    doTest(fileName);
+                }
+
                 @TestMetadata("initialization.kt")
                 public void testInitialization() throws Exception {
                     String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/smartCasts/varnotnull/initialization.kt");