diff --git a/compiler/frontend/src/org/jetbrains/kotlin/resolve/AnnotationChecker.kt b/compiler/frontend/src/org/jetbrains/kotlin/resolve/AnnotationChecker.kt
index 0c20e4cd409..7c89f336b78 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/resolve/AnnotationChecker.kt
+++ b/compiler/frontend/src/org/jetbrains/kotlin/resolve/AnnotationChecker.kt
@@ -18,6 +18,7 @@ package org.jetbrains.kotlin.resolve
 
 import org.jetbrains.kotlin.builtins.KotlinBuiltIns
 import org.jetbrains.kotlin.descriptors.ClassDescriptor
+import org.jetbrains.kotlin.descriptors.DeclarationDescriptor
 import org.jetbrains.kotlin.descriptors.annotations.*
 import org.jetbrains.kotlin.diagnostics.Errors
 import org.jetbrains.kotlin.psi.*
@@ -28,14 +29,12 @@ import org.jetbrains.kotlin.types.JetType
 import org.jetbrains.kotlin.types.TypeUtils
 import org.jetbrains.kotlin.resolve.descriptorUtil.isRepeatableAnnotation
 import org.jetbrains.kotlin.descriptors.annotations.KotlinTarget.*
-import org.jetbrains.kotlin.psi.psiUtil.getStrictParentOfType
-import org.jetbrains.kotlin.resolve.descriptorUtil.fqNameSafe
 import org.jetbrains.kotlin.resolve.descriptorUtil.getAnnotationRetention
 import org.jetbrains.kotlin.resolve.inline.InlineUtil
 
 public class AnnotationChecker(private val additionalCheckers: Iterable<AdditionalAnnotationChecker>) {
 
-    public fun check(annotated: JetAnnotated, trace: BindingTrace, descriptor: ClassDescriptor? = null) {
+    public fun check(annotated: JetAnnotated, trace: BindingTrace, descriptor: DeclarationDescriptor? = null) {
         if (annotated is JetTypeParameter) return // TODO: support type parameter annotations
         val actualTargets = getActualTargetList(annotated, descriptor)
         checkEntries(annotated.annotationEntries, actualTargets, trace)
@@ -157,9 +156,10 @@ public class AnnotationChecker(private val additionalCheckers: Iterable<Addition
             return getActualTargetList(annotated, descriptor).defaultTargets
         }
 
-        private fun getActualTargetList(annotated: JetElement, descriptor: ClassDescriptor?): TargetList {
+        private fun getActualTargetList(annotated: JetElement, descriptor: DeclarationDescriptor?): TargetList {
             return when (annotated) {
-                is JetClassOrObject -> descriptor?.let { TargetList(KotlinTarget.classActualTargets(it)) } ?: TargetLists.T_CLASSIFIER
+                is JetClassOrObject ->
+                    (descriptor as? ClassDescriptor)?.let { TargetList(KotlinTarget.classActualTargets(it)) } ?: TargetLists.T_CLASSIFIER
                 is JetMultiDeclarationEntry -> TargetLists.T_LOCAL_VARIABLE
                 is JetProperty -> {
                     if (annotated.isLocal)
@@ -177,7 +177,9 @@ public class AnnotationChecker(private val additionalCheckers: Iterable<Addition
                 }
                 is JetConstructor<*> -> TargetLists.T_CONSTRUCTOR
                 is JetFunction -> {
-                    if (annotated.isLocal)
+                    if (DescriptorUtils.isFunctionExpression(descriptor))
+                        TargetLists.T_FUNCTION_EXPRESSION
+                    else if (annotated.isLocal)
                         TargetLists.T_LOCAL_FUNCTION
                     else if (annotated.parent is JetClassOrObject || annotated.parent is JetClassBody)
                         TargetLists.T_MEMBER_FUNCTION
@@ -250,6 +252,8 @@ public class AnnotationChecker(private val additionalCheckers: Iterable<Addition
 
             val T_FUNCTION_LITERAL = targetList(FUNCTION_LITERAL, FUNCTION, EXPRESSION)
 
+            val T_FUNCTION_EXPRESSION = targetList(FUNCTION_EXPRESSION, FUNCTION, EXPRESSION)
+
             val T_OBJECT_LITERAL = targetList(OBJECT_LITERAL, CLASS, EXPRESSION)
 
             val T_TYPE_REFERENCE = targetList(TYPE) {
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/resolve/ModifiersChecker.java b/compiler/frontend/src/org/jetbrains/kotlin/resolve/ModifiersChecker.java
index 35b394a25fc..ed0a1bb7bcf 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/resolve/ModifiersChecker.java
+++ b/compiler/frontend/src/org/jetbrains/kotlin/resolve/ModifiersChecker.java
@@ -182,8 +182,7 @@ public class ModifiersChecker {
         private void checkModifierListCommon(@NotNull JetDeclaration modifierListOwner, @NotNull DeclarationDescriptor descriptor) {
             AnnotationUseSiteTargetChecker.INSTANCE$.check(modifierListOwner, descriptor, trace);
             runDeclarationCheckers(modifierListOwner, descriptor);
-            ClassDescriptor classDescriptor = descriptor instanceof ClassDescriptor ? (ClassDescriptor) descriptor : null;
-            annotationChecker.check(modifierListOwner, trace, classDescriptor);
+            annotationChecker.check(modifierListOwner, trace, descriptor);
             ModifierCheckerCore.INSTANCE$.check(modifierListOwner, trace, descriptor);
         }
 
diff --git a/compiler/testData/diagnostics/tests/annotations/options/functionExpression.kt b/compiler/testData/diagnostics/tests/annotations/options/functionExpression.kt
new file mode 100644
index 00000000000..4ecf25e4ffb
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/annotations/options/functionExpression.kt
@@ -0,0 +1,11 @@
+@Target(AnnotationTarget.EXPRESSION)
+annotation class ExprAnn
+
+@Target(AnnotationTarget.FUNCTION)
+annotation class FunAnn
+
+fun foo(): Int {
+    val x = @ExprAnn fun() = 1
+    val y = @FunAnn fun() = 2
+    return x() + y()    
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/annotations/options/functionExpression.txt b/compiler/testData/diagnostics/tests/annotations/options/functionExpression.txt
new file mode 100644
index 00000000000..61f00b2a86b
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/annotations/options/functionExpression.txt
@@ -0,0 +1,17 @@
+package
+
+public fun foo(): kotlin.Int
+
+@kotlin.annotation.Target(allowedTargets = {AnnotationTarget.EXPRESSION}) @kotlin.annotation.annotation() public final class ExprAnn : kotlin.Annotation {
+    public constructor ExprAnn()
+    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
+}
+
+@kotlin.annotation.Target(allowedTargets = {AnnotationTarget.FUNCTION}) @kotlin.annotation.annotation() public final class FunAnn : kotlin.Annotation {
+    public constructor FunAnn()
+    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/JetDiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/JetDiagnosticsTestGenerated.java
index c591ee9830a..8a9e2e8965c 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/JetDiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/JetDiagnosticsTestGenerated.java
@@ -1052,6 +1052,12 @@ public class JetDiagnosticsTestGenerated extends AbstractJetDiagnosticsTest {
                     doTest(fileName);
                 }
 
+                @TestMetadata("functionExpression.kt")
+                public void testFunctionExpression() throws Exception {
+                    String fileName = JetTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/annotations/options/functionExpression.kt");
+                    doTest(fileName);
+                }
+
                 @TestMetadata("functions.kt")
                 public void testFunctions() throws Exception {
                     String fileName = JetTestUtils.navigationMetadata("compiler/testData/diagnostics/tests/annotations/options/functions.kt");
diff --git a/core/descriptors/src/org/jetbrains/kotlin/descriptors/annotations/KotlinTarget.kt b/core/descriptors/src/org/jetbrains/kotlin/descriptors/annotations/KotlinTarget.kt
index 630971098c8..e06b488bd42 100644
--- a/core/descriptors/src/org/jetbrains/kotlin/descriptors/annotations/KotlinTarget.kt
+++ b/core/descriptors/src/org/jetbrains/kotlin/descriptors/annotations/KotlinTarget.kt
@@ -62,6 +62,7 @@ public enum class KotlinTarget(val description: String, val isDefault: Boolean =
     INITIALIZER("initializer", false),
     MULTI_DECLARATION("multi declaration", false),
     FUNCTION_LITERAL("function literal", false),
+    FUNCTION_EXPRESSION("function expression", false),
     OBJECT_LITERAL("object literal", false)
     ;