diff --git a/compiler/ir/backend.jvm/src/org/jetbrains/kotlin/backend/jvm/lower/LocalFunctionsLowering.kt b/compiler/ir/backend.jvm/src/org/jetbrains/kotlin/backend/jvm/lower/LocalFunctionsLowering.kt
index e5244947de6..c6244717116 100644
--- a/compiler/ir/backend.jvm/src/org/jetbrains/kotlin/backend/jvm/lower/LocalFunctionsLowering.kt
+++ b/compiler/ir/backend.jvm/src/org/jetbrains/kotlin/backend/jvm/lower/LocalFunctionsLowering.kt
@@ -296,6 +296,14 @@ class LocalFunctionsLowering(val context: JvmBackendContext): ClassLoweringPass
             return newDescriptor
         }
 
+        private fun suggestNameForCapturedValueParameter(valueDescriptor: ValueDescriptor): Name =
+                if (valueDescriptor.name.isSpecial) {
+                    val oldNameStr = valueDescriptor.name.asString()
+                    Name.identifier("$" + oldNameStr.substring(1, oldNameStr.length - 1))
+                }
+                else
+                    valueDescriptor.name
+
         private fun createUnsubstitutedCapturedValueParameter(
                 newParameterOwner: CallableMemberDescriptor,
                 valueDescriptor: ValueDescriptor,
@@ -303,7 +311,9 @@ class LocalFunctionsLowering(val context: JvmBackendContext): ClassLoweringPass
         ): ValueParameterDescriptor =
                 ValueParameterDescriptorImpl(
                         newParameterOwner, null, index,
-                        valueDescriptor.annotations, valueDescriptor.name, valueDescriptor.type,
+                        valueDescriptor.annotations,
+                        suggestNameForCapturedValueParameter(valueDescriptor),
+                        valueDescriptor.type,
                         false, false, false, false, null, valueDescriptor.source
                 )
 
diff --git a/compiler/testData/ir/box/closureConversion4.kt b/compiler/testData/ir/box/closureConversion4.kt
new file mode 100644
index 00000000000..aa59458d534
--- /dev/null
+++ b/compiler/testData/ir/box/closureConversion4.kt
@@ -0,0 +1,6 @@
+fun String.foo(): String {
+    fun bar(y: String) = this + y
+    return bar("K")
+}
+
+fun box() = "O".foo()
\ No newline at end of file
diff --git a/compiler/tests/org/jetbrains/kotlin/codegen/ir/IrOnlyBoxCodegenTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/codegen/ir/IrOnlyBoxCodegenTestGenerated.java
index 66f033ee55f..c64af4bce04 100644
--- a/compiler/tests/org/jetbrains/kotlin/codegen/ir/IrOnlyBoxCodegenTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/codegen/ir/IrOnlyBoxCodegenTestGenerated.java
@@ -59,6 +59,12 @@ public class IrOnlyBoxCodegenTestGenerated extends AbstractIrBlackBoxCodegenTest
         doTest(fileName);
     }
 
+    @TestMetadata("closureConversion4.kt")
+    public void testClosureConversion4() throws Exception {
+        String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/ir/box/closureConversion4.kt");
+        doTest(fileName);
+    }
+
     @TestMetadata("enumClass.kt")
     public void testEnumClass() throws Exception {
         String fileName = KotlinTestUtils.navigationMetadata("compiler/testData/ir/box/enumClass.kt");