diff --git a/core/src/main/scala/com/typesafe/tools/mima/core/ClassInfo.scala b/core/src/main/scala/com/typesafe/tools/mima/core/ClassInfo.scala
index b48ca233..c280415d 100644
--- a/core/src/main/scala/com/typesafe/tools/mima/core/ClassInfo.scala
+++ b/core/src/main/scala/com/typesafe/tools/mima/core/ClassInfo.scala
@@ -65,10 +65,10 @@ abstract class ClassInfo(val owner: PackageInfo) extends HasDeclarationName with
 
   override def canEqual(other: Any) = other.isInstanceOf[ClassInfo]
 
-  def formattedFullName = formatClassName(if (isObject) fullName.init else fullName)
+  def formattedFullName = formatClassName(if (isModule) fullName.init else fullName)
 
   def declarationPrefix = {
-    if (isObject) "object"
+    if (isModule) "object"
     else if (isTrait) "trait"
     else if (loaded && isInterface) "interface" // java interfaces and traits with no implementation methods
     else "class"
@@ -290,7 +290,7 @@ abstract class ClassInfo(val owner: PackageInfo) extends HasDeclarationName with
     ClassfileParser.isInterface(flags)
   }
 
-  def isObject: Boolean = bytecodeName.endsWith("$")
+  def isModule: Boolean = bytecodeName.endsWith("$")
 
   /** Is this class public? */
   /*
diff --git a/core/src/main/scala/com/typesafe/tools/mima/core/PackageInfo.scala b/core/src/main/scala/com/typesafe/tools/mima/core/PackageInfo.scala
index e55c444c..a3530c19 100644
--- a/core/src/main/scala/com/typesafe/tools/mima/core/PackageInfo.scala
+++ b/core/src/main/scala/com/typesafe/tools/mima/core/PackageInfo.scala
@@ -64,8 +64,9 @@ abstract class PackageInfo(val owner: PackageInfo) {
   def classes: mutable.Map[String, ClassInfo]
 
   lazy val accessibleClasses: Set[ClassInfo] = {
+    // FIXME: Make this a tailrecursive implementation
     /** Fixed point iteration for finding all accessible classes. */
-    def accessibleClassesUnder(prefix: Set[ClassInfo]): Set[ClassInfo] = {
+    def accessibleClassesUnder(prefix: Set[ClassInfo]): Set[ClassInfo] = { 
       val vclasses = (classes.valuesIterator filter (isAccessible(_, prefix))).toSet
       if (vclasses.isEmpty) vclasses
       else vclasses union accessibleClassesUnder(vclasses)
@@ -77,7 +78,28 @@ abstract class PackageInfo(val owner: PackageInfo) {
         else {
           val idx = clazz.decodedName.lastIndexOf("$")
           if (idx < 0) prefix.isEmpty // class name contains no $
-          else prefix exists (_.decodedName == clazz.decodedName.substring(0, idx)) // prefix before dollar is an accessible class detected previously
+          else {
+            // A top-level module is compiled into a class plus a module class (for instance,
+            // for a top-level `object A`, scalac creates two classfiles `A.class` and `A$.class`.).
+            // While, for an inner module, scalac creates only one classfile, i.e., the module class 
+            // classfile.
+            //
+            // `clazz` is an inner module if:
+            // 1) `clazz` is a module, and 
+            // 2) `clazz` decoded name starts with one of the passed `prefix`.
+            def isInnerModule: Boolean = {
+              clazz.isModule && 
+              prefix.exists { outer =>
+                // this condition is to avoid looping indefinitely 
+                clazz.decodedName != outer.decodedName &&
+                // checks if `outer` is a prefix of `clazz` name 
+                clazz.decodedName.startsWith(outer.decodedName)
+              }
+            }
+            // class, trait, and top-level module go through this condition
+            (prefix exists (_.decodedName == clazz.decodedName.substring(0, idx))) || // prefix before dollar is an accessible class detected previously
+            isInnerModule
+          }
         }
       }
       clazz.isPublic && isReachable
diff --git a/reporter/functional-tests/src/test/class-removing-inner-object-nok/problems.txt b/reporter/functional-tests/src/test/class-removing-inner-object-nok/problems.txt
new file mode 100644
index 00000000..57dea9bc
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-removing-inner-object-nok/problems.txt
@@ -0,0 +1,2 @@
+object A#B does not have a correspondent in new version
+method B()A#B# in class A does not have a correspondent in new version
\ No newline at end of file
diff --git a/reporter/functional-tests/src/test/class-removing-inner-object-nok/v1/A.scala b/reporter/functional-tests/src/test/class-removing-inner-object-nok/v1/A.scala
new file mode 100644
index 00000000..6e207331
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-removing-inner-object-nok/v1/A.scala
@@ -0,0 +1,5 @@
+class A {
+  object B {
+    def foo: Int = 2
+  }
+}
diff --git a/reporter/functional-tests/src/test/class-removing-inner-object-nok/v2/A.scala b/reporter/functional-tests/src/test/class-removing-inner-object-nok/v2/A.scala
new file mode 100644
index 00000000..2e2439c3
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-removing-inner-object-nok/v2/A.scala
@@ -0,0 +1,2 @@
+class A {
+}
diff --git a/reporter/functional-tests/src/test/object-removing-inner-object-nok/problems.txt b/reporter/functional-tests/src/test/object-removing-inner-object-nok/problems.txt
new file mode 100644
index 00000000..e4037ccc
--- /dev/null
+++ b/reporter/functional-tests/src/test/object-removing-inner-object-nok/problems.txt
@@ -0,0 +1 @@
+object A#B does not have a correspondent in new version
\ No newline at end of file
diff --git a/reporter/functional-tests/src/test/object-removing-inner-object-nok/v1/A.scala b/reporter/functional-tests/src/test/object-removing-inner-object-nok/v1/A.scala
new file mode 100644
index 00000000..598070d7
--- /dev/null
+++ b/reporter/functional-tests/src/test/object-removing-inner-object-nok/v1/A.scala
@@ -0,0 +1,5 @@
+object A {
+  object B {
+    def foo: Int = 2
+  }
+}
diff --git a/reporter/functional-tests/src/test/object-removing-inner-object-nok/v2/A.scala b/reporter/functional-tests/src/test/object-removing-inner-object-nok/v2/A.scala
new file mode 100644
index 00000000..169ef293
--- /dev/null
+++ b/reporter/functional-tests/src/test/object-removing-inner-object-nok/v2/A.scala
@@ -0,0 +1,2 @@
+object A {
+}