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 481248ae..0847f9be 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
@@ -59,6 +59,9 @@ abstract class ClassInfo(val owner: PackageInfo) extends HasDeclarationName with
   var _innerClasses: Seq[String] = Seq.empty
   def innerClasses = { ensureLoaded(); _innerClasses }
 
+  var _isLocalClass = false
+  def isLocalClass = { ensureLoaded(); _isLocalClass}
+
   var _isTopLevel = true
   def isTopLevel = { ensureLoaded(); _isTopLevel }
 
diff --git a/core/src/main/scala/com/typesafe/tools/mima/core/ClassfileParser.scala b/core/src/main/scala/com/typesafe/tools/mima/core/ClassfileParser.scala
index 837f27a4..20fd67ec 100644
--- a/core/src/main/scala/com/typesafe/tools/mima/core/ClassfileParser.scala
+++ b/core/src/main/scala/com/typesafe/tools/mima/core/ClassfileParser.scala
@@ -278,6 +278,8 @@ abstract class ClassfileParser(definitions: Definitions) {
              if (pool.getClassName(outerIndex) == c.bytecodeName) n else ""
            } else ""
          }.filterNot(_.isEmpty)
+       } else if (attrName == "EnclosingMethod") {
+         c._isLocalClass = true
        } else if (attrName == "Scala" || attrName == "ScalaSig") {
          this.parsedClass.isScala = true
        }
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 18e22b3c..4159f8e8 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
@@ -79,7 +79,7 @@ abstract class PackageInfo(val owner: PackageInfo) {
         else if (prefix.isEmpty) clazz.isTopLevel && !clazz.bytecodeName.contains("$$")
         else prefix.exists(_.innerClasses contains clazz.bytecodeName)
       }
-      clazz.isPublic && isReachable
+      clazz.isPublic && !clazz.isLocalClass && isReachable
     }
 
     accessibleClassesUnder(Set.empty, Set.empty)
diff --git a/reporter/functional-tests/src/test/class-added-local-class-ok/problems.txt b/reporter/functional-tests/src/test/class-added-local-class-ok/problems.txt
new file mode 100644
index 00000000..e69de29b
diff --git a/reporter/functional-tests/src/test/class-added-local-class-ok/v1/A.scala b/reporter/functional-tests/src/test/class-added-local-class-ok/v1/A.scala
new file mode 100644
index 00000000..0aa93b47
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-added-local-class-ok/v1/A.scala
@@ -0,0 +1 @@
+class A { def f() = { class Local } }
\ No newline at end of file
diff --git a/reporter/functional-tests/src/test/class-added-local-class-ok/v2/A.scala b/reporter/functional-tests/src/test/class-added-local-class-ok/v2/A.scala
new file mode 100644
index 00000000..db2c5423
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-added-local-class-ok/v2/A.scala
@@ -0,0 +1 @@
+class A { def f() = { } }
\ No newline at end of file
diff --git a/reporter/functional-tests/src/test/class-changed-local-class-ok/problems.txt b/reporter/functional-tests/src/test/class-changed-local-class-ok/problems.txt
new file mode 100644
index 00000000..e69de29b
diff --git a/reporter/functional-tests/src/test/class-changed-local-class-ok/v1/A.scala b/reporter/functional-tests/src/test/class-changed-local-class-ok/v1/A.scala
new file mode 100644
index 00000000..c44406ca
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-changed-local-class-ok/v1/A.scala
@@ -0,0 +1 @@
+class A { def f() = { class Local { def v1 = "v1"} } }
\ No newline at end of file
diff --git a/reporter/functional-tests/src/test/class-changed-local-class-ok/v2/A.scala b/reporter/functional-tests/src/test/class-changed-local-class-ok/v2/A.scala
new file mode 100644
index 00000000..0aa93b47
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-changed-local-class-ok/v2/A.scala
@@ -0,0 +1 @@
+class A { def f() = { class Local } }
\ No newline at end of file
diff --git a/reporter/functional-tests/src/test/class-removed-local-class-ok/problems.txt b/reporter/functional-tests/src/test/class-removed-local-class-ok/problems.txt
new file mode 100644
index 00000000..e69de29b
diff --git a/reporter/functional-tests/src/test/class-removed-local-class-ok/v1/A.scala b/reporter/functional-tests/src/test/class-removed-local-class-ok/v1/A.scala
new file mode 100644
index 00000000..dc63f8ce
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-removed-local-class-ok/v1/A.scala
@@ -0,0 +1 @@
+class A { def f() = { } }
diff --git a/reporter/functional-tests/src/test/class-removed-local-class-ok/v2/A.scala b/reporter/functional-tests/src/test/class-removed-local-class-ok/v2/A.scala
new file mode 100644
index 00000000..8b1774d4
--- /dev/null
+++ b/reporter/functional-tests/src/test/class-removed-local-class-ok/v2/A.scala
@@ -0,0 +1 @@
+class A { def f() = { class Local } }