--- a/langtools/src/jdk.compiler/share/classes/com/sun/tools/javac/comp/Resolve.java	Tue Nov 04 13:21:25 2014 -0800
+++ b/langtools/src/jdk.compiler/share/classes/com/sun/tools/javac/comp/Resolve.java	Wed Nov 05 08:37:04 2014 -0500
@@ -2033,10 +2033,11 @@
             // Return the type variable if we have it, and have no
             // immediate member, OR the type variable is for a method.
             if (tyvar != typeNotFound) {
-                if (sym == typeNotFound ||
+                if (env.baseClause || sym == typeNotFound ||
                     (tyvar.kind == TYP && tyvar.exists() &&
-                     tyvar.owner.kind == MTH))
+                     tyvar.owner.kind == MTH)) {
                     return tyvar;
+                }
             }
 
             // If the environment is a class def, finish up,

--- /dev/null	Thu Jan 01 00:00:00 1970 +0000
+++ b/langtools/test/tools/javac/TypeVarShadow.java	Wed Nov 05 08:37:04 2014 -0500
@@ -0,0 +1,41 @@
+/*
+ * Copyright (c) 2014, Oracle and/or its affiliates. All rights reserved.
+ * DO NOT ALTER OR REMOVE COPYRIGHT NOTICES OR THIS FILE HEADER.
+ *
+ * This code is free software; you can redistribute it and/or modify it
+ * under the terms of the GNU General Public License version 2 only, as
+ * published by the Free Software Foundation.
+ *
+ * This code is distributed in the hope that it will be useful, but WITHOUT
+ * ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or
+ * FITNESS FOR A PARTICULAR PURPOSE.  See the GNU General Public License
+ * version 2 for more details (a copy is included in the LICENSE file that
+ * accompanied this code).
+ *
+ * You should have received a copy of the GNU General Public License version
+ * 2 along with this work; if not, write to the Free Software Foundation,
+ * Inc., 51 Franklin St, Fifth Floor, Boston, MA 02110-1301 USA.
+ *
+ * Please contact Oracle, 500 Oracle Parkway, Redwood Shores, CA 94065 USA
+ * or visit www.oracle.com if you need additional information or have any
+ * questions.
+ */
+
+/**
+ * @test
+ * @summary Incorrect shadowing of classes vs type parameters
+ * @bug 8035259
+ * @run compile TypeVarShadow.java
+ */
+
+public class TypeVarShadow {
+    class T<E> {}
+
+    abstract class One<E> {
+        abstract E foo();
+    }
+
+    abstract class Two<T> extends One<T> {
+        abstract T foo();
+    }
+}