diff --git a/compiler/src/dotty/tools/dotc/transform/LambdaLift.scala b/compiler/src/dotty/tools/dotc/transform/LambdaLift.scala
index f7ffb7289568..8d3ce14983b7 100644
--- a/compiler/src/dotty/tools/dotc/transform/LambdaLift.scala
+++ b/compiler/src/dotty/tools/dotc/transform/LambdaLift.scala
@@ -338,11 +338,23 @@ object LambdaLift {
             else (topClass, JavaStatic)
           }
           else (lOwner, EmptyFlags)
+        // Drop Module because class is no longer a singleton in the lifted context.
+        var initFlags = local.flags &~ Module | Private | Lifted | maybeStatic
+        if (local is Method) {
+          if (newOwner is Trait)
+            // Drop Final when a method is lifted into a trait.
+            // According to the JVM specification, a method declared inside interface cannot have the final flag.
+            // "Methods of interfaces may have any of the flags in Table 4.6-A set except ACC_PROTECTED, ACC_FINAL, ..."
+            // (https://docs.oracle.com/javase/specs/jvms/se8/html/jvms-4.html#jvms-4.6)
+            initFlags = initFlags &~ Final
+          else
+            // Add Final when a method is lifted into a class.
+            initFlags = initFlags | Final
+        }
         local.copySymDenotation(
           owner = newOwner,
           name = newName(local),
-          initFlags = local.flags &~ Module &~ Final | Private | Lifted | maybeStatic,
-            // drop Module because class is no longer a singleton in the lifted context.
+          initFlags = initFlags,
           info = liftedInfo(local)).installAfter(thisPhase)
       }
       for (local <- free.keys)
diff --git a/tests/run/i4404a.check b/tests/run/i4404a.check
new file mode 100644
index 000000000000..11444aa1f1fe
--- /dev/null
+++ b/tests/run/i4404a.check
@@ -0,0 +1,8 @@
+false
+false
+false
+true
+false
+true
+true
+true
diff --git a/tests/run/i4404a.scala b/tests/run/i4404a.scala
new file mode 100644
index 000000000000..b322218cf930
--- /dev/null
+++ b/tests/run/i4404a.scala
@@ -0,0 +1,19 @@
+import java.lang.reflect.Modifier
+
+class Car
+final class Volvo extends Car
+
+object Car {
+  val car = new Car {}
+}
+
+object Test {
+  def main(args: Array[String]) = {
+    List(new Car, new Volvo, Car, Car.car)
+      .map(_.getClass.getModifiers)
+      .foreach { m =>
+        println(Modifier.isPrivate(m))
+        println(Modifier.isFinal(m))
+      }
+  }
+}
diff --git a/tests/run/i4404b.check b/tests/run/i4404b.check
new file mode 100644
index 000000000000..bb101b641b9b
--- /dev/null
+++ b/tests/run/i4404b.check
@@ -0,0 +1,2 @@
+true
+true
diff --git a/tests/run/i4404b.scala b/tests/run/i4404b.scala
new file mode 100644
index 000000000000..cf9653692b86
--- /dev/null
+++ b/tests/run/i4404b.scala
@@ -0,0 +1,14 @@
+import java.lang.reflect.Modifier
+
+object Test {
+  val x = {
+    final class Foo
+    new Foo
+  }
+
+  def main(args: Array[String]) = {
+    val m = x.getClass.getModifiers
+    println(Modifier.isPrivate(m))
+    println(Modifier.isFinal(m))
+  }
+}
diff --git a/tests/run/i4404c.check b/tests/run/i4404c.check
new file mode 100644
index 000000000000..1d474d525571
--- /dev/null
+++ b/tests/run/i4404c.check
@@ -0,0 +1,2 @@
+false
+true
diff --git a/tests/run/i4404c.scala b/tests/run/i4404c.scala
new file mode 100644
index 000000000000..29d504d57bce
--- /dev/null
+++ b/tests/run/i4404c.scala
@@ -0,0 +1,23 @@
+import java.lang.reflect.Modifier
+
+trait T {
+  def f = {
+    def f0 = ()
+  }
+}
+
+class C {
+  def g = {
+    def g0 = ()
+  }
+}
+
+object Test {
+  def main(args: Array[String]) = {
+    List((new T {}).getClass.getInterfaces.head, (new C).getClass)
+      .map(_.getDeclaredMethods)
+      .foreach { ms =>
+        println(ms.exists(m => Modifier.isFinal(m.getModifiers)))
+      }
+  }
+}