diff --git a/org.eclipse.jdt.core.tests.model/src/org/eclipse/jdt/core/tests/model/SignatureTests.java b/org.eclipse.jdt.core.tests.model/src/org/eclipse/jdt/core/tests/model/SignatureTests.java
index 01934f25bfd..fa2480b8f94 100644
--- a/org.eclipse.jdt.core.tests.model/src/org/eclipse/jdt/core/tests/model/SignatureTests.java
+++ b/org.eclipse.jdt.core.tests.model/src/org/eclipse/jdt/core/tests/model/SignatureTests.java
@@ -1600,9 +1600,17 @@ public void testCreateIntersectionTypeSignature2() {
 }
 
 public void testDollarPackage() {
-	String signature = Signature.getTypeErasure("Ljava.util.$foo$.Optional");
+	String signature = new String(Signature.toCharArray(new String("Ljava.util.$foo$.Optional;").toCharArray()));
 	assertEquals(
-			"Ljava.util.$foo$.Optional",
+			"java.util.$foo$.Optional",
+			new String(signature.toCharArray())
+			);
+}
+
+public void testDollarPackageDollarClass() {
+	String signature = new String(Signature.toCharArray(new String("Ljava.util.$foo$.$Optional;").toCharArray()));
+	assertEquals(
+			"java.util.$foo$..Optional",
 			new String(signature.toCharArray())
 			);
 }
diff --git a/org.eclipse.jdt.core/model/org/eclipse/jdt/core/Signature.java b/org.eclipse.jdt.core/model/org/eclipse/jdt/core/Signature.java
index 64e82e24b50..e512214993c 100644
--- a/org.eclipse.jdt.core/model/org/eclipse/jdt/core/Signature.java
+++ b/org.eclipse.jdt.core/model/org/eclipse/jdt/core/Signature.java
@@ -667,24 +667,39 @@ private static int appendClassTypeSignature(char[] string, int start, boolean fu
 				}
 				break;
 			 case C_DOLLAR :
-			 	innerTypeStart = buffer.length();
-			 	inAnonymousType = false;
-			 	if (resolved) {
-			 		if (prevC == C_DOT || nextC == C_DOT) {
-			 			buffer.append('$');
-			 		} else {
-			 			// once we hit "$" there are no more package prefixes
-			 			removePackageQualifiers = false;
-			 			/**
-			 			 * Convert '$' in resolved type signatures into '.'.
-			 			 * NOTE: This assumes that the type signature is an inner type
-			 			 * signature. This is true in most cases, but someone can define a
-			 			 * non-inner type name containing a '$'.
-			 			 */
-			 			buffer.append('.');
-			 		}
-			 	}
-			 	break;
+				 if (nextC == C_DOT) {
+					 buffer.append('$');
+				 } else {
+					 boolean foundDotAfterDollar = false;
+					 if (prevC == C_DOT) {
+						 int i = p + 1;
+						 // check to see if we have dollar as part of package or class
+						 while (i < string.length) {
+							 if (string[i++] == C_DOT) {
+								 foundDotAfterDollar = true;
+								 break;
+							 }
+						 }
+					 }
+					 if (foundDotAfterDollar) {
+						 buffer.append('$');
+						 break;
+					 }
+					 innerTypeStart = buffer.length();
+					 inAnonymousType = false;
+					 if (resolved) {
+						 // once we hit "$" there are no more package prefixes
+						 removePackageQualifiers = false;
+						 /**
+						  * Convert '$' in resolved type signatures into '.'.
+						  * NOTE: This assumes that the type signature is an inner type
+						  * signature. This is true in most cases, but someone can define a
+						  * non-inner type name containing a '$'.
+						  */
+						 buffer.append('.');
+					 }
+				 }
+				 break;
 			 default :
 				if (innerTypeStart != -1 && !inAnonymousType && Character.isDigit(c)) {
 					inAnonymousType = true;