8373570: Javac stack overflow on method-local class with nested record referring to enclosing type

src/jdk.compiler/share/classes/com/sun/tools/javac/comp/Resolve.java

@@ -3843,12 +3843,15 @@ Symbol findLocalClassOwner(Env<AttrContext> env, TypeSymbol c) {
         Env<AttrContext> env1 = env;
         boolean staticOnly = false;
         while (env1.outer != null) {
+            // If the local class is defined inside a static method, and the instance creation expression
+            // occurs in that same method, the creation occurs (technically) inside a static context, but that's ok.
             if (env1.info.scope.owner == owner) {
                 return (staticOnly) ?
                     new BadLocalClassCreation(c) :
                     owner;
+            } else if (isStatic(env1) || env1.enclClass.sym.isStatic()) {
+                staticOnly = true;
             }
-            if (isStatic(env1)) staticOnly = true;
             env1 = env1.outer;
         }
         return owner.kind == MTH ?

test/langtools/tools/javac/SuperInit/NewLocalNotInInner.java

@@ -0,0 +1,72 @@
+/*
+ * @test /nodynamiccopyright/
+ * @bug 8373570
+ * @summary Javac stack overflow on method-local class with nested record referring to enclosing type
+ * @compile/fail/ref=NewLocalNotInInner.out -XDrawDiagnostics NewLocalNotInInner.java
+ */
+class NewLocalNotInInner {
+    void m() {
+        class Local {
+            static class Foo {
+                void m() {
+                    new Local(); // error
+                }
+            }
+        }
+    }
+
+    void m_anon() {
+        class Local {
+            static class Foo {
+                void m() {
+                    new Local() { }; // error
+                }
+            }
+        }
+    }
+
+    void m_record() {
+        class Local {
+            record Foo() {
+                void m() {
+                    new Local(); // error
+                }
+            }
+        }
+    }
+
+    void m_intf() {
+        class Local {
+            interface Foo {
+                default void m() {
+                    new Local(); // error
+                }
+            }
+        }
+    }
+
+    void sup() {
+        class Local {
+            static class Foo {
+                void m() {
+                    class Sub extends Local { }; // error
+                    new Sub();
+                }
+            }
+        }
+    }
+
+    static void staticLocal() {
+        class Local { }
+        new Local(); // ok
+    }
+
+    static void staticLocalFromAnon() {
+        class Local { }
+        new Object() {
+            Local local() {
+                return new Local(); // ok
+            }
+        };
+    }
+}

test/langtools/tools/javac/SuperInit/NewLocalNotInInner.out

@@ -0,0 +1,6 @@
+NewLocalNotInInner.java:12:21: compiler.err.local.cant.be.inst.static: kindname.class, Local
+NewLocalNotInInner.java:22:21: compiler.err.local.cant.be.inst.static: kindname.class, Local
+NewLocalNotInInner.java:32:21: compiler.err.local.cant.be.inst.static: kindname.class, Local
+NewLocalNotInInner.java:42:21: compiler.err.local.cant.be.inst.static: kindname.class, Local
+NewLocalNotInInner.java:52:21: compiler.err.local.cant.be.inst.static: kindname.class, Local
+5 errors