diff --git a/jedi/api/__init__.py b/jedi/api/__init__.py
index 912f911d..934d2773 100644
--- a/jedi/api/__init__.py
+++ b/jedi/api/__init__.py
@@ -592,8 +592,9 @@ class Script(object):
                 raise TypeError('If you provide until_line you have to provide until_column')
             until_pos = until_line, until_column
         return refactoring.extract_function(
-            self._inference_state, self.path, self._module_node, new_name,
-            (line, column), until_pos)
+            self._inference_state, self.path, self._get_module_context(),
+            new_name, (line, column), until_pos
+        )
 
     @no_py2_support
     def inline(self, line=None, column=None):
diff --git a/jedi/api/refactoring.py b/jedi/api/refactoring.py
index 74626fcf..23996351 100644
--- a/jedi/api/refactoring.py
+++ b/jedi/api/refactoring.py
@@ -278,23 +278,24 @@ def _find_nodes(module_node, pos, until_pos):
     return nodes
 
 
-def _replace(nodes, expression_replacement, extracted):
+def _replace(nodes, expression_replacement, extracted, insert_before_leaf=None):
     # Now try to replace the nodes found with a variable and move the code
     # before the current statement.
     definition = _get_parent_definition(nodes[0])
-    first_definition_leaf = definition.get_first_leaf()
+    if insert_before_leaf is None:
+        insert_before_leaf = definition.get_first_leaf()
 
     replacement_dct = {}
     extracted_prefix = _insert_line_before(
-        first_definition_leaf.prefix,
+        insert_before_leaf.prefix,
         extracted,
     )
     first_node_leaf = nodes[0].get_first_leaf()
-    if first_node_leaf is first_definition_leaf:
+    if first_node_leaf is insert_before_leaf:
         replacement_dct[nodes[0]] = extracted_prefix + expression_replacement
     else:
         replacement_dct[nodes[0]] = first_node_leaf.prefix + expression_replacement
-        replacement_dct[first_definition_leaf] = extracted_prefix + first_definition_leaf.value
+        replacement_dct[insert_before_leaf] = extracted_prefix + insert_before_leaf.value
 
     for node in nodes[1:]:
         replacement_dct[node] = ''
@@ -371,20 +372,28 @@ def _is_not_extractable_syntax(node):
         or node.type == 'keyword' and node.value not in ('None', 'True', 'False')
 
 
-def extract_function(inference_state, path, module_node, name, pos, until_pos):
+def extract_function(inference_state, path, module_context, name, pos, until_pos):
     # 1. extract expression
     is_class_method = False
     is_method = False
     is_expression = True
     class_indentation = ''
     # 2. extract statements
-    nodes = _find_nodes(module_node, pos, until_pos)
+    nodes = _find_nodes(module_context.tree_node, pos, until_pos)
     return_variables = []
     params = _find_non_global_names(nodes)
 
     dct = {}
     # Find variables
     # Is a class method / method
+    context = module_context.create_context(nodes[0])
+    if context.is_module():
+        insert_before_leaf = None  # Leaf will be determined later
+    else:
+        node = context.tree_node
+        while node.parent.type in ('async_funcdef', 'decorated', 'async_stmt'):
+            node = node.parent
+        insert_before_leaf = node.get_first_leaf()
     if is_expression:
         code_block = 'return ' + _expression_nodes_to_string(nodes)
     else:
@@ -409,7 +418,7 @@ def extract_function(inference_state, path, module_node, name, pos, until_pos):
     dct[nodes[0]] = replacement
     for node in nodes[1:]:
         dct[node] = ''
-    file_to_node_changes = {path: _replace(nodes, replacement, function_code)}
+    file_to_node_changes = {path: _replace(nodes, replacement, function_code, insert_before_leaf)}
     return Refactoring(inference_state.grammar, file_to_node_changes)
 
 
diff --git a/test/refactor/extract_function.py b/test/refactor/extract_function.py
index 7eca733a..10c87025 100644
--- a/test/refactor/extract_function.py
+++ b/test/refactor/extract_function.py
@@ -18,3 +18,29 @@ def ab():
 
 
 ab()
+# -------------------------------------------------- in-function-1
+def f(x):
+#? 11 text {'new_name': 'ab'}
+    return x + 1 * 2
+# ++++++++++++++++++++++++++++++++++++++++++++++++++
+def ab():
+    return x + 1 * 2
+
+
+def f(x):
+#? 11 text {'new_name': 'ab'}
+    return ab()
+# -------------------------------------------------- in-function-with-dec
+@classmethod
+def f(x):
+#? 11 text {'new_name': 'ab'}
+    return x + 1 * 2
+# ++++++++++++++++++++++++++++++++++++++++++++++++++
+def ab():
+    return x + 1 * 2
+
+
+@classmethod
+def f(x):
+#? 11 text {'new_name': 'ab'}
+    return ab()