diff --git a/src/main/java/com/android/tools/r8/Version.java b/src/main/java/com/android/tools/r8/Version.java
index 8024a8a..5f5162a 100644
--- a/src/main/java/com/android/tools/r8/Version.java
+++ b/src/main/java/com/android/tools/r8/Version.java
@@ -11,7 +11,7 @@
 
   // This field is accessed from release scripts using simple pattern matching.
   // Therefore, changing this field could break our release scripts.
-  public static final String LABEL = "2.1.47";
+  public static final String LABEL = "2.1.48";
 
   private Version() {
   }
diff --git a/src/main/java/com/android/tools/r8/ir/optimize/classinliner/ClassInlinerCostAnalysis.java b/src/main/java/com/android/tools/r8/ir/optimize/classinliner/ClassInlinerCostAnalysis.java
index 3feac87..f80e1d7 100644
--- a/src/main/java/com/android/tools/r8/ir/optimize/classinliner/ClassInlinerCostAnalysis.java
+++ b/src/main/java/com/android/tools/r8/ir/optimize/classinliner/ClassInlinerCostAnalysis.java
@@ -12,8 +12,11 @@
 import com.android.tools.r8.graph.AppView;
 import com.android.tools.r8.graph.DexProgramClass;
 import com.android.tools.r8.graph.ProgramMethod;
+import com.android.tools.r8.ir.analysis.type.TypeElement;
+import com.android.tools.r8.ir.code.AssumeAndCheckCastAliasedValueConfiguration;
 import com.android.tools.r8.ir.code.IRCode;
 import com.android.tools.r8.ir.code.Instruction;
+import com.android.tools.r8.ir.code.InstructionIterator;
 import com.android.tools.r8.ir.code.InvokeMethod;
 import com.android.tools.r8.ir.code.Value;
 import com.android.tools.r8.ir.optimize.inliner.InliningIRProvider;
@@ -23,6 +26,7 @@
 import java.util.Map;
 import java.util.Set;
 
+// TODO(b/160634549): Rename or refactor this to reflect its non-cost related analysis.
 /** Analysis that estimates the cost of class inlining an object allocation. */
 class ClassInlinerCostAnalysis {
 
@@ -73,6 +77,28 @@
         continue;
       }
       IRCode inliningIR = inliningIRProvider.getAndCacheInliningIR(invoke, inlinee);
+
+      // If the instance is part of a phi, then inlining will invalidate the inliner assumptions.
+      // TODO(b/160634549): This is not a budget miss but a hard requirement.
+      InstructionIterator iterator = inliningIR.entryBlock().iterator();
+      while (iterator.hasNext()) {
+        Instruction next = iterator.next();
+        if (!next.isArgument()) {
+          break;
+        }
+        Value argumentValue = next.outValue();
+        TypeElement argumentType = argumentValue.getType();
+        if (argumentType.isClassType()
+            && argumentType.asClassType().getClassType() == eligibleClass.type) {
+          assert argumentValue.uniqueUsers().stream()
+              .noneMatch(
+                  AssumeAndCheckCastAliasedValueConfiguration.getInstance()::isIntroducingAnAlias);
+          if (argumentValue.hasPhiUsers()) {
+            return true;
+          }
+        }
+      }
+
       int increment =
           inlinee.getDefinition().getCode().estimatedSizeForInlining()
               - estimateNumberOfNonMaterializingInstructions(invoke, inliningIR);
diff --git a/src/test/java/com/android/tools/r8/regress/Regress160394262Test.java b/src/test/java/com/android/tools/r8/regress/Regress160394262Test.java
new file mode 100644
index 0000000..0c3206c
--- /dev/null
+++ b/src/test/java/com/android/tools/r8/regress/Regress160394262Test.java
@@ -0,0 +1,176 @@
+// Copyright (c) 2020, the R8 project authors. Please see the AUTHORS file
+// for details. All rights reserved. Use of this source code is governed by a
+// BSD-style license that can be found in the LICENSE file.
+package com.android.tools.r8.regress;
+
+import static com.android.tools.r8.utils.codeinspector.Matchers.isPresent;
+import static org.hamcrest.CoreMatchers.not;
+import static org.hamcrest.MatcherAssert.assertThat;
+
+import com.android.tools.r8.TestBase;
+import com.android.tools.r8.TestParameters;
+import com.android.tools.r8.TestParametersCollection;
+import com.android.tools.r8.utils.StringUtils;
+import com.android.tools.r8.utils.codeinspector.CodeInspector;
+import java.io.IOException;
+import java.util.Arrays;
+import java.util.Iterator;
+import java.util.List;
+import org.junit.Test;
+import org.junit.runner.RunWith;
+import org.junit.runners.Parameterized;
+
+@RunWith(Parameterized.class)
+public class Regress160394262Test extends TestBase {
+
+  static final String EXPECTED = StringUtils.lines("1;2;3");
+
+  private final TestParameters parameters;
+
+  @Parameterized.Parameters(name = "{0}")
+  public static TestParametersCollection data() {
+    return getTestParameters().withAllRuntimes().withAllApiLevels().build();
+  }
+
+  public Regress160394262Test(TestParameters parameters) {
+    this.parameters = parameters;
+  }
+
+  @Test
+  public void testReference() throws Exception {
+    testForRuntime(parameters)
+        .addInnerClasses(Regress160394262Test.class)
+        .run(parameters.getRuntime(), TestClass.class)
+        .assertSuccessWithOutput(EXPECTED);
+  }
+
+  @Test
+  public void testR8() throws Exception {
+    testForR8(parameters.getBackend())
+        .allowAccessModification()
+        .addKeepMainRule(TestClass.class)
+        .addInnerClasses(Regress160394262Test.class)
+        .setMinApi(parameters.getApiLevel())
+        .run(parameters.getRuntime(), TestClass.class)
+        .assertSuccessWithOutput(EXPECTED)
+        .inspect(this::checkJoinerIsClassInlined);
+  }
+
+  private void checkJoinerIsClassInlined(CodeInspector inspector) {
+    // TODO(b/160640028): When compiling to DEX a trivial phi remains in the inline code preventing
+    //  class inlining of Joiner and the anonymous Joiner subclass.
+    if (parameters.isDexRuntime()) {
+      assertThat(inspector.clazz(Joiner.class), isPresent());
+      assertThat(inspector.clazz(Joiner.class.getTypeName() + "$1"), isPresent());
+      return;
+    }
+    assertThat(inspector.clazz(Joiner.class), not(isPresent()));
+    assertThat(inspector.clazz(Joiner.class.getTypeName() + "$1"), not(isPresent()));
+  }
+
+  static class TestClass {
+
+    public void foo(List<?> items) {
+      System.out.println(Joiner.on(";").skipNulls().join(items));
+    }
+
+    public static void main(String[] args) {
+      new TestClass().foo(Arrays.asList("1", 2, 3l, null));
+    }
+  }
+
+  // Minimized copy of com.google.common.base.Preconditions
+  static class Preconditions {
+
+    public static <T> T checkNotNull(T reference) {
+      if (reference == null) {
+        throw new NullPointerException();
+      } else {
+        return reference;
+      }
+    }
+
+    public static <T> T checkNotNull(T reference, Object errorMessage) {
+      if (reference == null) {
+        throw new NullPointerException(String.valueOf(errorMessage));
+      } else {
+        return reference;
+      }
+    }
+  }
+
+  // Minimized copy of com.google.common.base.Joiner
+  static class Joiner {
+
+    private final String separator;
+
+    public static Joiner on(String separator) {
+      return new Joiner(separator);
+    }
+
+    private Joiner(String separator) {
+      this.separator = Preconditions.checkNotNull(separator);
+    }
+
+    private Joiner(Joiner prototype) {
+      this.separator = prototype.separator;
+    }
+
+    public <A extends Appendable> A appendTo(A appendable, Iterator<?> parts) throws IOException {
+      Preconditions.checkNotNull(appendable);
+      if (parts.hasNext()) {
+        appendable.append(this.toString(parts.next()));
+        while (parts.hasNext()) {
+          appendable.append(this.separator);
+          appendable.append(this.toString(parts.next()));
+        }
+      }
+      return appendable;
+    }
+
+    public final String join(Iterable<?> parts) {
+      return join(parts.iterator());
+    }
+
+    public final String join(Iterator<?> parts) {
+      StringBuilder builder = new StringBuilder();
+      try {
+        appendTo((Appendable) builder, parts);
+        return builder.toString();
+      } catch (IOException e) {
+        throw new AssertionError(e);
+      }
+    }
+
+    public Joiner skipNulls() {
+      return new Joiner(this) {
+        public <A extends Appendable> A appendTo(A appendable, Iterator<?> parts)
+            throws IOException {
+          Preconditions.checkNotNull(appendable, "appendable");
+          Preconditions.checkNotNull(parts, "parts");
+          Object part;
+          while (parts.hasNext()) {
+            part = parts.next();
+            if (part != null) {
+              appendable.append(Joiner.this.toString(part));
+              break;
+            }
+          }
+          while (parts.hasNext()) {
+            part = parts.next();
+            if (part != null) {
+              appendable.append(Joiner.this.separator);
+              appendable.append(Joiner.this.toString(part));
+            }
+          }
+          return appendable;
+        }
+      };
+    }
+
+    CharSequence toString(Object part) {
+      Preconditions.checkNotNull(part);
+      return part instanceof CharSequence ? (CharSequence) part : part.toString();
+    }
+  }
+}