[object] Mocking methods of local scope objects with Mockito

No way. You'll need some dependency injection, i.e. instead of having the obj1 instantiated it should be provided by some factory.

MyObjectFactory factory;

public void setMyObjectFactory(MyObjectFactory factory)
{
  this.factory = factory;
}

void method1()
{
  MyObject obj1 = factory.get();
  obj1.method();
}

Then your test would look like:

@Test
public void testMethod1() throws Exception
{
  MyObjectFactory factory = Mockito.mock(MyObjectFactory.class);
  MyObject obj1 = Mockito.mock(MyObject.class);
  Mockito.when(factory.get()).thenReturn(obj1);
  
  // mock the method()
  Mockito.when(obj1.method()).thenReturn(Boolean.FALSE);

  SomeObject someObject = new SomeObject();
  someObject.setMyObjectFactory(factory);
  someObject.method1();

  // do some assertions
}

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