diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index 86acdb7c44b6d..d9af70cd037d9 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -25172,13 +25172,17 @@ export function createTypeChecker(host: TypeCheckerHost): TypeChecker {
     }
 
     function applyToReturnTypes(source: Signature, target: Signature, callback: (s: Type, t: Type) => void) {
-        const sourceTypePredicate = getTypePredicateOfSignature(source);
         const targetTypePredicate = getTypePredicateOfSignature(target);
-        if (sourceTypePredicate && targetTypePredicate && typePredicateKindsMatch(sourceTypePredicate, targetTypePredicate) && sourceTypePredicate.type && targetTypePredicate.type) {
-            callback(sourceTypePredicate.type, targetTypePredicate.type);
+        if (targetTypePredicate) {
+            const sourceTypePredicate = getTypePredicateOfSignature(source);
+            if (sourceTypePredicate && typePredicateKindsMatch(sourceTypePredicate, targetTypePredicate) && sourceTypePredicate.type && targetTypePredicate.type) {
+                callback(sourceTypePredicate.type, targetTypePredicate.type);
+                return;
+            }
         }
-        else {
-            callback(getReturnTypeOfSignature(source), getReturnTypeOfSignature(target));
+        const targetReturnType = getReturnTypeOfSignature(target);
+        if (couldContainTypeVariables(targetReturnType)) {
+            callback(getReturnTypeOfSignature(source), targetReturnType);
         }
     }
 
diff --git a/tests/baselines/reference/circularReferenceInReturnType.errors.txt b/tests/baselines/reference/circularReferenceInReturnType.errors.txt
index bae89c5c1520c..b94a93182ce0f 100644
--- a/tests/baselines/reference/circularReferenceInReturnType.errors.txt
+++ b/tests/baselines/reference/circularReferenceInReturnType.errors.txt
@@ -1,10 +1,8 @@
 circularReferenceInReturnType.ts(3,7): error TS7022: 'res1' implicitly has type 'any' because it does not have a type annotation and is referenced directly or indirectly in its own initializer.
 circularReferenceInReturnType.ts(3,18): error TS7024: Function implicitly has return type 'any' because it does not have a return type annotation and is referenced directly or indirectly in one of its return expressions.
-circularReferenceInReturnType.ts(9,7): error TS7022: 'res3' implicitly has type 'any' because it does not have a type annotation and is referenced directly or indirectly in its own initializer.
-circularReferenceInReturnType.ts(9,20): error TS7024: Function implicitly has return type 'any' because it does not have a return type annotation and is referenced directly or indirectly in one of its return expressions.
 
 
-==== circularReferenceInReturnType.ts (4 errors) ====
+==== circularReferenceInReturnType.ts (2 errors) ====
     // inference fails for res1 and res2, but ideally should not
     declare function fn1<T>(cb: () => T): string;
     const res1 = fn1(() => res1);
@@ -18,8 +16,14 @@ circularReferenceInReturnType.ts(9,20): error TS7024: Function implicitly has re
     
     declare function fn3<T>(): <T2>(cb: (arg: T2) => any) => (a: T) => void;
     const res3 = fn3()(() => res3);
-          ~~~~
-!!! error TS7022: 'res3' implicitly has type 'any' because it does not have a type annotation and is referenced directly or indirectly in its own initializer.
-                       ~~~~~~~~~~
-!!! error TS7024: Function implicitly has return type 'any' because it does not have a return type annotation and is referenced directly or indirectly in one of its return expressions.
+    
+    // https://github.com/microsoft/TypeScript/issues/58616
+    
+    function foo(arg: Parameters<typeof bar>[0]) {
+        return arg;
+    }
+    
+    function bar(arg: string) {
+        return foo(arg);
+    }
     
\ No newline at end of file
diff --git a/tests/baselines/reference/circularReferenceInReturnType.symbols b/tests/baselines/reference/circularReferenceInReturnType.symbols
index d126adc332884..72d98a41f140a 100644
--- a/tests/baselines/reference/circularReferenceInReturnType.symbols
+++ b/tests/baselines/reference/circularReferenceInReturnType.symbols
@@ -40,3 +40,24 @@ const res3 = fn3()(() => res3);
 >fn3 : Symbol(fn3, Decl(circularReferenceInReturnType.ts, 5, 31))
 >res3 : Symbol(res3, Decl(circularReferenceInReturnType.ts, 8, 5))
 
+// https://github.com/microsoft/TypeScript/issues/58616
+
+function foo(arg: Parameters<typeof bar>[0]) {
+>foo : Symbol(foo, Decl(circularReferenceInReturnType.ts, 8, 31))
+>arg : Symbol(arg, Decl(circularReferenceInReturnType.ts, 12, 13))
+>Parameters : Symbol(Parameters, Decl(lib.es5.d.ts, --, --))
+>bar : Symbol(bar, Decl(circularReferenceInReturnType.ts, 14, 1))
+
+    return arg;
+>arg : Symbol(arg, Decl(circularReferenceInReturnType.ts, 12, 13))
+}
+
+function bar(arg: string) {
+>bar : Symbol(bar, Decl(circularReferenceInReturnType.ts, 14, 1))
+>arg : Symbol(arg, Decl(circularReferenceInReturnType.ts, 16, 13))
+
+    return foo(arg);
+>foo : Symbol(foo, Decl(circularReferenceInReturnType.ts, 8, 31))
+>arg : Symbol(arg, Decl(circularReferenceInReturnType.ts, 16, 13))
+}
+
diff --git a/tests/baselines/reference/circularReferenceInReturnType.types b/tests/baselines/reference/circularReferenceInReturnType.types
index 37d311ac83852..bcc174e7be663 100644
--- a/tests/baselines/reference/circularReferenceInReturnType.types
+++ b/tests/baselines/reference/circularReferenceInReturnType.types
@@ -53,16 +53,46 @@ declare function fn3<T>(): <T2>(cb: (arg: T2) => any) => (a: T) => void;
 >  : ^
 
 const res3 = fn3()(() => res3);
->res3 : any
->     : ^^^
+>res3 : (a: unknown) => void
+>     : ^ ^^^^^^^^^^^^^^    
 >fn3()(() => res3) : (a: unknown) => void
 >                  : ^ ^^^^^^^^^^^^^^    
 >fn3() : <T2>(cb: (arg: T2) => any) => (a: unknown) => void
 >      : ^^^^^  ^^^   ^^^^^^^^^   ^^^^^    ^^^^^^^         
 >fn3 : <T>() => <T2>(cb: (arg: T2) => any) => (a: T) => void
 >    : ^ ^^^^^^^                                            
->() => res3 : () => any
->           : ^^^^^^^^^
->res3 : any
->     : ^^^
+>() => res3 : () => (a: unknown) => void
+>           : ^^^^^^^ ^^^^^^^^^^^^^^    
+>res3 : (a: unknown) => void
+>     : ^ ^^^^^^^^^^^^^^    
+
+// https://github.com/microsoft/TypeScript/issues/58616
+
+function foo(arg: Parameters<typeof bar>[0]) {
+>foo : (arg: Parameters<typeof bar>[0]) => string
+>    : ^   ^^                         ^^^^^^^^^^^
+>arg : string
+>    : ^^^^^^
+>bar : (arg: string) => string
+>    : ^   ^^      ^^^^^^^^^^^
+
+    return arg;
+>arg : string
+>    : ^^^^^^
+}
+
+function bar(arg: string) {
+>bar : (arg: string) => string
+>    : ^   ^^      ^^^^^^^^^^^
+>arg : string
+>    : ^^^^^^
+
+    return foo(arg);
+>foo(arg) : string
+>         : ^^^^^^
+>foo : (arg: Parameters<typeof bar>[0]) => string
+>    : ^   ^^                         ^^^^^^^^^^^
+>arg : string
+>    : ^^^^^^
+}
 
diff --git a/tests/baselines/reference/complexRecursiveCollections.types b/tests/baselines/reference/complexRecursiveCollections.types
index 11d60bdbb0778..eba0f913b22ab 100644
--- a/tests/baselines/reference/complexRecursiveCollections.types
+++ b/tests/baselines/reference/complexRecursiveCollections.types
@@ -3,7 +3,7 @@
 === Performance Stats ===
 Assignability cache: 10,000
 Type Count: 50,000
-Instantiation count: 250,000
+Instantiation count: 100,000
 Symbol count: 100,000
 
 === complex.ts ===
diff --git a/tests/baselines/reference/flatArrayNoExcessiveStackDepth.errors.txt b/tests/baselines/reference/flatArrayNoExcessiveStackDepth.errors.txt
index fee12ed489776..d4ae5a13e8947 100644
--- a/tests/baselines/reference/flatArrayNoExcessiveStackDepth.errors.txt
+++ b/tests/baselines/reference/flatArrayNoExcessiveStackDepth.errors.txt
@@ -1,6 +1,6 @@
 flatArrayNoExcessiveStackDepth.ts(20,5): error TS2322: Type 'FlatArray<Arr, any>' is not assignable to type 'FlatArray<Arr, D>'.
   Type 'Arr' is not assignable to type 'FlatArray<Arr, D>'.
-    Type 'Arr' is not assignable to type '(Arr extends readonly (infer InnerArr)[] ? FlatArray<InnerArr, [-1, 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20][D]> : Arr) & Arr'.
+    Type 'Arr' is not assignable to type 'Arr & (Arr extends readonly (infer InnerArr)[] ? FlatArray<InnerArr, [-1, 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20][D]> : Arr)'.
       Type 'Arr' is not assignable to type 'Arr extends readonly (infer InnerArr)[] ? FlatArray<InnerArr, [-1, 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20][D]> : Arr'.
 
 
@@ -28,7 +28,7 @@ flatArrayNoExcessiveStackDepth.ts(20,5): error TS2322: Type 'FlatArray<Arr, any>
         ~
 !!! error TS2322: Type 'FlatArray<Arr, any>' is not assignable to type 'FlatArray<Arr, D>'.
 !!! error TS2322:   Type 'Arr' is not assignable to type 'FlatArray<Arr, D>'.
-!!! error TS2322:     Type 'Arr' is not assignable to type '(Arr extends readonly (infer InnerArr)[] ? FlatArray<InnerArr, [-1, 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20][D]> : Arr) & Arr'.
+!!! error TS2322:     Type 'Arr' is not assignable to type 'Arr & (Arr extends readonly (infer InnerArr)[] ? FlatArray<InnerArr, [-1, 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20][D]> : Arr)'.
 !!! error TS2322:       Type 'Arr' is not assignable to type 'Arr extends readonly (infer InnerArr)[] ? FlatArray<InnerArr, [-1, 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20][D]> : Arr'.
     }
     
\ No newline at end of file
diff --git a/tests/cases/compiler/circularReferenceInReturnType.ts b/tests/cases/compiler/circularReferenceInReturnType.ts
index 50f82f9e37156..ec53b6d50731f 100644
--- a/tests/cases/compiler/circularReferenceInReturnType.ts
+++ b/tests/cases/compiler/circularReferenceInReturnType.ts
@@ -10,3 +10,13 @@ const res2 = fn2()(() => res2);
 
 declare function fn3<T>(): <T2>(cb: (arg: T2) => any) => (a: T) => void;
 const res3 = fn3()(() => res3);
+
+// https://github.com/microsoft/TypeScript/issues/58616
+
+function foo(arg: Parameters<typeof bar>[0]) {
+    return arg;
+}
+
+function bar(arg: string) {
+    return foo(arg);
+}