diff --git a/tsc/internal/checker/checker.go b/tsc/internal/checker/checker.go
index 10ddb3c0c88b4..f6cffb8246a61 100644
--- a/tsc/internal/checker/checker.go
+++ b/tsc/internal/checker/checker.go
@@ -765,6 +765,7 @@ type Checker struct {
 	uniqueLiteralType                           *Type
 	uniqueLiteralMapper                         *TypeMapper
 	reliabilityFlags                            RelationComparisonResult
+	sawCircularVariance                         bool
 	reportUnreliableMapper                      *TypeMapper
 	reportUnmeasurableMapper                    *TypeMapper
 	restrictiveMapper                           *TypeMapper
diff --git a/tsc/internal/checker/relater.go b/tsc/internal/checker/relater.go
index d3b6c86014498..9ad8d2bb880f1 100644
--- a/tsc/internal/checker/relater.go
+++ b/tsc/internal/checker/relater.go
@@ -1369,7 +1369,9 @@ func (c *Checker) getVariancesWorker(symbol *ast.Symbol, typeParameters []*Type)
 					variance = VarianceFlagsContravariant
 				default:
 					saveReliabilityFlags := c.reliabilityFlags
+					saveSawCircularVariance := c.sawCircularVariance
 					c.reliabilityFlags = 0
+					c.sawCircularVariance = false
 					// We first compare instantiations where the type parameter is replaced with
 					// marker types that have a known subtype relationship. From this we can infer
 					// invariance, covariance, contravariance or bivariance.
@@ -1380,9 +1382,15 @@ func (c *Checker) getVariancesWorker(symbol *ast.Symbol, typeParameters []*Type)
 					// If the instantiations appear to be related bivariantly it may be because the
 					// type parameter is independent (i.e. it isn't witnessed anywhere in the generic
 					// type). To determine this we compare instantiations where the type parameter is
-					// replaced with marker types that are known to be unrelated.
+					// replaced with marker types that are known to be unrelated. However, if the comparisons
+					// relied on variances of circular types still being computed, the type parameter may be
+					// witnessed through those types, so we can only conclude that the variance is unmeasurable.
 					if variance == VarianceFlagsBivariant && c.isTypeAssignableTo(c.createMarkerType(symbol, tp, c.markerOtherType), typeWithSuper) {
-						variance = VarianceFlagsIndependent
+						if c.sawCircularVariance {
+							variance |= VarianceFlagsUnmeasurable
+						} else {
+							variance = VarianceFlagsIndependent
+						}
 					}
 					if c.reliabilityFlags&RelationComparisonResultReportsUnmeasurable != 0 {
 						variance |= VarianceFlagsUnmeasurable
@@ -1391,6 +1399,7 @@ func (c *Checker) getVariancesWorker(symbol *ast.Symbol, typeParameters []*Type)
 						variance |= VarianceFlagsUnreliable
 					}
 					c.reliabilityFlags = saveReliabilityFlags
+					c.sawCircularVariance = saveSawCircularVariance
 				}
 				// If variance computation was restarted due to a circularity we may have already
 				// computed variances for this generic type. If so, we exit early.
@@ -3426,6 +3435,7 @@ func (r *Relater) structuredTypeRelatedToWorker(source *Type, target *Type, repo
 		target.alias != nil && source.alias.symbol == target.alias.symbol && !(r.c.isMarkerType(source) || r.c.isMarkerType(target)) {
 		variances := r.c.getAliasVariances(source.alias.symbol)
 		if len(variances) == 0 {
+			r.c.sawCircularVariance = true
 			return TernaryUnknown
 		}
 		params := r.c.typeAliasLinks.Get(source.alias.symbol).typeParameters
@@ -3865,6 +3875,7 @@ func (r *Relater) structuredTypeRelatedToWorker(source *Type, target *Type, repo
 			// effectively means we measure variance only from type parameter occurrences that aren't nested in
 			// recursive instantiations of the generic type.
 			if len(variances) == 0 {
+				r.c.sawCircularVariance = true
 				return TernaryUnknown
 			}
 			varianceResult, ok := relateVariances(r.c.getTypeArguments(source), r.c.getTypeArguments(target), variances, intersectionState)
diff --git a/tsc/testdata/baselines/reference/compiler/circularVariance3.errors.txt b/tsc/testdata/baselines/reference/compiler/circularVariance3.errors.txt
new file mode 100644
index 0000000000000..647460190de4a
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/circularVariance3.errors.txt
@@ -0,0 +1,30 @@
+circularVariance3.ts(6,14): error TS2322: Type 'Handler<string, string>' is not assignable to type 'Handler<number, string>'.
+  Types of parameters 'params' and 'params' are incompatible.
+    Type 'Params<number, string>' is not assignable to type 'Params<string, string>'.
+      Type 'string' is not assignable to type 'number'.
+circularVariance3.ts(7,14): error TS2322: Type 'Handler<string, string>' is not assignable to type 'Handler<boolean, { x: 1; }>'.
+  Types of parameters 'params' and 'params' are incompatible.
+    Type 'Params<boolean, { x: 1; }>' is not assignable to type 'Params<string, string>'.
+      Type 'string' is not assignable to type 'boolean'.
+
+
+==== circularVariance3.ts (2 errors) ====
+    type Params<T, K> = { config: Config<T, K> };
+    type Handler<T, K> = (params: Params<T, K>) => void;
+    type Config<T, K> = { read: (item: T) => void; handler: Handler<T, K> };
+    
+    declare const a: Handler<string, string>;
+    export const b: Handler<number, string> = a;  // Error
+                 ~
+!!! error TS2322: Type 'Handler<string, string>' is not assignable to type 'Handler<number, string>'.
+!!! error TS2322:   Types of parameters 'params' and 'params' are incompatible.
+!!! error TS2322:     Type 'Params<number, string>' is not assignable to type 'Params<string, string>'.
+!!! error TS2322:       Type 'string' is not assignable to type 'number'.
+    export const c: Handler<boolean, { x: 1 }> = a;  // Error
+                 ~
+!!! error TS2322: Type 'Handler<string, string>' is not assignable to type 'Handler<boolean, { x: 1; }>'.
+!!! error TS2322:   Types of parameters 'params' and 'params' are incompatible.
+!!! error TS2322:     Type 'Params<boolean, { x: 1; }>' is not assignable to type 'Params<string, string>'.
+!!! error TS2322:       Type 'string' is not assignable to type 'boolean'.
+    export const d: Handler<string, number> = a;
+    
\ No newline at end of file
diff --git a/tsc/testdata/baselines/reference/compiler/circularVariance3.symbols b/tsc/testdata/baselines/reference/compiler/circularVariance3.symbols
new file mode 100644
index 0000000000000..13eb331ffaf23
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/circularVariance3.symbols
@@ -0,0 +1,53 @@
+//// [tests/cases/compiler/circularVariance3.ts] ////
+
+=== circularVariance3.ts ===
+type Params<T, K> = { config: Config<T, K> };
+>Params : Symbol(Params, Decl(circularVariance3.ts, 0, 0))
+>T : Symbol(T, Decl(circularVariance3.ts, 0, 12))
+>K : Symbol(K, Decl(circularVariance3.ts, 0, 14))
+>config : Symbol(config, Decl(circularVariance3.ts, 0, 21))
+>Config : Symbol(Config, Decl(circularVariance3.ts, 1, 52))
+>T : Symbol(T, Decl(circularVariance3.ts, 0, 12))
+>K : Symbol(K, Decl(circularVariance3.ts, 0, 14))
+
+type Handler<T, K> = (params: Params<T, K>) => void;
+>Handler : Symbol(Handler, Decl(circularVariance3.ts, 0, 45))
+>T : Symbol(T, Decl(circularVariance3.ts, 1, 13))
+>K : Symbol(K, Decl(circularVariance3.ts, 1, 15))
+>params : Symbol(params, Decl(circularVariance3.ts, 1, 22))
+>Params : Symbol(Params, Decl(circularVariance3.ts, 0, 0))
+>T : Symbol(T, Decl(circularVariance3.ts, 1, 13))
+>K : Symbol(K, Decl(circularVariance3.ts, 1, 15))
+
+type Config<T, K> = { read: (item: T) => void; handler: Handler<T, K> };
+>Config : Symbol(Config, Decl(circularVariance3.ts, 1, 52))
+>T : Symbol(T, Decl(circularVariance3.ts, 2, 12))
+>K : Symbol(K, Decl(circularVariance3.ts, 2, 14))
+>read : Symbol(read, Decl(circularVariance3.ts, 2, 21))
+>item : Symbol(item, Decl(circularVariance3.ts, 2, 29))
+>T : Symbol(T, Decl(circularVariance3.ts, 2, 12))
+>handler : Symbol(handler, Decl(circularVariance3.ts, 2, 46))
+>Handler : Symbol(Handler, Decl(circularVariance3.ts, 0, 45))
+>T : Symbol(T, Decl(circularVariance3.ts, 2, 12))
+>K : Symbol(K, Decl(circularVariance3.ts, 2, 14))
+
+declare const a: Handler<string, string>;
+>a : Symbol(a, Decl(circularVariance3.ts, 4, 13))
+>Handler : Symbol(Handler, Decl(circularVariance3.ts, 0, 45))
+
+export const b: Handler<number, string> = a;  // Error
+>b : Symbol(b, Decl(circularVariance3.ts, 5, 12))
+>Handler : Symbol(Handler, Decl(circularVariance3.ts, 0, 45))
+>a : Symbol(a, Decl(circularVariance3.ts, 4, 13))
+
+export const c: Handler<boolean, { x: 1 }> = a;  // Error
+>c : Symbol(c, Decl(circularVariance3.ts, 6, 12))
+>Handler : Symbol(Handler, Decl(circularVariance3.ts, 0, 45))
+>x : Symbol(x, Decl(circularVariance3.ts, 6, 34))
+>a : Symbol(a, Decl(circularVariance3.ts, 4, 13))
+
+export const d: Handler<string, number> = a;
+>d : Symbol(d, Decl(circularVariance3.ts, 7, 12))
+>Handler : Symbol(Handler, Decl(circularVariance3.ts, 0, 45))
+>a : Symbol(a, Decl(circularVariance3.ts, 4, 13))
+
diff --git a/tsc/testdata/baselines/reference/compiler/circularVariance3.types b/tsc/testdata/baselines/reference/compiler/circularVariance3.types
new file mode 100644
index 0000000000000..beb5a3135dcd4
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/circularVariance3.types
@@ -0,0 +1,33 @@
+//// [tests/cases/compiler/circularVariance3.ts] ////
+
+=== circularVariance3.ts ===
+type Params<T, K> = { config: Config<T, K> };
+>Params : Params<T, K>
+>config : Config<T, K>
+
+type Handler<T, K> = (params: Params<T, K>) => void;
+>Handler : Handler<T, K>
+>params : Params<T, K>
+
+type Config<T, K> = { read: (item: T) => void; handler: Handler<T, K> };
+>Config : Config<T, K>
+>read : (item: T) => void
+>item : T
+>handler : Handler<T, K>
+
+declare const a: Handler<string, string>;
+>a : Handler<string, string>
+
+export const b: Handler<number, string> = a;  // Error
+>b : Handler<number, string>
+>a : Handler<string, string>
+
+export const c: Handler<boolean, { x: 1 }> = a;  // Error
+>c : Handler<boolean, { x: 1; }>
+>x : 1
+>a : Handler<string, string>
+
+export const d: Handler<string, number> = a;
+>d : Handler<string, number>
+>a : Handler<string, string>
+
diff --git a/tsc/testdata/baselines/reference/compiler/circularVariance4.errors.txt b/tsc/testdata/baselines/reference/compiler/circularVariance4.errors.txt
new file mode 100644
index 0000000000000..a6957be9f4b42
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/circularVariance4.errors.txt
@@ -0,0 +1,38 @@
+circularVariance4.ts(6,14): error TS2322: Type 'Params<string, string>' is not assignable to type 'Params<number, string>'.
+  Type 'number' is not assignable to type 'string'.
+circularVariance4.ts(9,14): error TS2322: Type 'Handler<string, string>' is not assignable to type 'Handler<number, string>'.
+  Types of parameters 'params' and 'params' are incompatible.
+    Type 'Params<number, string>' is not assignable to type 'Params<string, string>'.
+      Type 'string' is not assignable to type 'number'.
+circularVariance4.ts(10,14): error TS2322: Type 'Handler<string, string>' is not assignable to type 'Handler<boolean, { x: 1; }>'.
+  Types of parameters 'params' and 'params' are incompatible.
+    Type 'Params<boolean, { x: 1; }>' is not assignable to type 'Params<string, string>'.
+      Type 'string' is not assignable to type 'boolean'.
+
+
+==== circularVariance4.ts (3 errors) ====
+    type Params<T, K> = { config: Config<T, K> };
+    type Handler<T, K> = (params: Params<T, K>) => void;
+    type Config<T, K> = { read: (item: T) => void; handler: Handler<T, K> };
+    
+    declare const p: Params<string, string>;
+    export const q: Params<number, string> = p;  // Error
+                 ~
+!!! error TS2322: Type 'Params<string, string>' is not assignable to type 'Params<number, string>'.
+!!! error TS2322:   Type 'number' is not assignable to type 'string'.
+    
+    declare const a: Handler<string, string>;
+    export const b: Handler<number, string> = a;  // Error
+                 ~
+!!! error TS2322: Type 'Handler<string, string>' is not assignable to type 'Handler<number, string>'.
+!!! error TS2322:   Types of parameters 'params' and 'params' are incompatible.
+!!! error TS2322:     Type 'Params<number, string>' is not assignable to type 'Params<string, string>'.
+!!! error TS2322:       Type 'string' is not assignable to type 'number'.
+    export const c: Handler<boolean, { x: 1 }> = a;  // Error
+                 ~
+!!! error TS2322: Type 'Handler<string, string>' is not assignable to type 'Handler<boolean, { x: 1; }>'.
+!!! error TS2322:   Types of parameters 'params' and 'params' are incompatible.
+!!! error TS2322:     Type 'Params<boolean, { x: 1; }>' is not assignable to type 'Params<string, string>'.
+!!! error TS2322:       Type 'string' is not assignable to type 'boolean'.
+    export const d: Handler<string, number> = a;
+    
\ No newline at end of file
diff --git a/tsc/testdata/baselines/reference/compiler/circularVariance4.symbols b/tsc/testdata/baselines/reference/compiler/circularVariance4.symbols
new file mode 100644
index 0000000000000..9ee4d6119f4c1
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/circularVariance4.symbols
@@ -0,0 +1,62 @@
+//// [tests/cases/compiler/circularVariance4.ts] ////
+
+=== circularVariance4.ts ===
+type Params<T, K> = { config: Config<T, K> };
+>Params : Symbol(Params, Decl(circularVariance4.ts, 0, 0))
+>T : Symbol(T, Decl(circularVariance4.ts, 0, 12))
+>K : Symbol(K, Decl(circularVariance4.ts, 0, 14))
+>config : Symbol(config, Decl(circularVariance4.ts, 0, 21))
+>Config : Symbol(Config, Decl(circularVariance4.ts, 1, 52))
+>T : Symbol(T, Decl(circularVariance4.ts, 0, 12))
+>K : Symbol(K, Decl(circularVariance4.ts, 0, 14))
+
+type Handler<T, K> = (params: Params<T, K>) => void;
+>Handler : Symbol(Handler, Decl(circularVariance4.ts, 0, 45))
+>T : Symbol(T, Decl(circularVariance4.ts, 1, 13))
+>K : Symbol(K, Decl(circularVariance4.ts, 1, 15))
+>params : Symbol(params, Decl(circularVariance4.ts, 1, 22))
+>Params : Symbol(Params, Decl(circularVariance4.ts, 0, 0))
+>T : Symbol(T, Decl(circularVariance4.ts, 1, 13))
+>K : Symbol(K, Decl(circularVariance4.ts, 1, 15))
+
+type Config<T, K> = { read: (item: T) => void; handler: Handler<T, K> };
+>Config : Symbol(Config, Decl(circularVariance4.ts, 1, 52))
+>T : Symbol(T, Decl(circularVariance4.ts, 2, 12))
+>K : Symbol(K, Decl(circularVariance4.ts, 2, 14))
+>read : Symbol(read, Decl(circularVariance4.ts, 2, 21))
+>item : Symbol(item, Decl(circularVariance4.ts, 2, 29))
+>T : Symbol(T, Decl(circularVariance4.ts, 2, 12))
+>handler : Symbol(handler, Decl(circularVariance4.ts, 2, 46))
+>Handler : Symbol(Handler, Decl(circularVariance4.ts, 0, 45))
+>T : Symbol(T, Decl(circularVariance4.ts, 2, 12))
+>K : Symbol(K, Decl(circularVariance4.ts, 2, 14))
+
+declare const p: Params<string, string>;
+>p : Symbol(p, Decl(circularVariance4.ts, 4, 13))
+>Params : Symbol(Params, Decl(circularVariance4.ts, 0, 0))
+
+export const q: Params<number, string> = p;  // Error
+>q : Symbol(q, Decl(circularVariance4.ts, 5, 12))
+>Params : Symbol(Params, Decl(circularVariance4.ts, 0, 0))
+>p : Symbol(p, Decl(circularVariance4.ts, 4, 13))
+
+declare const a: Handler<string, string>;
+>a : Symbol(a, Decl(circularVariance4.ts, 7, 13))
+>Handler : Symbol(Handler, Decl(circularVariance4.ts, 0, 45))
+
+export const b: Handler<number, string> = a;  // Error
+>b : Symbol(b, Decl(circularVariance4.ts, 8, 12))
+>Handler : Symbol(Handler, Decl(circularVariance4.ts, 0, 45))
+>a : Symbol(a, Decl(circularVariance4.ts, 7, 13))
+
+export const c: Handler<boolean, { x: 1 }> = a;  // Error
+>c : Symbol(c, Decl(circularVariance4.ts, 9, 12))
+>Handler : Symbol(Handler, Decl(circularVariance4.ts, 0, 45))
+>x : Symbol(x, Decl(circularVariance4.ts, 9, 34))
+>a : Symbol(a, Decl(circularVariance4.ts, 7, 13))
+
+export const d: Handler<string, number> = a;
+>d : Symbol(d, Decl(circularVariance4.ts, 10, 12))
+>Handler : Symbol(Handler, Decl(circularVariance4.ts, 0, 45))
+>a : Symbol(a, Decl(circularVariance4.ts, 7, 13))
+
diff --git a/tsc/testdata/baselines/reference/compiler/circularVariance4.types b/tsc/testdata/baselines/reference/compiler/circularVariance4.types
new file mode 100644
index 0000000000000..99770a22368a1
--- /dev/null
+++ b/tsc/testdata/baselines/reference/compiler/circularVariance4.types
@@ -0,0 +1,40 @@
+//// [tests/cases/compiler/circularVariance4.ts] ////
+
+=== circularVariance4.ts ===
+type Params<T, K> = { config: Config<T, K> };
+>Params : Params<T, K>
+>config : Config<T, K>
+
+type Handler<T, K> = (params: Params<T, K>) => void;
+>Handler : Handler<T, K>
+>params : Params<T, K>
+
+type Config<T, K> = { read: (item: T) => void; handler: Handler<T, K> };
+>Config : Config<T, K>
+>read : (item: T) => void
+>item : T
+>handler : Handler<T, K>
+
+declare const p: Params<string, string>;
+>p : Params<string, string>
+
+export const q: Params<number, string> = p;  // Error
+>q : Params<number, string>
+>p : Params<string, string>
+
+declare const a: Handler<string, string>;
+>a : Handler<string, string>
+
+export const b: Handler<number, string> = a;  // Error
+>b : Handler<number, string>
+>a : Handler<string, string>
+
+export const c: Handler<boolean, { x: 1 }> = a;  // Error
+>c : Handler<boolean, { x: 1; }>
+>x : 1
+>a : Handler<string, string>
+
+export const d: Handler<string, number> = a;
+>d : Handler<string, number>
+>a : Handler<string, string>
+
diff --git a/tsc/testdata/baselines/reference/compiler/varianceMeasurement.errors.txt b/tsc/testdata/baselines/reference/compiler/varianceMeasurement.errors.txt
index 7a361e5b94ac6..3ba500b0151f1 100644
--- a/tsc/testdata/baselines/reference/compiler/varianceMeasurement.errors.txt
+++ b/tsc/testdata/baselines/reference/compiler/varianceMeasurement.errors.txt
@@ -23,7 +23,9 @@ varianceMeasurement.ts(57,7): error TS2322: Type 'Fn<string, number>' is not ass
 varianceMeasurement.ts(62,7): error TS2322: Type 'Fn<string, number>' is not assignable to type 'Fn<string, 0>'.
   Type 'number' is not assignable to type '0'.
 varianceMeasurement.ts(75,7): error TS2322: Type 'C<unknown, number>' is not assignable to type 'C<unknown, string>'.
-  Type 'number' is not assignable to type 'string'.
+  Types of property 'sub' are incompatible.
+    Type 'I<unknown, number>' is not assignable to type 'I<unknown, string>'.
+      Type 'number' is not assignable to type 'string'.
 
 
 ==== varianceMeasurement.ts (9 errors) ====
@@ -136,5 +138,7 @@ varianceMeasurement.ts(75,7): error TS2322: Type 'C<unknown, number>' is not ass
     const c1: C<unknown, string> = new C<unknown, number>();  // Error
           ~~
 !!! error TS2322: Type 'C<unknown, number>' is not assignable to type 'C<unknown, string>'.
-!!! error TS2322:   Type 'number' is not assignable to type 'string'.
+!!! error TS2322:   Types of property 'sub' are incompatible.
+!!! error TS2322:     Type 'I<unknown, number>' is not assignable to type 'I<unknown, string>'.
+!!! error TS2322:       Type 'number' is not assignable to type 'string'.
     
\ No newline at end of file
diff --git a/tsc/testdata/tests/cases/compiler/circularVariance3.ts b/tsc/testdata/tests/cases/compiler/circularVariance3.ts
new file mode 100644
index 0000000000000..e83bd5e78e18e
--- /dev/null
+++ b/tsc/testdata/tests/cases/compiler/circularVariance3.ts
@@ -0,0 +1,11 @@
+// @strict: true
+// @noEmit: true
+
+type Params<T, K> = { config: Config<T, K> };
+type Handler<T, K> = (params: Params<T, K>) => void;
+type Config<T, K> = { read: (item: T) => void; handler: Handler<T, K> };
+
+declare const a: Handler<string, string>;
+export const b: Handler<number, string> = a;  // Error
+export const c: Handler<boolean, { x: 1 }> = a;  // Error
+export const d: Handler<string, number> = a;
diff --git a/tsc/testdata/tests/cases/compiler/circularVariance4.ts b/tsc/testdata/tests/cases/compiler/circularVariance4.ts
new file mode 100644
index 0000000000000..2245c3cb34899
--- /dev/null
+++ b/tsc/testdata/tests/cases/compiler/circularVariance4.ts
@@ -0,0 +1,14 @@
+// @strict: true
+// @noEmit: true
+
+type Params<T, K> = { config: Config<T, K> };
+type Handler<T, K> = (params: Params<T, K>) => void;
+type Config<T, K> = { read: (item: T) => void; handler: Handler<T, K> };
+
+declare const p: Params<string, string>;
+export const q: Params<number, string> = p;  // Error
+
+declare const a: Handler<string, string>;
+export const b: Handler<number, string> = a;  // Error
+export const c: Handler<boolean, { x: 1 }> = a;  // Error
+export const d: Handler<string, number> = a;