diff --git a/compiler/testData/codegen/box/builderInference/issues/kt63733.kt b/compiler/testData/codegen/box/builderInference/issues/kt63733.kt
new file mode 100644
index 00000000000..b917c1744fc
--- /dev/null
+++ b/compiler/testData/codegen/box/builderInference/issues/kt63733.kt
@@ -0,0 +1,35 @@
+// ISSUE: KT-63733
+
+// IGNORE_LIGHT_ANALYSIS
+// IGNORE_BACKEND: ANY
+// REASON: red code (see corresponding diagnostic test)
+
+fun BoundedBuildee<TargetType>.setBoundedTypeVariable(arg: DifferentType) {}
+
+fun box(): String {
+    boundedBuild<TargetType> {
+        setBoundedTypeVariable(TargetType())
+        setBoundedTypeVariable(DifferentType())
+    }
+    boundedBuild {
+        setBoundedTypeVariable(TargetType())
+        setBoundedTypeVariable(DifferentType())
+    }
+    return "OK"
+}
+
+
+
+
+open class TargetTypeBase
+class TargetType: TargetTypeBase()
+class DifferentType
+
+class BoundedBuildee<BTV: TargetTypeBase> {
+    fun setBoundedTypeVariable(value: BTV) { storage = value }
+    private var storage: BTV = TargetType() as BTV
+}
+
+fun <PBTV: TargetTypeBase> boundedBuild(instructions: BoundedBuildee<PBTV>.() -> Unit): BoundedBuildee<PBTV> {
+    return BoundedBuildee<PBTV>().apply(instructions)
+}
diff --git a/compiler/testData/diagnostics/tests/builderInference/issues/kt63733.fir.kt b/compiler/testData/diagnostics/tests/builderInference/issues/kt63733.fir.kt
new file mode 100644
index 00000000000..7617d95762c
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/issues/kt63733.fir.kt
@@ -0,0 +1,34 @@
+// ISSUE: KT-63733
+// CHECK_TYPE_WITH_EXACT
+
+fun BoundedBuildee<TargetType>.setBoundedTypeVariable(arg: DifferentType) {}
+
+fun test() {
+    boundedBuild<TargetType> {
+        setBoundedTypeVariable(TargetType())
+        setBoundedTypeVariable(DifferentType())
+    }
+    val buildee = <!NEW_INFERENCE_ERROR!>boundedBuild {
+        setBoundedTypeVariable(TargetType())
+        setBoundedTypeVariable(DifferentType())
+    }<!>
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<BoundedBuildee<TargetType>>(<!ARGUMENT_TYPE_MISMATCH("BoundedBuildee<TargetType>; BoundedBuildee<kotlin.Any>")!>buildee<!>)
+}
+
+
+
+
+open class TargetTypeBase
+class TargetType: TargetTypeBase()
+class DifferentType
+
+class BoundedBuildee<BTV: TargetTypeBase> {
+    fun setBoundedTypeVariable(value: BTV) { storage = value }
+    private var storage: BTV = null!!
+}
+
+fun <PBTV: TargetTypeBase> boundedBuild(instructions: BoundedBuildee<PBTV>.() -> Unit): BoundedBuildee<PBTV> {
+    return BoundedBuildee<PBTV>().apply(instructions)
+}
diff --git a/compiler/testData/diagnostics/tests/builderInference/issues/kt63733.kt b/compiler/testData/diagnostics/tests/builderInference/issues/kt63733.kt
new file mode 100644
index 00000000000..e490c2b2dfe
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/builderInference/issues/kt63733.kt
@@ -0,0 +1,34 @@
+// ISSUE: KT-63733
+// CHECK_TYPE_WITH_EXACT
+
+fun BoundedBuildee<TargetType>.setBoundedTypeVariable(arg: DifferentType) {}
+
+fun test() {
+    boundedBuild<TargetType> {
+        setBoundedTypeVariable(TargetType())
+        setBoundedTypeVariable(DifferentType())
+    }
+    val buildee = boundedBuild {
+        setBoundedTypeVariable(TargetType())
+        setBoundedTypeVariable(<!TYPE_MISMATCH("TargetTypeBase; DifferentType")!>DifferentType()<!>)
+    }
+    // exact type equality check — turns unexpected compile-time behavior into red code
+    // considered to be non-user-reproducible code for the purposes of these tests
+    checkExactType<BoundedBuildee<TargetType>>(<!TYPE_MISMATCH("BoundedBuildee<TargetType>; BoundedBuildee<Any>"), TYPE_MISMATCH("BoundedBuildee<Any>; BoundedBuildee<TargetType>")!>buildee<!>)
+}
+
+
+
+
+open class TargetTypeBase
+class TargetType: TargetTypeBase()
+class DifferentType
+
+class BoundedBuildee<BTV: TargetTypeBase> {
+    fun setBoundedTypeVariable(value: BTV) { storage = value }
+    private var storage: BTV = null!!
+}
+
+fun <PBTV: TargetTypeBase> boundedBuild(instructions: BoundedBuildee<PBTV>.() -> Unit): BoundedBuildee<PBTV> {
+    return BoundedBuildee<PBTV>().apply(instructions)
+}