diff --git a/compiler/fir/psi2fir/src/org/jetbrains/kotlin/fir/builder/RawFirBuilder.kt b/compiler/fir/psi2fir/src/org/jetbrains/kotlin/fir/builder/RawFirBuilder.kt
index 8fb8fbf5f7e..85c0647ed4b 100644
--- a/compiler/fir/psi2fir/src/org/jetbrains/kotlin/fir/builder/RawFirBuilder.kt
+++ b/compiler/fir/psi2fir/src/org/jetbrains/kotlin/fir/builder/RawFirBuilder.kt
@@ -856,7 +856,7 @@ class RawFirBuilder(session: FirSession, val stubMode: Boolean) : BaseFirBuilder
                         isNullable,
                         unwrappedElement.receiverTypeReference.convertSafe(),
                         // TODO: probably implicit type should not be here
-                        unwrappedElement.returnTypeReference.toFirOrImplicitType()
+                        unwrappedElement.returnTypeReference.toFirOrErrorType()
                     )
                     for (valueParameter in unwrappedElement.parameters) {
                         functionType.valueParameters += valueParameter.convert<FirValueParameter>()
diff --git a/compiler/fir/resolve/testData/resolve/arguments/incorrectFunctionalType.kt b/compiler/fir/resolve/testData/resolve/arguments/incorrectFunctionalType.kt
new file mode 100644
index 00000000000..cc93ef073fe
--- /dev/null
+++ b/compiler/fir/resolve/testData/resolve/arguments/incorrectFunctionalType.kt
@@ -0,0 +1,7 @@
+fun foo(func: (Int).Int -> Int) {}
+
+fun test() {
+    <!INAPPLICABLE_CANDIDATE!>foo<!> {
+        this + <!UNRESOLVED_REFERENCE!>it<!>
+    }
+}
\ No newline at end of file
diff --git a/compiler/fir/resolve/testData/resolve/arguments/incorrectFunctionalType.txt b/compiler/fir/resolve/testData/resolve/arguments/incorrectFunctionalType.txt
new file mode 100644
index 00000000000..91c07b808b9
--- /dev/null
+++ b/compiler/fir/resolve/testData/resolve/arguments/incorrectFunctionalType.txt
@@ -0,0 +1,10 @@
+FILE: incorrectFunctionalType.kt
+    public final fun foo(func: R|kotlin/Int.() -> class error: Incomplete code|, Int: <implicit>): R|kotlin/Unit|
+    fun <anonymous>(): R|kotlin/Unit| {
+    }
+    public final fun test(): R|kotlin/Unit| {
+        <Inapplicable(PARAMETER_MAPPING_ERROR): [/foo]>#(<L> = foo@fun <implicit>.<anonymous>(): R|kotlin/String| {
+            this#.R|kotlin/plus|(<Unresolved name: it>#)
+        }
+        )
+    }
diff --git a/compiler/fir/resolve/tests/org/jetbrains/kotlin/fir/FirDiagnosticsTestGenerated.java b/compiler/fir/resolve/tests/org/jetbrains/kotlin/fir/FirDiagnosticsTestGenerated.java
index 07830f33a38..908a4b3835f 100644
--- a/compiler/fir/resolve/tests/org/jetbrains/kotlin/fir/FirDiagnosticsTestGenerated.java
+++ b/compiler/fir/resolve/tests/org/jetbrains/kotlin/fir/FirDiagnosticsTestGenerated.java
@@ -240,6 +240,11 @@ public class FirDiagnosticsTestGenerated extends AbstractFirDiagnosticsTest {
             runTest("compiler/fir/resolve/testData/resolve/arguments/fieldPlusAssign.kt");
         }
 
+        @TestMetadata("incorrectFunctionalType.kt")
+        public void testIncorrectFunctionalType() throws Exception {
+            runTest("compiler/fir/resolve/testData/resolve/arguments/incorrectFunctionalType.kt");
+        }
+
         @TestMetadata("invoke.kt")
         public void testInvoke() throws Exception {
             runTest("compiler/fir/resolve/testData/resolve/arguments/invoke.kt");