diff --git a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirOldFrontendDiagnosticsTestGenerated.java b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirOldFrontendDiagnosticsTestGenerated.java
index ef38b88c9b3..243c7970454 100644
--- a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirOldFrontendDiagnosticsTestGenerated.java
+++ b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirOldFrontendDiagnosticsTestGenerated.java
@@ -14175,6 +14175,34 @@ public class FirOldFrontendDiagnosticsTestGenerated extends AbstractFirDiagnosti
                 public void testTwoTypeConstructors() throws Exception {
                     runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/twoTypeConstructors.kt");
                 }
+
+                @Nested
+                @TestMetadata("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes")
+                @TestDataPath("$PROJECT_ROOT")
+                public class SelfTypes {
+                    @Test
+                    public void testAllFilesPresentInSelfTypes() throws Exception {
+                        KtTestUtil.assertAllTestsPresentByMetadataWithExcluded(this.getClass(), new File("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes"), Pattern.compile("^(.+)\\.kt$"), Pattern.compile("^(.+)\\.fir\\.kts?$"), true);
+                    }
+
+                    @Test
+                    @TestMetadata("basicInferenceForImplicitSelfType.kt")
+                    public void testBasicInferenceForImplicitSelfType() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.kt");
+                    }
+
+                    @Test
+                    @TestMetadata("recursiveTypeWithTwoTypeParams.kt")
+                    public void testRecursiveTypeWithTwoTypeParams() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.kt");
+                    }
+
+                    @Test
+                    @TestMetadata("writerAppenderExampleRecursive.kt")
+                    public void testWriterAppenderExampleRecursive() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.kt");
+                    }
+                }
             }
 
             @Nested
diff --git a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirOldFrontendDiagnosticsWithLightTreeTestGenerated.java b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirOldFrontendDiagnosticsWithLightTreeTestGenerated.java
index 8ec97696058..70bcbb00f95 100644
--- a/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirOldFrontendDiagnosticsWithLightTreeTestGenerated.java
+++ b/compiler/fir/analysis-tests/tests-gen/org/jetbrains/kotlin/test/runners/FirOldFrontendDiagnosticsWithLightTreeTestGenerated.java
@@ -14175,6 +14175,34 @@ public class FirOldFrontendDiagnosticsWithLightTreeTestGenerated extends Abstrac
                 public void testTwoTypeConstructors() throws Exception {
                     runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/twoTypeConstructors.kt");
                 }
+
+                @Nested
+                @TestMetadata("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes")
+                @TestDataPath("$PROJECT_ROOT")
+                public class SelfTypes {
+                    @Test
+                    public void testAllFilesPresentInSelfTypes() throws Exception {
+                        KtTestUtil.assertAllTestsPresentByMetadataWithExcluded(this.getClass(), new File("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes"), Pattern.compile("^(.+)\\.kt$"), Pattern.compile("^(.+)\\.fir\\.kts?$"), true);
+                    }
+
+                    @Test
+                    @TestMetadata("basicInferenceForImplicitSelfType.kt")
+                    public void testBasicInferenceForImplicitSelfType() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.kt");
+                    }
+
+                    @Test
+                    @TestMetadata("recursiveTypeWithTwoTypeParams.kt")
+                    public void testRecursiveTypeWithTwoTypeParams() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.kt");
+                    }
+
+                    @Test
+                    @TestMetadata("writerAppenderExampleRecursive.kt")
+                    public void testWriterAppenderExampleRecursive() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.kt");
+                    }
+                }
             }
 
             @Nested
diff --git a/compiler/resolution/src/org/jetbrains/kotlin/resolve/calls/inference/components/KotlinConstraintSystemCompleter.kt b/compiler/resolution/src/org/jetbrains/kotlin/resolve/calls/inference/components/KotlinConstraintSystemCompleter.kt
index cbd0cb02edb..e642300118b 100644
--- a/compiler/resolution/src/org/jetbrains/kotlin/resolve/calls/inference/components/KotlinConstraintSystemCompleter.kt
+++ b/compiler/resolution/src/org/jetbrains/kotlin/resolve/calls/inference/components/KotlinConstraintSystemCompleter.kt
@@ -293,17 +293,51 @@ class KotlinConstraintSystemCompleter(
 
             val variableWithConstraints = notFixedTypeVariables.getValue(variableForFixation.variable)
 
-            if (variableForFixation.hasProperConstraint) {
-                fixVariable(this, variableWithConstraints, topLevelAtoms)
-                return true
-            } else {
-                processVariableWhenNotEnoughInformation(this, variableWithConstraints, topLevelAtoms, diagnosticsHolder)
+            when {
+                variableForFixation.hasProperConstraint -> {
+                    fixVariable(this, variableWithConstraints, topLevelAtoms)
+                    return true
+                }
+
+                hasDeclaredUpperBoundSelfTypes(variableWithConstraints) -> {
+                    fixVariable(this, variableWithConstraints, topLevelAtoms)
+                    return true
+                }
+
+                else -> processVariableWhenNotEnoughInformation(this, variableWithConstraints, topLevelAtoms, diagnosticsHolder)
             }
         }
 
         return false
     }
 
+    private fun ConstraintSystemCompletionContext.hasDeclaredUpperBoundSelfTypes(variable: VariableWithConstraints): Boolean {
+        val constraints = variable.constraints
+        return constraints.isNotEmpty() && constraints.all {
+            it.position.from is DeclaredUpperBoundConstraintPosition<*> && isSelfType(it.type.typeConstructor())
+        }
+    }
+
+    private fun ConstraintSystemCompletionContext.isSelfType(typeConstructor: TypeConstructorMarker): Boolean {
+        if (typeConstructor.isTypeParameterTypeConstructor()) {
+            val supertype = typeConstructor.supertypes().firstOrNull() ?: return false
+            return isSelfType(supertype.typeConstructor())
+        }
+
+        val parametersCount = typeConstructor.parametersCount()
+        if (parametersCount == 0) return false
+
+        for (parameterId in 0 until parametersCount) {
+            val parameter = typeConstructor.getParameter(parameterId)
+            if (parameter.upperBoundCount() != 1) return false
+
+            val upperBound = parameter.getUpperBound(0)
+            if (upperBound.typeConstructor() == typeConstructor) return true
+        }
+
+        return false
+    }
+
     private fun processVariableWhenNotEnoughInformation(
         c: ConstraintSystemCompletionContext,
         variableWithConstraints: VariableWithConstraints,
diff --git a/compiler/testData/diagnostics/tests/generics/projectionsScope/typeParameterBounds.kt b/compiler/testData/diagnostics/tests/generics/projectionsScope/typeParameterBounds.kt
index cbb6a8249de..dd6ce679c4e 100644
--- a/compiler/testData/diagnostics/tests/generics/projectionsScope/typeParameterBounds.kt
+++ b/compiler/testData/diagnostics/tests/generics/projectionsScope/typeParameterBounds.kt
@@ -12,15 +12,15 @@ class A<T> {
 }
 
 fun foo2(a: A<out CharSequence>, b: A<in CharSequence>) {
-    a.foo1(<!TYPE_MISMATCH!>Out<CharSequence>()<!>)
-    a.foo1<<!UPPER_BOUND_VIOLATED!>Out<CharSequence><!>>(<!TYPE_MISMATCH!>Out()<!>)
+    a.foo1(Out<CharSequence>())
+    a.foo1<Out<CharSequence>>(Out())
 
     a.foo1(Out())
     a.foo1(Out<Nothing>())
 
-    a.foo2(<!TYPE_MISMATCH!>Inv()<!>)
-    a.foo2(<!TYPE_MISMATCH!>Inv<CharSequence>()<!>)
-    a.foo2<<!UPPER_BOUND_VIOLATED!>Inv<CharSequence><!>>(<!TYPE_MISMATCH!>Inv()<!>)
+    a.foo2(Inv())
+    a.foo2(Inv<CharSequence>())
+    a.foo2<Inv<CharSequence>>(Inv())
 
     a.foo3(In())
     a.foo3(In<CharSequence>())
@@ -30,13 +30,13 @@ fun foo2(a: A<out CharSequence>, b: A<in CharSequence>) {
     b.foo1(Out<CharSequence>())
     b.foo1<Out<CharSequence>>(Out())
 
-    b.foo2(<!TYPE_MISMATCH!>Inv()<!>)
-    b.foo2(<!TYPE_MISMATCH!>Inv<CharSequence>()<!>)
-    b.foo2<<!UPPER_BOUND_VIOLATED!>Inv<CharSequence><!>>(<!TYPE_MISMATCH!>Inv()<!>)
+    b.foo2(Inv())
+    b.foo2(Inv<CharSequence>())
+    b.foo2<Inv<CharSequence>>(Inv())
 
 
-    b.foo3(<!TYPE_MISMATCH!>In<CharSequence>()<!>)
-    b.foo3<<!UPPER_BOUND_VIOLATED!>In<CharSequence><!>>(<!TYPE_MISMATCH!>In()<!>)
+    b.foo3(In<CharSequence>())
+    b.foo3<In<CharSequence>>(In())
 
     b.foo3(In<Any?>())
     b.foo3(In())
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.fir.kt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.fir.kt
new file mode 100644
index 00000000000..905f12fc3ab
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.fir.kt
@@ -0,0 +1,29 @@
+class Builder<B : Builder<B>> {
+    fun <T : B> test(): T = TODO()
+
+    fun foo() {}
+}
+
+fun testStar(builder: Builder<*>) {
+    builder.test()
+
+    builder
+        .test()
+        .foo()
+}
+
+fun <K : Builder<K>> testTypeParam(builder: Builder<K>) {
+    builder.test()
+
+    builder
+        .test()
+        .foo()
+}
+
+interface BodySpec<B, S : BodySpec<B, S>> {
+    fun <T : S> isEqualTo(expected: B): T
+}
+
+fun test(b: BodySpec<String, *>) {
+    b.isEqualTo("")
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.kt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.kt
new file mode 100644
index 00000000000..2bf74c06de7
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.kt
@@ -0,0 +1,21 @@
+class Builder<B : Builder<B>> {
+    fun <T : B> test(): T = TODO()
+
+    fun foo() {}
+}
+
+fun testStar(builder: Builder<*>) {
+    <!DEBUG_INFO_EXPRESSION_TYPE("Builder<*>")!>builder.test()<!>
+
+    builder
+        .test()
+        .foo()
+}
+
+fun <K : Builder<K>> testTypeParam(builder: Builder<K>) {
+    <!DEBUG_INFO_EXPRESSION_TYPE("K")!>builder.test()<!>
+
+    builder
+        .test()
+        .foo()
+}
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.txt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.txt
new file mode 100644
index 00000000000..37b74c7fc6f
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.txt
@@ -0,0 +1,14 @@
+package
+
+public fun testStar(/*0*/ builder: Builder<*>): kotlin.Unit
+public fun </*0*/ K : Builder<K>> testTypeParam(/*0*/ builder: Builder<K>): kotlin.Unit
+
+public final class Builder</*0*/ B : Builder<B>> {
+    public constructor Builder</*0*/ B : Builder<B>>()
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public final fun foo(): kotlin.Unit
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public final fun </*0*/ T : B> test(): T
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+}
+
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.fir.kt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.fir.kt
new file mode 100644
index 00000000000..6d30685c076
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.fir.kt
@@ -0,0 +1,8 @@
+interface BodySpec<B, S : BodySpec<B, S>> {
+    fun <T : S> isEqualTo(expected: B): T
+}
+
+fun test(b: BodySpec<String, *>) {
+    val x = b.isEqualTo("")
+    x
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.kt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.kt
new file mode 100644
index 00000000000..fa0b9dfc29e
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.kt
@@ -0,0 +1,8 @@
+interface BodySpec<B, S : BodySpec<B, S>> {
+    fun <T : S> isEqualTo(expected: B): T
+}
+
+fun test(b: BodySpec<String, *>) {
+    val x = b.isEqualTo("")
+    <!DEBUG_INFO_EXPRESSION_TYPE("BodySpec<*, *>")!>x<!>
+}
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.txt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.txt
new file mode 100644
index 00000000000..220f4c9f9b9
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.txt
@@ -0,0 +1,10 @@
+package
+
+public fun test(/*0*/ b: BodySpec<kotlin.String, *>): kotlin.Unit
+
+public interface BodySpec</*0*/ B, /*1*/ S : BodySpec<B, S>> {
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public abstract fun </*0*/ T : S> isEqualTo(/*0*/ expected: B): T
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+}
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.fir.kt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.fir.kt
new file mode 100644
index 00000000000..a12bdc16f6a
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.fir.kt
@@ -0,0 +1,15 @@
+fun test() {
+    WriterAppender.newBuilder()
+}
+
+object WriterAppender {
+    class Builder<B : Builder<B>> {
+        fun asBuilder(): B {
+            return this as B
+        }
+    }
+
+    fun <B : Builder<B>> newBuilder(): B {
+        return Builder<B>().asBuilder()
+    }
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.kt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.kt
new file mode 100644
index 00000000000..84256060a91
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.kt
@@ -0,0 +1,15 @@
+fun test() {
+    WriterAppender.<!TYPE_MISMATCH!>newBuilder<!>()
+}
+
+object WriterAppender {
+    class Builder<B : Builder<B>> {
+        fun asBuilder(): B {
+            return this <!UNCHECKED_CAST!>as B<!>
+        }
+    }
+
+    fun <B : Builder<B>> newBuilder(): B {
+        return Builder<B>().asBuilder()
+    }
+}
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.txt b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.txt
new file mode 100644
index 00000000000..2272f255742
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.txt
@@ -0,0 +1,19 @@
+package
+
+public fun test(): kotlin.Unit
+
+public object WriterAppender {
+    private constructor WriterAppender()
+    public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+    public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+    public final fun </*0*/ B : WriterAppender.Builder<B>> newBuilder(): B
+    public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+
+    public final class Builder</*0*/ B : WriterAppender.Builder<B>> {
+        public constructor Builder</*0*/ B : WriterAppender.Builder<B>>()
+        public final fun asBuilder(): B
+        public open override /*1*/ /*fake_override*/ fun equals(/*0*/ other: kotlin.Any?): kotlin.Boolean
+        public open override /*1*/ /*fake_override*/ fun hashCode(): kotlin.Int
+        public open override /*1*/ /*fake_override*/ fun toString(): kotlin.String
+    }
+}
diff --git a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
index 2d25d7ef6fd..f932a367bd2 100644
--- a/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
+++ b/compiler/tests-common-new/tests-gen/org/jetbrains/kotlin/test/runners/DiagnosticTestGenerated.java
@@ -14181,6 +14181,34 @@ public class DiagnosticTestGenerated extends AbstractDiagnosticTest {
                 public void testTwoTypeConstructors() throws Exception {
                     runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/twoTypeConstructors.kt");
                 }
+
+                @Nested
+                @TestMetadata("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes")
+                @TestDataPath("$PROJECT_ROOT")
+                public class SelfTypes {
+                    @Test
+                    public void testAllFilesPresentInSelfTypes() throws Exception {
+                        KtTestUtil.assertAllTestsPresentByMetadataWithExcluded(this.getClass(), new File("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes"), Pattern.compile("^(.*)\\.kts?$"), Pattern.compile("^(.+)\\.fir\\.kts?$"), true);
+                    }
+
+                    @Test
+                    @TestMetadata("basicInferenceForImplicitSelfType.kt")
+                    public void testBasicInferenceForImplicitSelfType() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/basicInferenceForImplicitSelfType.kt");
+                    }
+
+                    @Test
+                    @TestMetadata("recursiveTypeWithTwoTypeParams.kt")
+                    public void testRecursiveTypeWithTwoTypeParams() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/recursiveTypeWithTwoTypeParams.kt");
+                    }
+
+                    @Test
+                    @TestMetadata("writerAppenderExampleRecursive.kt")
+                    public void testWriterAppenderExampleRecursive() throws Exception {
+                        runTest("compiler/testData/diagnostics/tests/inference/recursiveTypes/selfTypes/writerAppenderExampleRecursive.kt");
+                    }
+                }
             }
 
             @Nested
diff --git a/core/descriptors/src/org/jetbrains/kotlin/types/DescriptorSubstitutor.java b/core/descriptors/src/org/jetbrains/kotlin/types/DescriptorSubstitutor.java
index f618390fffc..147c34c6d22 100644
--- a/core/descriptors/src/org/jetbrains/kotlin/types/DescriptorSubstitutor.java
+++ b/core/descriptors/src/org/jetbrains/kotlin/types/DescriptorSubstitutor.java
@@ -84,7 +84,7 @@ public class DescriptorSubstitutor {
         for (TypeParameterDescriptor descriptor : typeParameters) {
             TypeParameterDescriptorImpl substituted = substitutedMap.get(descriptor);
             for (KotlinType upperBound : descriptor.getUpperBounds()) {
-                KotlinType substitutedBound = substitutor.substitute(upperBound, Variance.IN_VARIANCE);
+                KotlinType substitutedBound = substitutor.substitute(upperBound, Variance.OUT_VARIANCE);
                 if (substitutedBound == null) return null;
 
                 if (substitutedBound != upperBound && wereChanges != null) {