diff --git a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosisCompilerTestFE10TestdataTestGenerated.java b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosisCompilerTestFE10TestdataTestGenerated.java
index a5df7e16a79..0fe79f6db61 100644
--- a/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosisCompilerTestFE10TestdataTestGenerated.java
+++ b/analysis/low-level-api-fir/tests/org/jetbrains/kotlin/analysis/low/level/api/fir/diagnostic/compiler/based/DiagnosisCompilerTestFE10TestdataTestGenerated.java
@@ -13881,6 +13881,18 @@ public class DiagnosisCompilerTestFE10TestdataTestGenerated extends AbstractDiag
                 runTest("compiler/testData/diagnostics/tests/inference/underscoredTypeInForbiddenPositions.kt");
             }
 
+            @Test
+            @TestMetadata("unsoundness1.kt")
+            public void testUnsoundness1() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/unsoundness1.kt");
+            }
+
+            @Test
+            @TestMetadata("unsoundness2.kt")
+            public void testUnsoundness2() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/unsoundness2.kt");
+            }
+
             @Test
             @TestMetadata("useFunctionLiteralsToInferType.kt")
             public void testUseFunctionLiteralsToInferType() throws Exception {
@@ -31083,6 +31095,12 @@ public class DiagnosisCompilerTestFE10TestdataTestGenerated extends AbstractDiag
                 runTest("compiler/testData/diagnostics/tests/typeParameters/repeatedBound.kt");
             }
 
+            @Test
+            @TestMetadata("starProjectionInsteadOutCaptured.kt")
+            public void testStarProjectionInsteadOutCaptured() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/typeParameters/starProjectionInsteadOutCaptured.kt");
+            }
+
             @Test
             @TestMetadata("upperBoundCannotBeArray.kt")
             public void testUpperBoundCannotBeArray() throws Exception {
diff --git a/compiler/fir/analysis-tests/testData/resolve/diagnostics/upperBoundViolated.fir.txt b/compiler/fir/analysis-tests/testData/resolve/diagnostics/upperBoundViolated.fir.txt
index 42f7b68fa54..fbca37f9aaa 100644
--- a/compiler/fir/analysis-tests/testData/resolve/diagnostics/upperBoundViolated.fir.txt
+++ b/compiler/fir/analysis-tests/testData/resolve/diagnostics/upperBoundViolated.fir.txt
@@ -140,3 +140,21 @@ FILE: upperBoundViolated.kt
 
     }
     public final typealias Alias<V1> = R|(Class<V1>) -> kotlin/Boolean|
+    public abstract class Base<T : R|Base<T>|> : R|kotlin/Any| {
+        public constructor<T : R|Base<T>|>(): R|Base<T>| {
+            super<R|kotlin/Any|>()
+        }
+
+    }
+    public final class DerivedOut<out O : R|Base<out O>|> : R|kotlin/Any| {
+        public constructor<out O : R|Base<out O>|>(): R|DerivedOut<O>| {
+            super<R|kotlin/Any|>()
+        }
+
+    }
+    public final class DerivedIn<in I : R|Base<in I>|> : R|kotlin/Any| {
+        public constructor<in I : R|Base<in I>|>(): R|DerivedIn<I>| {
+            super<R|kotlin/Any|>()
+        }
+
+    }
diff --git a/compiler/fir/analysis-tests/testData/resolve/diagnostics/upperBoundViolated.kt b/compiler/fir/analysis-tests/testData/resolve/diagnostics/upperBoundViolated.kt
index 1b0dd99fb2c..035a6e1d562 100644
--- a/compiler/fir/analysis-tests/testData/resolve/diagnostics/upperBoundViolated.kt
+++ b/compiler/fir/analysis-tests/testData/resolve/diagnostics/upperBoundViolated.kt
@@ -55,7 +55,7 @@ class Test1<S1 : Test1<S1, K>, K : Any>
 class Test2<S2 : Test1<S2, *>>
 
 class Test3<S3 : Test3<S3, in K>, K : Any>
-class Test4<S4 : Test3<<!UPPER_BOUND_VIOLATED!>S4<!>, out Any>>
+class Test4<S4 : Test3<S4, out Any>>
 
 class Test5<S5 : Test5<S5, in K>, K : Any>
 class Test6<S6 : Test5<S6, in Any>>
@@ -66,9 +66,8 @@ class Test8<S8 : Test7<S8, <!UPPER_BOUND_VIOLATED!>in Any<!>>>
 class Class<V : Any>
 typealias Alias <V1> = (Class<V1>) -> Boolean
 
-/* TODO: Should not be errors. Uncomment after fixing of https://youtrack.jetbrains.com/issue/KT-48044
 abstract class Base<T : Base<T>> {}
 class DerivedOut<out O : Base<out O>> {}
-class DerivedIn<in I : Base<in I>> {}*/
+class DerivedIn<in I : Base<in I>> {}
 
 
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 832e0bef8da..2d509aef2db 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
@@ -13881,6 +13881,18 @@ public class FirOldFrontendDiagnosticsTestGenerated extends AbstractFirDiagnosti
                 runTest("compiler/testData/diagnostics/tests/inference/underscoredTypeInForbiddenPositions.kt");
             }
 
+            @Test
+            @TestMetadata("unsoundness1.kt")
+            public void testUnsoundness1() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/unsoundness1.kt");
+            }
+
+            @Test
+            @TestMetadata("unsoundness2.kt")
+            public void testUnsoundness2() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/unsoundness2.kt");
+            }
+
             @Test
             @TestMetadata("useFunctionLiteralsToInferType.kt")
             public void testUseFunctionLiteralsToInferType() throws Exception {
@@ -31083,6 +31095,12 @@ public class FirOldFrontendDiagnosticsTestGenerated extends AbstractFirDiagnosti
                 runTest("compiler/testData/diagnostics/tests/typeParameters/repeatedBound.kt");
             }
 
+            @Test
+            @TestMetadata("starProjectionInsteadOutCaptured.kt")
+            public void testStarProjectionInsteadOutCaptured() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/typeParameters/starProjectionInsteadOutCaptured.kt");
+            }
+
             @Test
             @TestMetadata("upperBoundCannotBeArray.kt")
             public void testUpperBoundCannotBeArray() throws Exception {
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 7948ce33211..890f136ca1c 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
@@ -13881,6 +13881,18 @@ public class FirOldFrontendDiagnosticsWithLightTreeTestGenerated extends Abstrac
                 runTest("compiler/testData/diagnostics/tests/inference/underscoredTypeInForbiddenPositions.kt");
             }
 
+            @Test
+            @TestMetadata("unsoundness1.kt")
+            public void testUnsoundness1() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/unsoundness1.kt");
+            }
+
+            @Test
+            @TestMetadata("unsoundness2.kt")
+            public void testUnsoundness2() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/unsoundness2.kt");
+            }
+
             @Test
             @TestMetadata("useFunctionLiteralsToInferType.kt")
             public void testUseFunctionLiteralsToInferType() throws Exception {
@@ -31083,6 +31095,12 @@ public class FirOldFrontendDiagnosticsWithLightTreeTestGenerated extends Abstrac
                 runTest("compiler/testData/diagnostics/tests/typeParameters/repeatedBound.kt");
             }
 
+            @Test
+            @TestMetadata("starProjectionInsteadOutCaptured.kt")
+            public void testStarProjectionInsteadOutCaptured() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/typeParameters/starProjectionInsteadOutCaptured.kt");
+            }
+
             @Test
             @TestMetadata("upperBoundCannotBeArray.kt")
             public void testUpperBoundCannotBeArray() throws Exception {
diff --git a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirInconsistentTypeParameterHelpers.kt b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirInconsistentTypeParameterHelpers.kt
index 8a6437e9343..a6211b32d17 100644
--- a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirInconsistentTypeParameterHelpers.kt
+++ b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirInconsistentTypeParameterHelpers.kt
@@ -6,10 +6,10 @@
 package org.jetbrains.kotlin.fir.analysis.checkers
 
 import org.jetbrains.kotlin.KtSourceElement
-import org.jetbrains.kotlin.fir.analysis.checkers.context.CheckerContext
 import org.jetbrains.kotlin.diagnostics.DiagnosticReporter
-import org.jetbrains.kotlin.fir.analysis.diagnostics.FirErrors
 import org.jetbrains.kotlin.diagnostics.reportOn
+import org.jetbrains.kotlin.fir.analysis.checkers.context.CheckerContext
+import org.jetbrains.kotlin.fir.analysis.diagnostics.FirErrors
 import org.jetbrains.kotlin.fir.analysis.diagnostics.withSuppressedDiagnostics
 import org.jetbrains.kotlin.fir.resolve.fullyExpandedType
 import org.jetbrains.kotlin.fir.resolve.substitution.ConeSubstitutorByMap
@@ -70,7 +70,11 @@ private fun buildDeepSubstitutionMultimap(
             for (index in 0 until count) {
                 val typeArgument = typeArguments[index]
 
-                val substitutedArgument = ConeSubstitutorByMap(substitution, session).substituteArgument(typeArgument) ?: typeArgument
+                val substitutedArgument = ConeSubstitutorByMap(substitution, session).substituteArgument(
+                    typeArgument,
+                    classSymbol.toLookupTag(),
+                    index
+                ) ?: typeArgument
                 val substitutedType = substitutedArgument.type ?: continue
 
                 val typeParameterSymbol = typeParameterSymbols[index]
diff --git a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirUpperBoundViolatedHelpers.kt b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirUpperBoundViolatedHelpers.kt
index c5e8457ef07..b187c4e1542 100644
--- a/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirUpperBoundViolatedHelpers.kt
+++ b/compiler/fir/checkers/src/org/jetbrains/kotlin/fir/analysis/checkers/FirUpperBoundViolatedHelpers.kt
@@ -8,16 +8,23 @@ package org.jetbrains.kotlin.fir.analysis.checkers
 import org.jetbrains.kotlin.KtSourceElement
 import org.jetbrains.kotlin.diagnostics.DiagnosticReporter
 import org.jetbrains.kotlin.diagnostics.reportOn
+import org.jetbrains.kotlin.fir.FirSession
 import org.jetbrains.kotlin.fir.analysis.checkers.context.CheckerContext
 import org.jetbrains.kotlin.fir.analysis.diagnostics.FirErrors
 import org.jetbrains.kotlin.fir.resolve.fullyExpandedType
+import org.jetbrains.kotlin.fir.resolve.substitution.AbstractConeSubstitutor
 import org.jetbrains.kotlin.fir.resolve.substitution.ConeSubstitutor
-import org.jetbrains.kotlin.fir.resolve.substitution.substitutorByMap
 import org.jetbrains.kotlin.fir.resolve.toSymbol
+import org.jetbrains.kotlin.fir.resolve.withCombinedAttributesFrom
+import org.jetbrains.kotlin.fir.symbols.ConeClassLikeLookupTag
 import org.jetbrains.kotlin.fir.symbols.impl.FirRegularClassSymbol
 import org.jetbrains.kotlin.fir.symbols.impl.FirTypeParameterSymbol
 import org.jetbrains.kotlin.fir.types.*
+import org.jetbrains.kotlin.name.StandardClassIds
 import org.jetbrains.kotlin.types.AbstractTypeChecker
+import org.jetbrains.kotlin.types.TypeApproximatorConfiguration
+import org.jetbrains.kotlin.types.Variance
+import kotlin.reflect.KClass
 
 /**
  * Recursively analyzes type parameters and reports the diagnostic on the given source calculated using typeRef
@@ -44,23 +51,9 @@ fun checkUpperBoundViolated(
         return
     }
 
-    val count = minOf(typeParameterSymbols.size, type.typeArguments.size)
-    val substitution = mutableMapOf<FirTypeParameterSymbol, ConeKotlinType>()
+    val substitution = typeParameterSymbols.zip(type.typeArguments).toMap()
+    val substitutor = FE10LikeConeSubstitutor(substitution, context.session)
 
-    for (index in 0 until count) {
-        val typeArgument = type.typeArguments[index]
-        val typeParameterSymbol = typeParameterSymbols[index]
-
-        val typeArgumentType = typeArgument.type
-        if (typeArgumentType != null) {
-            substitution[typeParameterSymbol] = typeArgumentType
-        } else {
-            substitution[typeParameterSymbol] =
-                ConeStubTypeForTypeVariableInSubtyping(ConeTypeVariable("", typeParameterSymbol.toLookupTag()), ConeNullability.NOT_NULL)
-        }
-    }
-
-    val substitutor = substitutorByMap(substitution, context.session)
     val typeRefAndSourcesForArguments = extractArgumentsTypeRefAndSource(typeRef) ?: return
     val typeArgumentsWithSourceInfo = type.typeArguments.withIndex().map { (index, projection) ->
         val (argTypeRef, source) =
@@ -80,6 +73,87 @@ fun checkUpperBoundViolated(
     )
 }
 
+private class FE10LikeConeSubstitutor(
+    private val substitution: Map<FirTypeParameterSymbol, ConeTypeProjection>,
+    private val useSiteSession: FirSession
+) : AbstractConeSubstitutor(useSiteSession.typeContext) {
+    override fun substituteType(type: ConeKotlinType): ConeKotlinType? {
+        if (type !is ConeTypeParameterType) return null
+        val projection = substitution[type.lookupTag.symbol] ?: return null
+
+        if (projection.isStarProjection) {
+            return StandardClassIds.Any.constructClassLikeType(emptyArray(), isNullable = true).withProjection(projection)
+        }
+
+        val result =
+            projection.type!!.updateNullabilityIfNeeded(type)
+                ?.withCombinedAttributesFrom(type, useSiteSession.typeContext)
+                ?: return null
+
+        if (type.isUnsafeVarianceType(useSiteSession)) {
+            useSiteSession.typeApproximator.approximateToSuperType(
+                result, TypeApproximatorConfiguration.FinalApproximationAfterResolutionAndInference
+            )?.let {
+                return it.withProjection(projection)
+            }
+        }
+
+        return result.withProjection(projection)
+    }
+
+    private fun ConeKotlinType.withProjection(projection: ConeTypeProjection): ConeKotlinType {
+        if (projection.kind == ProjectionKind.INVARIANT) return this
+        return withAttributes(ConeAttributes.create(listOf(OriginalProjectionTypeAttribute(projection))), useSiteSession.typeContext)
+    }
+
+    override fun substituteArgument(projection: ConeTypeProjection, lookupTag: ConeClassLikeLookupTag, index: Int): ConeTypeProjection? {
+        val substitutedProjection = super.substituteArgument(projection, lookupTag, index) ?: return null
+        if (substitutedProjection.isStarProjection) return null
+
+        val type = substitutedProjection.type!!
+
+        val projectionFromType = type.attributes.originalProjection?.data ?: type
+        val projectionKindFromType = projectionFromType.kind
+
+        if (projectionKindFromType == ProjectionKind.STAR) return ConeStarProjection
+
+        if (projectionKindFromType == ProjectionKind.INVARIANT || projectionKindFromType == projection.kind) {
+            return substitutedProjection
+        }
+
+        if (projection.kind == ProjectionKind.INVARIANT) {
+            return wrapProjection(projectionFromType, type)
+        }
+
+        return ConeStarProjection
+    }
+}
+
+private class OriginalProjectionTypeAttribute(val data: ConeTypeProjection) : ConeAttribute<OriginalProjectionTypeAttribute>() {
+    override fun union(other: OriginalProjectionTypeAttribute?): OriginalProjectionTypeAttribute? {
+        return other
+    }
+
+    override fun intersect(other: OriginalProjectionTypeAttribute?): OriginalProjectionTypeAttribute? {
+        return other
+    }
+
+    override fun add(other: OriginalProjectionTypeAttribute?): OriginalProjectionTypeAttribute? {
+        return other
+    }
+
+    override fun isSubtypeOf(other: OriginalProjectionTypeAttribute?): Boolean {
+        return true
+    }
+
+    override fun toString() = "OriginalProjectionTypeAttribute: $data"
+
+    override val key: KClass<out OriginalProjectionTypeAttribute>
+        get() = OriginalProjectionTypeAttribute::class
+}
+
+private val ConeAttributes.originalProjection: OriginalProjectionTypeAttribute? by ConeAttributes.attributeAccessor<OriginalProjectionTypeAttribute>()
+
 class TypeArgumentWithSourceInfo(
     val coneTypeProjection: ConeTypeProjection,
     val typeRef: FirTypeRef?,
diff --git a/compiler/fir/providers/src/org/jetbrains/kotlin/fir/resolve/TypeExpansionUtils.kt b/compiler/fir/providers/src/org/jetbrains/kotlin/fir/resolve/TypeExpansionUtils.kt
index e490d283d7a..8434fd83d14 100644
--- a/compiler/fir/providers/src/org/jetbrains/kotlin/fir/resolve/TypeExpansionUtils.kt
+++ b/compiler/fir/providers/src/org/jetbrains/kotlin/fir/resolve/TypeExpansionUtils.kt
@@ -10,6 +10,7 @@ import org.jetbrains.kotlin.fir.declarations.FirResolvePhase
 import org.jetbrains.kotlin.fir.declarations.FirTypeAlias
 import org.jetbrains.kotlin.fir.declarations.utils.expandedConeType
 import org.jetbrains.kotlin.fir.resolve.substitution.AbstractConeSubstitutor
+import org.jetbrains.kotlin.fir.symbols.ConeClassLikeLookupTag
 import org.jetbrains.kotlin.fir.symbols.ensureResolved
 import org.jetbrains.kotlin.fir.symbols.impl.FirTypeAliasSymbol
 import org.jetbrains.kotlin.fir.types.*
@@ -115,10 +116,18 @@ private fun mapTypeAliasArguments(
             return null
         }
 
-        override fun substituteArgument(projection: ConeTypeProjection): ConeTypeProjection? {
+        override fun substituteArgument(
+            projection: ConeTypeProjection,
+            lookupTag: ConeClassLikeLookupTag,
+            index: Int
+        ): ConeTypeProjection? {
             val type = (projection as? ConeKotlinTypeProjection)?.type ?: return null
-            val symbol = (type as? ConeTypeParameterType)?.lookupTag?.symbol ?: return super.substituteArgument(projection)
-            val mappedProjection = typeAliasMap[symbol] ?: return super.substituteArgument(projection)
+            val symbol = (type as? ConeTypeParameterType)?.lookupTag?.symbol ?: return super.substituteArgument(
+                projection,
+                lookupTag,
+                index
+            )
+            val mappedProjection = typeAliasMap[symbol] ?: return super.substituteArgument(projection, lookupTag, index)
             var mappedType = (mappedProjection as? ConeKotlinTypeProjection)?.type.updateNullabilityIfNeeded(type)
             mappedType = when (mappedType) {
                 is ConeClassErrorType,
diff --git a/compiler/fir/providers/src/org/jetbrains/kotlin/fir/resolve/substitution/Substitutors.kt b/compiler/fir/providers/src/org/jetbrains/kotlin/fir/resolve/substitution/Substitutors.kt
index 4d79446dcb8..5aed2c60f60 100644
--- a/compiler/fir/providers/src/org/jetbrains/kotlin/fir/resolve/substitution/Substitutors.kt
+++ b/compiler/fir/providers/src/org/jetbrains/kotlin/fir/resolve/substitution/Substitutors.kt
@@ -7,6 +7,7 @@ package org.jetbrains.kotlin.fir.resolve.substitution
 
 import org.jetbrains.kotlin.fir.FirSession
 import org.jetbrains.kotlin.fir.resolve.withCombinedAttributesFrom
+import org.jetbrains.kotlin.fir.symbols.ConeClassLikeLookupTag
 import org.jetbrains.kotlin.fir.symbols.impl.FirTypeParameterSymbol
 import org.jetbrains.kotlin.fir.types.*
 import org.jetbrains.kotlin.fir.types.impl.ConeClassLikeTypeImpl
@@ -17,7 +18,7 @@ import org.jetbrains.kotlin.types.model.TypeVariableMarker
 import org.jetbrains.kotlin.types.model.typeConstructor
 
 abstract class AbstractConeSubstitutor(protected val typeContext: ConeTypeContext) : ConeSubstitutor() {
-    private fun wrapProjection(old: ConeTypeProjection, newType: ConeKotlinType): ConeTypeProjection {
+    protected fun wrapProjection(old: ConeTypeProjection, newType: ConeKotlinType): ConeTypeProjection {
         return when (old) {
             is ConeStarProjection -> old
             is ConeKotlinTypeProjectionIn -> ConeKotlinTypeProjectionIn(newType)
@@ -29,7 +30,7 @@ abstract class AbstractConeSubstitutor(protected val typeContext: ConeTypeContex
     }
 
     abstract fun substituteType(type: ConeKotlinType): ConeKotlinType?
-    open fun substituteArgument(projection: ConeTypeProjection): ConeTypeProjection? {
+    open fun substituteArgument(projection: ConeTypeProjection, lookupTag: ConeClassLikeLookupTag, index: Int): ConeTypeProjection? {
         val type = (projection as? ConeKotlinTypeProjection)?.type ?: return null
         val newType = substituteOrNull(type) ?: return null
         return wrapProjection(projection, newType)
@@ -124,8 +125,11 @@ abstract class AbstractConeSubstitutor(protected val typeContext: ConeTypeContex
     private fun ConeKotlinType.substituteArguments(): ConeKotlinType? {
         val newArguments by lazy { arrayOfNulls<ConeTypeProjection>(typeArguments.size) }
         var initialized = false
+
+        require(this is ConeClassLikeType) { "Unknown type to substitute: $this, ${this::class}" }
+
         for ((index, typeArgument) in this.typeArguments.withIndex()) {
-            newArguments[index] = substituteArgument(typeArgument)?.also {
+            newArguments[index] = substituteArgument(typeArgument, lookupTag, index)?.also {
                 initialized = true
             }
         }
@@ -144,8 +148,7 @@ abstract class AbstractConeSubstitutor(protected val typeContext: ConeTypeContex
                     nullability.isNullable,
                     attributes
                 )
-                is ConeClassLikeType -> error("Unknown class-like type to substitute: $this, ${this::class}")
-                else -> error("Unknown type to substitute: $this, ${this::class}")
+                else -> error("Unknown class-like type to substitute: $this, ${this::class}")
             }
         }
         return null
diff --git a/compiler/testData/codegen/box/inference/kt49838.kt b/compiler/testData/codegen/box/inference/kt49838.kt
index f39d45e4486..22b0e6e817a 100644
--- a/compiler/testData/codegen/box/inference/kt49838.kt
+++ b/compiler/testData/codegen/box/inference/kt49838.kt
@@ -1,6 +1,4 @@
 // IGNORE_BACKEND: JVM
-// IGNORE_BACKEND_FIR: JVM_IR
-// FIR status: UPPER_BOUND_VIOLATED at Service<out T>
 
 inline fun <
         reified TService : Service<TService, TEvent>,
@@ -25,4 +23,4 @@ class SomeService : Service<SomeService, SomeService.SomeEvent> {
 fun box(): String {
     event { someEvent: SomeService.SomeEvent ->  } // REIFIED_TYPE_FORBIDDEN_SUBSTITUTION
     return "OK"
-}
\ No newline at end of file
+}
diff --git a/compiler/testData/diagnostics/tests/inference/unsoundness1.fir.kt b/compiler/testData/diagnostics/tests/inference/unsoundness1.fir.kt
new file mode 100644
index 00000000000..f1303ae99e5
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/unsoundness1.fir.kt
@@ -0,0 +1,23 @@
+// SKIP_TXT
+// !LANGUAGE: +ProperTypeInferenceConstraintsProcessing
+
+class A<T, F : T>
+fun foo(a: A<*, in CharSequence>) {}
+fun <T, U> coerce(t: T): U {
+    val constrain: Constrain<U, *, in T>? = null
+    val bind = Bind(constrain)
+    return bind.upcast(t)
+}
+
+class Constrain<A, B : A, C : B>
+
+class Bind<A, B : A, C : B>(val constrain: Constrain<A, B, C>?) {
+    fun upcast(c: C): A = c
+}
+
+fun <T, U> coerce2(t: T): U {
+    // We might report an error on unsound type reference Constrain<U, *, T>?, too
+    val constrain: Constrain<U, *, T>? = null
+    val bind = Bind(<!ARGUMENT_TYPE_MISMATCH!>constrain<!>) // WARNING: Type mismatch: inferred type is T but U was expected
+    return bind.upcast(t)
+}
diff --git a/compiler/testData/diagnostics/tests/inference/unsoundness1.kt b/compiler/testData/diagnostics/tests/inference/unsoundness1.kt
new file mode 100644
index 00000000000..c64912ef54d
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/unsoundness1.kt
@@ -0,0 +1,23 @@
+// SKIP_TXT
+// !LANGUAGE: +ProperTypeInferenceConstraintsProcessing
+
+class A<T, F : T>
+fun foo(a: A<*, in CharSequence>) {}
+fun <T, U> coerce(t: T): U {
+    val constrain: Constrain<U, *, in T>? = null
+    val bind = Bind(constrain)
+    return bind.upcast(t)
+}
+
+class Constrain<A, B : A, C : B>
+
+class Bind<A, B : A, C : B>(val constrain: Constrain<A, B, C>?) {
+    fun upcast(c: C): A = c
+}
+
+fun <T, U> coerce2(t: T): U {
+    // We might report an error on unsound type reference Constrain<U, *, T>?, too
+    val constrain: Constrain<U, *, T>? = null
+    val bind = Bind(<!TYPE_MISMATCH, TYPE_MISMATCH!>constrain<!>) // WARNING: Type mismatch: inferred type is T but U was expected
+    return bind.upcast(t)
+}
diff --git a/compiler/testData/diagnostics/tests/inference/unsoundness2.kt b/compiler/testData/diagnostics/tests/inference/unsoundness2.kt
new file mode 100644
index 00000000000..15b14cb4e17
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/unsoundness2.kt
@@ -0,0 +1,22 @@
+// FIR_IDENTICAL
+// SKIP_TXT
+// !LANGUAGE: +ProperTypeInferenceConstraintsProcessing
+
+fun main(args: Array<String>) {
+    val zero = coerce<Int, String>(0)
+}
+
+fun <T, U> coerce(t: T): U {
+    // Should be an error somewhere because this code leads to unsoundness
+    // We may report that `Constrain<U, *, in T>?` type definition is unsound or the call `Bind(constrain)`
+    // See KT-50230
+    val constrain: Constrain<U, *, in T>? = null
+    val bind = Bind(constrain)
+    return bind.upcast(t)
+}
+
+class Constrain<A, B : A, C : B>
+
+class Bind<A, B : A, C : B>(val constrain: Constrain<A, B, C>?) {
+    fun upcast(c: C): A = c
+}
diff --git a/compiler/testData/diagnostics/tests/typeParameters/starProjectionInsteadOutCaptured.kt b/compiler/testData/diagnostics/tests/typeParameters/starProjectionInsteadOutCaptured.kt
new file mode 100644
index 00000000000..c02a9b4d315
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/typeParameters/starProjectionInsteadOutCaptured.kt
@@ -0,0 +1,11 @@
+// FIR_IDENTICAL
+// SKIP_TXT
+interface A
+interface B<X : A>
+interface C<E : A, F : B<E>>
+
+fun foo1(c: C<out A, out B<*>>) {}
+
+fun foo2(c: C<*, B<*>>) {}
+fun <T : B<*>> foo3(c: C<*, T>) {}
+fun <T : B<*>> foo4(c: C<out A, T>) {}
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 387f5d0b544..399dfe9f974 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
@@ -13887,6 +13887,18 @@ public class DiagnosticTestGenerated extends AbstractDiagnosticTest {
                 runTest("compiler/testData/diagnostics/tests/inference/underscoredTypeInForbiddenPositions.kt");
             }
 
+            @Test
+            @TestMetadata("unsoundness1.kt")
+            public void testUnsoundness1() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/unsoundness1.kt");
+            }
+
+            @Test
+            @TestMetadata("unsoundness2.kt")
+            public void testUnsoundness2() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/unsoundness2.kt");
+            }
+
             @Test
             @TestMetadata("useFunctionLiteralsToInferType.kt")
             public void testUseFunctionLiteralsToInferType() throws Exception {
@@ -31173,6 +31185,12 @@ public class DiagnosticTestGenerated extends AbstractDiagnosticTest {
                 runTest("compiler/testData/diagnostics/tests/typeParameters/repeatedBound.kt");
             }
 
+            @Test
+            @TestMetadata("starProjectionInsteadOutCaptured.kt")
+            public void testStarProjectionInsteadOutCaptured() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/typeParameters/starProjectionInsteadOutCaptured.kt");
+            }
+
             @Test
             @TestMetadata("upperBoundCannotBeArray.kt")
             public void testUpperBoundCannotBeArray() throws Exception {