diff --git a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/calls/ConeInferenceContext.kt b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/calls/ConeInferenceContext.kt
index eaa70dc091a..addf9b1c587 100644
--- a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/calls/ConeInferenceContext.kt
+++ b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/calls/ConeInferenceContext.kt
@@ -202,19 +202,12 @@ interface ConeInferenceContext : TypeSystemInferenceExtensionContext, ConeTypeCo
 
     override fun KotlinTypeMarker.makeDefinitelyNotNullOrNotNull(): KotlinTypeMarker {
         require(this is ConeKotlinType)
-        return makeDefinitelyNotNullOrNotNull()
+        return makeConeTypeDefinitelyNotNullOrNotNull()
     }
 
     override fun SimpleTypeMarker.makeSimpleTypeDefinitelyNotNullOrNotNull(): SimpleTypeMarker {
         require(this is ConeKotlinType)
-        return makeDefinitelyNotNullOrNotNull() as SimpleTypeMarker
-    }
-
-    private fun ConeKotlinType.makeDefinitelyNotNullOrNotNull(): ConeKotlinType {
-        if (this is ConeIntersectionType) {
-            return ConeIntersectionType(intersectedTypes.map { it.makeDefinitelyNotNullOrNotNull() })
-        }
-        return ConeDefinitelyNotNullType.create(this) ?: this.withNullability(false) as ConeKotlinType
+        return makeConeTypeDefinitelyNotNullOrNotNull() as SimpleTypeMarker
     }
 
     override fun createCapturedType(
diff --git a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/substitution/Substitutors.kt b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/substitution/Substitutors.kt
index 97fed82b9c7..b4de2249773 100644
--- a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/substitution/Substitutors.kt
+++ b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/resolve/substitution/Substitutors.kt
@@ -38,6 +38,9 @@ abstract class AbstractConeSubstitutor : ConeSubstitutor() {
 
     override fun substituteOrNull(type: ConeKotlinType): ConeKotlinType? {
         val newType = substituteType(type)
+        if (newType != null && type is ConeDefinitelyNotNullType) {
+            return newType.makeConeTypeDefinitelyNotNullOrNotNull()
+        }
         return (newType ?: type.substituteRecursive())
     }
 
diff --git a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/types/TypeUtils.kt b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/types/TypeUtils.kt
index d391f207244..0fa7b16f5ab 100644
--- a/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/types/TypeUtils.kt
+++ b/compiler/fir/resolve/src/org/jetbrains/kotlin/fir/types/TypeUtils.kt
@@ -6,6 +6,7 @@
 package org.jetbrains.kotlin.fir.types
 
 import org.jetbrains.kotlin.fir.resolve.calls.ConeInferenceContext
+import org.jetbrains.kotlin.fir.resolve.withNullability
 import org.jetbrains.kotlin.resolve.calls.NewCommonSuperTypeCalculator
 import org.jetbrains.kotlin.resolve.calls.NewCommonSuperTypeCalculator.commonSuperType
 import org.jetbrains.kotlin.types.AbstractNullabilityChecker
@@ -42,7 +43,8 @@ fun ConeInferenceContext.intersectTypesOrNull(types: List<ConeKotlinType>): Cone
 fun ConeDefinitelyNotNullType.Companion.create(original: ConeKotlinType): ConeDefinitelyNotNullType? {
     return when {
         original is ConeDefinitelyNotNullType -> original
-        makesSenseToBeDefinitelyNotNull(original) -> ConeDefinitelyNotNullType(original.lowerBoundIfFlexible())
+        makesSenseToBeDefinitelyNotNull(original) ->
+            ConeDefinitelyNotNullType(original.lowerBoundIfFlexible())
         else -> null
     }
 }
@@ -50,7 +52,30 @@ fun ConeDefinitelyNotNullType.Companion.create(original: ConeKotlinType): ConeDe
 fun makesSenseToBeDefinitelyNotNull(type: ConeKotlinType): Boolean =
     type.canHaveUndefinedNullability() // TODO: also check nullability
 
-fun ConeKotlinType.canHaveUndefinedNullability(): Boolean =
-    this is ConeTypeVariableType ||
-            this is ConeTypeParameterType ||
-            this is ConeCapturedType
+fun ConeKotlinType.canHaveUndefinedNullability(): Boolean {
+    return when (this) {
+        is ConeTypeVariableType,
+        is ConeCapturedType
+        -> true
+        is ConeTypeParameterType -> type.isMarkedNullable || !hasNotNullUpperBound()
+        else -> false
+    }
+}
+
+private fun ConeTypeParameterType.hasNotNullUpperBound(): Boolean {
+    return lookupTag.typeParameterSymbol.fir.bounds.any {
+        val boundType = it.coneTypeUnsafe<ConeKotlinType>()
+        if (boundType is ConeTypeParameterType) {
+            boundType.hasNotNullUpperBound()
+        } else {
+            boundType.nullability == ConeNullability.NOT_NULL
+        }
+    }
+}
+
+fun ConeKotlinType.makeConeTypeDefinitelyNotNullOrNotNull(): ConeKotlinType {
+    if (this is ConeIntersectionType) {
+        return ConeIntersectionType(intersectedTypes.map { it.makeConeTypeDefinitelyNotNullOrNotNull() })
+    }
+    return ConeDefinitelyNotNullType.create(this) ?: this.withNullability(ConeNullability.NOT_NULL)
+}
\ No newline at end of file
diff --git a/compiler/fir/resolve/testData/resolve/expresssions/genericDiagnostic.txt b/compiler/fir/resolve/testData/resolve/expresssions/genericDiagnostic.txt
index 2d125c19844..1e490e2a819 100644
--- a/compiler/fir/resolve/testData/resolve/expresssions/genericDiagnostic.txt
+++ b/compiler/fir/resolve/testData/resolve/expresssions/genericDiagnostic.txt
@@ -10,7 +10,7 @@ FILE: test.kt
         R|/Fix.Fix|(R|<local>/element|)
     }
     public final fun <DE : R|DerivedElement|> createGeneric(d: R|Diagnostic<DE>|): R|kotlin/Unit| {
-        lval element: R|DE!!| = R|<local>/d|.R|/Diagnostic.element|
+        lval element: R|DE| = R|<local>/d|.R|/Diagnostic.element|
         R|/Fix.Fix|(R|<local>/element|)
     }
     private final val DERIVED_FACTORY: R|DiagnosticFactory0<DerivedElement>| = R|/DiagnosticFactory0.DiagnosticFactory0|<R|DerivedElement|>()
diff --git a/compiler/fir/resolve/testData/resolve/problems/definetelyNotNullForTypeParameter.kt b/compiler/fir/resolve/testData/resolve/problems/definetelyNotNullForTypeParameter.kt
index 518989b5ca6..ce312e56336 100644
--- a/compiler/fir/resolve/testData/resolve/problems/definetelyNotNullForTypeParameter.kt
+++ b/compiler/fir/resolve/testData/resolve/problems/definetelyNotNullForTypeParameter.kt
@@ -5,8 +5,5 @@ fun <X> id(x: Out<X>): Out<X> = TODO()
 fun <F : Any> foo(computable: Out<F?>)
 
 fun <T : Any> bar(computable: Out<T?>) {
-    // Should be resolved but fails during inference
-    // Failed incorporated constraint: T? <: Any (from T? <: X!! and X!! <: F and F <: Any)
-    // Hypothesis: DefinetelyNotNull(T?) = should just remove "?" while it actually gets created
-    <!INAPPLICABLE_CANDIDATE!>foo<!>(id(computable))
+    foo(id(computable))
 }
diff --git a/compiler/fir/resolve/testData/resolve/problems/definetelyNotNullForTypeParameter.txt b/compiler/fir/resolve/testData/resolve/problems/definetelyNotNullForTypeParameter.txt
index 7414e4607cc..a98d52191d6 100644
--- a/compiler/fir/resolve/testData/resolve/problems/definetelyNotNullForTypeParameter.txt
+++ b/compiler/fir/resolve/testData/resolve/problems/definetelyNotNullForTypeParameter.txt
@@ -6,5 +6,5 @@ FILE: definetelyNotNullForTypeParameter.kt
     }
     public final fun <F : R|kotlin/Any|> foo(computable: R|Out<F?>|): R|kotlin/Unit|
     public final fun <T : R|kotlin/Any|> bar(computable: R|Out<T?>|): R|kotlin/Unit| {
-        <Inapplicable(INAPPLICABLE): [/foo]>#(R|/id|<R|T?|>(R|<local>/computable|))
+        R|/foo|<R|T?!!|>(R|/id|<R|T?|>(R|<local>/computable|))
     }