diff --git a/compiler/fir/analysis-tests/tests/org/jetbrains/kotlin/fir/FirOldFrontendDiagnosticsTestGenerated.java b/compiler/fir/analysis-tests/tests/org/jetbrains/kotlin/fir/FirOldFrontendDiagnosticsTestGenerated.java
index a0e90e7dfe1..dd05f944457 100644
--- a/compiler/fir/analysis-tests/tests/org/jetbrains/kotlin/fir/FirOldFrontendDiagnosticsTestGenerated.java
+++ b/compiler/fir/analysis-tests/tests/org/jetbrains/kotlin/fir/FirOldFrontendDiagnosticsTestGenerated.java
@@ -11050,6 +11050,11 @@ public class FirOldFrontendDiagnosticsTestGenerated extends AbstractFirOldFronte
             public void testPlatformNothingAsUsefulConstraint() throws Exception {
                 runTest("compiler/testData/diagnostics/tests/inference/nothingType/platformNothingAsUsefulConstraint.kt");
             }
+
+            @TestMetadata("reifiedParameterWithRecursiveBound.kt")
+            public void testReifiedParameterWithRecursiveBound() throws Exception {
+                runTest("compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.kt");
+            }
         }
 
         @TestMetadata("compiler/testData/diagnostics/tests/inference/publicApproximation")
diff --git a/compiler/resolution/src/org/jetbrains/kotlin/resolve/calls/inference/components/VariableFixationFinder.kt b/compiler/resolution/src/org/jetbrains/kotlin/resolve/calls/inference/components/VariableFixationFinder.kt
index 606fe30c04e..d4491b8c075 100644
--- a/compiler/resolution/src/org/jetbrains/kotlin/resolve/calls/inference/components/VariableFixationFinder.kt
+++ b/compiler/resolution/src/org/jetbrains/kotlin/resolve/calls/inference/components/VariableFixationFinder.kt
@@ -54,8 +54,8 @@ class VariableFixationFinder(
     enum class TypeVariableFixationReadiness {
         FORBIDDEN,
         WITHOUT_PROPER_ARGUMENT_CONSTRAINT, // proper constraint from arguments -- not from upper bound for type parameters
-        WITH_COMPLEX_DEPENDENCY_LOWER, // if type variable T has constraint with non fixed type variable inside (non-top-level): T <: Foo<S>
-        WITH_COMPLEX_DEPENDENCY_UPPER, // Foo<S> <: T
+        WITH_COMPLEX_DEPENDENCY_LOWER, // if type variable T has constraint with non fixed type variable inside (non-top-level): Foo<S> <: T
+        WITH_COMPLEX_DEPENDENCY_UPPER, // T <: Foo<S>
         WITH_TRIVIAL_OR_NON_PROPER_CONSTRAINTS, // proper trivial constraint from arguments, Nothing <: T
         RELATED_TO_ANY_OUTPUT_TYPE,
         READY_FOR_FIXATION,
@@ -124,7 +124,10 @@ class VariableFixationFinder(
     private fun Context.hasDependencyToOtherTypeVariables(typeVariable: TypeConstructorMarker, kind: ConstraintKind): Boolean {
         for (constraint in notFixedTypeVariables[typeVariable]?.constraints ?: return false) {
             if (constraint.kind != kind || constraint.kind == ConstraintKind.EQUALITY) continue
-            if (constraint.type.lowerBoundIfFlexible().argumentsCount() != 0 && constraint.type.contains { notFixedTypeVariables.containsKey(it.typeConstructor()) }) {
+            if (constraint.type.lowerBoundIfFlexible().argumentsCount() != 0
+                && constraint.type.contains {
+                    it.typeConstructor() != typeVariable && notFixedTypeVariables.containsKey(it.typeConstructor())
+                }) {
                 return true
             }
         }
diff --git a/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.fir.kt b/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.fir.kt
new file mode 100644
index 00000000000..ec2982fe8a1
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.fir.kt
@@ -0,0 +1,35 @@
+// Issue: KT-37621
+// !LANGUAGE: +NewInference
+
+class Inv<T>
+class In<in I>
+class Out<out O>
+
+inline fun <reified TB : Inv<TB>> invBound(): TB = TODO()
+inline fun <reified IB : In<IB>> inBound(): IB = TODO()
+inline fun <reified OB : Out<OB>> outBound(): OB = TODO()
+
+inline fun <reified T : Inv<T>> testInv(): T {
+    return try {
+        invBound()
+    } catch (ex: Exception) {
+        throw Exception()
+    }
+}
+
+inline fun <reified T : In<T>> testIn(): T {
+    return try {
+        inBound()
+    } catch (ex: Exception) {
+        throw Exception()
+    }
+}
+
+// Unexpected behaviour
+inline fun <reified T : Out<T>> testOut(): T {
+    return try {
+        outBound()
+    } catch (ex: Exception) {
+        throw Exception()
+    }
+}
diff --git a/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.kt b/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.kt
new file mode 100644
index 00000000000..e385c67e256
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.kt
@@ -0,0 +1,35 @@
+// Issue: KT-37621
+// !LANGUAGE: +NewInference
+
+class Inv<T>
+class In<in I>
+class Out<out O>
+
+inline fun <reified TB : Inv<TB>> invBound(): TB = TODO()
+inline fun <reified IB : In<IB>> inBound(): IB = TODO()
+inline fun <reified OB : Out<OB>> outBound(): OB = TODO()
+
+inline fun <reified T : Inv<T>> testInv(): T {
+    return try {
+        <!DEBUG_INFO_EXPRESSION_TYPE("T")!>invBound()<!>
+    } catch (ex: Exception) {
+        throw Exception()
+    }
+}
+
+inline fun <reified T : In<T>> testIn(): T {
+    return try {
+        <!DEBUG_INFO_EXPRESSION_TYPE("T")!>inBound()<!>
+    } catch (ex: Exception) {
+        throw Exception()
+    }
+}
+
+// Unexpected behaviour
+inline fun <reified T : Out<T>> testOut(): T {
+    <!UNREACHABLE_CODE!>return<!> try {
+        <!IMPLICIT_NOTHING_TYPE_ARGUMENT_IN_RETURN_POSITION, REIFIED_TYPE_FORBIDDEN_SUBSTITUTION, REIFIED_TYPE_FORBIDDEN_SUBSTITUTION!>outBound<!>()
+    } catch (ex: Exception) {
+        throw Exception()
+    }
+}
diff --git a/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.txt b/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.txt
new file mode 100644
index 00000000000..ca288f50e87
--- /dev/null
+++ b/compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.txt
@@ -0,0 +1,29 @@
+package
+
+public inline fun </*0*/ reified IB : In<IB>> inBound(): IB
+public inline fun </*0*/ reified TB : Inv<TB>> invBound(): TB
+public inline fun </*0*/ reified OB : Out<OB>> outBound(): OB
+public inline fun </*0*/ reified T : In<T>> testIn(): T
+public inline fun </*0*/ reified T : Inv<T>> testInv(): T
+public inline fun </*0*/ reified T : Out<T>> testOut(): T
+
+public final class In</*0*/ in I> {
+    public constructor In</*0*/ in I>()
+    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
+}
+
+public final class Inv</*0*/ T> {
+    public constructor Inv</*0*/ T>()
+    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
+}
+
+public final class Out</*0*/ out O> {
+    public constructor Out</*0*/ out O>()
+    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/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
index edf5af8bfcd..71029936cd7 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/DiagnosticsTestGenerated.java
@@ -11057,6 +11057,11 @@ public class DiagnosticsTestGenerated extends AbstractDiagnosticsTestWithFirVali
                 public void testPlatformNothingAsUsefulConstraint() throws Exception {
                     runTest("compiler/testData/diagnostics/tests/inference/nothingType/platformNothingAsUsefulConstraint.kt");
                 }
+
+                @TestMetadata("reifiedParameterWithRecursiveBound.kt")
+                public void testReifiedParameterWithRecursiveBound() throws Exception {
+                    runTest("compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.kt");
+                }
             }
 
             @TestMetadata("compiler/testData/diagnostics/tests/inference/publicApproximation")
diff --git a/compiler/tests/org/jetbrains/kotlin/checkers/javac/DiagnosticsUsingJavacTestGenerated.java b/compiler/tests/org/jetbrains/kotlin/checkers/javac/DiagnosticsUsingJavacTestGenerated.java
index 16d37d269ab..52ee095b111 100644
--- a/compiler/tests/org/jetbrains/kotlin/checkers/javac/DiagnosticsUsingJavacTestGenerated.java
+++ b/compiler/tests/org/jetbrains/kotlin/checkers/javac/DiagnosticsUsingJavacTestGenerated.java
@@ -11052,6 +11052,11 @@ public class DiagnosticsUsingJavacTestGenerated extends AbstractDiagnosticsUsing
                 public void testPlatformNothingAsUsefulConstraint() throws Exception {
                     runTest("compiler/testData/diagnostics/tests/inference/nothingType/platformNothingAsUsefulConstraint.kt");
                 }
+
+                @TestMetadata("reifiedParameterWithRecursiveBound.kt")
+                public void testReifiedParameterWithRecursiveBound() throws Exception {
+                    runTest("compiler/testData/diagnostics/tests/inference/nothingType/reifiedParameterWithRecursiveBound.kt");
+                }
             }
 
             @TestMetadata("compiler/testData/diagnostics/tests/inference/publicApproximation")