diff --git a/pkg/codegen/schema/bind.go b/pkg/codegen/schema/bind.go
index b8e17c2687a0..472bf163a38e 100644
--- a/pkg/codegen/schema/bind.go
+++ b/pkg/codegen/schema/bind.go
@@ -1551,7 +1551,7 @@ func (t *types) bindFunctionDef(token string) (*Function, hcl.Diagnostics, error
 		// compute the return type from the spec
 		if spec.ReturnType.ObjectTypeSpec != nil {
 			// bind as an object type
-			outs, outDiags, err := t.bindAnonymousObjectType(path+"/outputs", token+"Result", *spec.Outputs)
+			outs, outDiags, err := t.bindAnonymousObjectType(path+"/outputs", token+"Result", *spec.ReturnType.ObjectTypeSpec)
 			diags = diags.Extend(outDiags)
 			if err != nil {
 				return nil, diags, fmt.Errorf("error binding outputs for function %v: %w", token, err)
diff --git a/pkg/codegen/schema/pulumi.json b/pkg/codegen/schema/pulumi.json
index 6d479b058988..ff5d408870c9 100644
--- a/pkg/codegen/schema/pulumi.json
+++ b/pkg/codegen/schema/pulumi.json
@@ -530,7 +530,7 @@
                 },
                 "outputs": {
                     "description": "Specifies the return type of the function definition.",
-                    "oneOf": [
+                    "anyOf": [
                         { "$ref": "#/$defs/typeSpec" },
                         { "$ref": "#/$defs/objectTypeSpec" }
                     ]
diff --git a/pkg/codegen/schema/schema.go b/pkg/codegen/schema/schema.go
index b1898f693f89..306f1c30c86b 100644
--- a/pkg/codegen/schema/schema.go
+++ b/pkg/codegen/schema/schema.go
@@ -1659,11 +1659,6 @@ func unmarshalFunctionSpec(funcSpec *FunctionSpec, data map[string]RawMessage) e
 			if err := json.Unmarshal(returnType, &funcSpec.ReturnType); err != nil {
 				return err
 			}
-
-			if funcSpec.ReturnType != nil && funcSpec.ReturnType.ObjectTypeSpec != nil {
-				// derive outputs from the return type
-				funcSpec.Outputs = funcSpec.ReturnType.ObjectTypeSpec
-			}
 		} else {
 			funcSpec.ReturnType = nil
 		}