diff --git a/CHANGES.rst b/CHANGES.rst
index 6cee76fbc91..b2437254b06 100644
--- a/CHANGES.rst
+++ b/CHANGES.rst
@@ -18,6 +18,9 @@ Features added
   Patch by James Addison and Adam Turner
 
   .. _officially recommended: https://jinja.palletsprojects.com/en/latest/templates/#template-file-extension
+* Flatten ``Union[Literal[T], Literal[U], ...]`` to ``Literal[T, U, ...]``
+  when turning annotations into strings.
+  Patch by Adam Turner.
 
 Bugs fixed
 ----------
diff --git a/sphinx/util/typing.py b/sphinx/util/typing.py
index 002c85641da..c8e89ee0ad6 100644
--- a/sphinx/util/typing.py
+++ b/sphinx/util/typing.py
@@ -439,6 +439,15 @@ def stringify_annotation(
     # They must be a list or a tuple, otherwise they are considered 'broken'.
     annotation_args = getattr(annotation, '__args__', ())
     if annotation_args and isinstance(annotation_args, (list, tuple)):
+        if (
+            qualname in {'Union', 'types.UnionType'}
+            and all(getattr(a, '__origin__', ...) is typing.Literal for a in annotation_args)
+        ):
+            # special case to flatten a Union of Literals into a literal
+            flattened_args = typing.Literal[annotation_args].__args__  # type: ignore[attr-defined]
+            args = ', '.join(_format_literal_arg_stringify(a, mode=mode)
+                             for a in flattened_args)
+            return f'{module_prefix}Literal[{args}]'
         if qualname in {'Optional', 'Union', 'types.UnionType'}:
             return ' | '.join(stringify_annotation(a, mode) for a in annotation_args)
         elif qualname == 'Callable':
diff --git a/tests/test_util/test_util_inspect.py b/tests/test_util/test_util_inspect.py
index 83a6b72d974..764ca20d1de 100644
--- a/tests/test_util/test_util_inspect.py
+++ b/tests/test_util/test_util_inspect.py
@@ -359,6 +359,10 @@ def test_signature_annotations():
     sig = inspect.signature(mod.f25)
     assert stringify_signature(sig) == '(a, b, /)'
 
+    # collapse Literal types
+    sig = inspect.signature(mod.f26)
+    assert stringify_signature(sig) == "(x: typing.Literal[1, 2, 3] = 1, y: typing.Literal['a', 'b'] = 'a') -> None"
+
 
 def test_signature_from_str_basic():
     signature = '(a, b, *args, c=0, d="blah", **kwargs)'
diff --git a/tests/test_util/typing_test_data.py b/tests/test_util/typing_test_data.py
index e29b60050eb..05888366e75 100644
--- a/tests/test_util/typing_test_data.py
+++ b/tests/test_util/typing_test_data.py
@@ -1,6 +1,6 @@
 from inspect import Signature
 from numbers import Integral
-from typing import Any, Callable, Dict, List, Optional, Tuple, TypeVar, Union
+from typing import Any, Callable, Dict, List, Literal, Optional, Tuple, TypeVar, Union
 
 
 def f0(x: int, y: Integral) -> None:
@@ -121,6 +121,10 @@ def f25(a, b, /):
     pass
 
 
+def f26(x: Literal[1, 2, 3] = 1, y: Union[Literal["a"], Literal["b"]] = "a") -> None:
+    pass
+
+
 class Node:
     def __init__(self, parent: Optional['Node']) -> None:
         pass