diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index f9cd044a79331..eb8397a18b019 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -20239,14 +20239,17 @@ namespace ts {
         }
 
         function getGlobalNonNullableTypeInstantiation(type: Type) {
+            // First reduce away any constituents that are assignable to 'undefined' or 'null'. This not only eliminates
+            // 'undefined' and 'null', but also higher-order types such as a type parameter 'U extends undefined | null'
+            // that isn't eliminated by a NonNullable<T> instantiation.
+            const reducedType = getTypeWithFacts(type, TypeFacts.NEUndefinedOrNull);
             if (!deferredGlobalNonNullableTypeAlias) {
                 deferredGlobalNonNullableTypeAlias = getGlobalSymbol("NonNullable" as __String, SymbolFlags.TypeAlias, /*diagnostic*/ undefined) || unknownSymbol;
             }
-            // Use NonNullable global type alias if available to improve quick info/declaration emit
-            if (deferredGlobalNonNullableTypeAlias !== unknownSymbol) {
-                return getTypeAliasInstantiation(deferredGlobalNonNullableTypeAlias, [type]);
-            }
-            return getTypeWithFacts(type, TypeFacts.NEUndefinedOrNull); // Type alias unavailable, fall back to non-higher-order behavior
+            // If the NonNullable<T> type is available, return an instantiation. Otherwise just return the reduced type.
+            return deferredGlobalNonNullableTypeAlias !== unknownSymbol ?
+                getTypeAliasInstantiation(deferredGlobalNonNullableTypeAlias, [reducedType]) :
+                reducedType;
         }
 
         function getNonNullableType(type: Type): Type {
@@ -24035,7 +24038,7 @@ namespace ts {
         }
 
         function isGenericTypeWithUnionConstraint(type: Type) {
-            return !!(type.flags & TypeFlags.Instantiable && getBaseConstraintOrType(type).flags & TypeFlags.Union);
+            return !!(type.flags & TypeFlags.Instantiable && getBaseConstraintOrType(type).flags & (TypeFlags.Nullable | TypeFlags.Union));
         }
 
         function containsGenericType(type: Type): boolean {
diff --git a/tests/baselines/reference/nonNullableReduction.js b/tests/baselines/reference/nonNullableReduction.js
new file mode 100644
index 0000000000000..57de1f96a7b71
--- /dev/null
+++ b/tests/baselines/reference/nonNullableReduction.js
@@ -0,0 +1,33 @@
+//// [nonNullableReduction.ts]
+// Repros from #43425
+
+type Transform1<T> = ((value: string) => T) | (string extends T ? undefined : never);
+type Transform2<T> = string extends T ? ((value: string) => T) | undefined : (value: string) => T;
+
+function test<T>(f1: Transform1<T>, f2: Transform2<T>) {
+    f1?.("hello");
+    f2?.("hello");
+}
+
+function f1<T>(x: T | (string extends T ? null | undefined : never)) {
+    let z = x!;  // NonNullable<T>
+}
+
+function f2<T, U extends null | undefined>(x: T | U) {
+    let z = x!;  // NonNullable<T>
+}
+
+
+//// [nonNullableReduction.js]
+"use strict";
+// Repros from #43425
+function test(f1, f2) {
+    f1 === null || f1 === void 0 ? void 0 : f1("hello");
+    f2 === null || f2 === void 0 ? void 0 : f2("hello");
+}
+function f1(x) {
+    var z = x; // NonNullable<T>
+}
+function f2(x) {
+    var z = x; // NonNullable<T>
+}
diff --git a/tests/baselines/reference/nonNullableReduction.symbols b/tests/baselines/reference/nonNullableReduction.symbols
new file mode 100644
index 0000000000000..6007449ca6d4c
--- /dev/null
+++ b/tests/baselines/reference/nonNullableReduction.symbols
@@ -0,0 +1,61 @@
+=== tests/cases/compiler/nonNullableReduction.ts ===
+// Repros from #43425
+
+type Transform1<T> = ((value: string) => T) | (string extends T ? undefined : never);
+>Transform1 : Symbol(Transform1, Decl(nonNullableReduction.ts, 0, 0))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 2, 16))
+>value : Symbol(value, Decl(nonNullableReduction.ts, 2, 23))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 2, 16))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 2, 16))
+
+type Transform2<T> = string extends T ? ((value: string) => T) | undefined : (value: string) => T;
+>Transform2 : Symbol(Transform2, Decl(nonNullableReduction.ts, 2, 85))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 3, 16))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 3, 16))
+>value : Symbol(value, Decl(nonNullableReduction.ts, 3, 42))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 3, 16))
+>value : Symbol(value, Decl(nonNullableReduction.ts, 3, 78))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 3, 16))
+
+function test<T>(f1: Transform1<T>, f2: Transform2<T>) {
+>test : Symbol(test, Decl(nonNullableReduction.ts, 3, 98))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 5, 14))
+>f1 : Symbol(f1, Decl(nonNullableReduction.ts, 5, 17))
+>Transform1 : Symbol(Transform1, Decl(nonNullableReduction.ts, 0, 0))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 5, 14))
+>f2 : Symbol(f2, Decl(nonNullableReduction.ts, 5, 35))
+>Transform2 : Symbol(Transform2, Decl(nonNullableReduction.ts, 2, 85))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 5, 14))
+
+    f1?.("hello");
+>f1 : Symbol(f1, Decl(nonNullableReduction.ts, 5, 17))
+
+    f2?.("hello");
+>f2 : Symbol(f2, Decl(nonNullableReduction.ts, 5, 35))
+}
+
+function f1<T>(x: T | (string extends T ? null | undefined : never)) {
+>f1 : Symbol(f1, Decl(nonNullableReduction.ts, 8, 1))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 10, 12))
+>x : Symbol(x, Decl(nonNullableReduction.ts, 10, 15))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 10, 12))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 10, 12))
+
+    let z = x!;  // NonNullable<T>
+>z : Symbol(z, Decl(nonNullableReduction.ts, 11, 7))
+>x : Symbol(x, Decl(nonNullableReduction.ts, 10, 15))
+}
+
+function f2<T, U extends null | undefined>(x: T | U) {
+>f2 : Symbol(f2, Decl(nonNullableReduction.ts, 12, 1))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 14, 12))
+>U : Symbol(U, Decl(nonNullableReduction.ts, 14, 14))
+>x : Symbol(x, Decl(nonNullableReduction.ts, 14, 43))
+>T : Symbol(T, Decl(nonNullableReduction.ts, 14, 12))
+>U : Symbol(U, Decl(nonNullableReduction.ts, 14, 14))
+
+    let z = x!;  // NonNullable<T>
+>z : Symbol(z, Decl(nonNullableReduction.ts, 15, 7))
+>x : Symbol(x, Decl(nonNullableReduction.ts, 14, 43))
+}
+
diff --git a/tests/baselines/reference/nonNullableReduction.types b/tests/baselines/reference/nonNullableReduction.types
new file mode 100644
index 0000000000000..20a4a82179f7f
--- /dev/null
+++ b/tests/baselines/reference/nonNullableReduction.types
@@ -0,0 +1,50 @@
+=== tests/cases/compiler/nonNullableReduction.ts ===
+// Repros from #43425
+
+type Transform1<T> = ((value: string) => T) | (string extends T ? undefined : never);
+>Transform1 : Transform1<T>
+>value : string
+
+type Transform2<T> = string extends T ? ((value: string) => T) | undefined : (value: string) => T;
+>Transform2 : Transform2<T>
+>value : string
+>value : string
+
+function test<T>(f1: Transform1<T>, f2: Transform2<T>) {
+>test : <T>(f1: Transform1<T>, f2: Transform2<T>) => void
+>f1 : Transform1<T>
+>f2 : Transform2<T>
+
+    f1?.("hello");
+>f1?.("hello") : T | undefined
+>f1 : ((value: string) => T) | undefined
+>"hello" : "hello"
+
+    f2?.("hello");
+>f2?.("hello") : T | undefined
+>f2 : ((value: string) => T) | ((value: string) => T) | undefined
+>"hello" : "hello"
+}
+
+function f1<T>(x: T | (string extends T ? null | undefined : never)) {
+>f1 : <T>(x: T | (string extends T ? null | undefined : never)) => void
+>x : T | (string extends T ? null | undefined : never)
+>null : null
+
+    let z = x!;  // NonNullable<T>
+>z : NonNullable<T>
+>x! : NonNullable<T>
+>x : T | (string extends T ? null | undefined : never)
+}
+
+function f2<T, U extends null | undefined>(x: T | U) {
+>f2 : <T, U extends null | undefined>(x: T | U) => void
+>null : null
+>x : T | U
+
+    let z = x!;  // NonNullable<T>
+>z : NonNullable<T>
+>x! : NonNullable<T>
+>x : T | U
+}
+
diff --git a/tests/baselines/reference/nonNullableReductionNonStrict.js b/tests/baselines/reference/nonNullableReductionNonStrict.js
new file mode 100644
index 0000000000000..29c88cdec7fc1
--- /dev/null
+++ b/tests/baselines/reference/nonNullableReductionNonStrict.js
@@ -0,0 +1,32 @@
+//// [nonNullableReductionNonStrict.ts]
+// Repros from #43425
+
+type Transform1<T> = ((value: string) => T) | (string extends T ? undefined : never);
+type Transform2<T> = string extends T ? ((value: string) => T) | undefined : (value: string) => T;
+
+function test<T>(f1: Transform1<T>, f2: Transform2<T>) {
+    f1?.("hello");
+    f2?.("hello");
+}
+
+function f1<T>(x: T | (string extends T ? null | undefined : never)) {
+    let z = x!;  // NonNullable<T>
+}
+
+function f2<T, U extends null | undefined>(x: T | U) {
+    let z = x!;  // NonNullable<T>
+}
+
+
+//// [nonNullableReductionNonStrict.js]
+// Repros from #43425
+function test(f1, f2) {
+    f1 === null || f1 === void 0 ? void 0 : f1("hello");
+    f2 === null || f2 === void 0 ? void 0 : f2("hello");
+}
+function f1(x) {
+    var z = x; // NonNullable<T>
+}
+function f2(x) {
+    var z = x; // NonNullable<T>
+}
diff --git a/tests/baselines/reference/nonNullableReductionNonStrict.symbols b/tests/baselines/reference/nonNullableReductionNonStrict.symbols
new file mode 100644
index 0000000000000..20e0c8ee0ff80
--- /dev/null
+++ b/tests/baselines/reference/nonNullableReductionNonStrict.symbols
@@ -0,0 +1,61 @@
+=== tests/cases/compiler/nonNullableReductionNonStrict.ts ===
+// Repros from #43425
+
+type Transform1<T> = ((value: string) => T) | (string extends T ? undefined : never);
+>Transform1 : Symbol(Transform1, Decl(nonNullableReductionNonStrict.ts, 0, 0))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 2, 16))
+>value : Symbol(value, Decl(nonNullableReductionNonStrict.ts, 2, 23))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 2, 16))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 2, 16))
+
+type Transform2<T> = string extends T ? ((value: string) => T) | undefined : (value: string) => T;
+>Transform2 : Symbol(Transform2, Decl(nonNullableReductionNonStrict.ts, 2, 85))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 3, 16))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 3, 16))
+>value : Symbol(value, Decl(nonNullableReductionNonStrict.ts, 3, 42))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 3, 16))
+>value : Symbol(value, Decl(nonNullableReductionNonStrict.ts, 3, 78))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 3, 16))
+
+function test<T>(f1: Transform1<T>, f2: Transform2<T>) {
+>test : Symbol(test, Decl(nonNullableReductionNonStrict.ts, 3, 98))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 5, 14))
+>f1 : Symbol(f1, Decl(nonNullableReductionNonStrict.ts, 5, 17))
+>Transform1 : Symbol(Transform1, Decl(nonNullableReductionNonStrict.ts, 0, 0))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 5, 14))
+>f2 : Symbol(f2, Decl(nonNullableReductionNonStrict.ts, 5, 35))
+>Transform2 : Symbol(Transform2, Decl(nonNullableReductionNonStrict.ts, 2, 85))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 5, 14))
+
+    f1?.("hello");
+>f1 : Symbol(f1, Decl(nonNullableReductionNonStrict.ts, 5, 17))
+
+    f2?.("hello");
+>f2 : Symbol(f2, Decl(nonNullableReductionNonStrict.ts, 5, 35))
+}
+
+function f1<T>(x: T | (string extends T ? null | undefined : never)) {
+>f1 : Symbol(f1, Decl(nonNullableReductionNonStrict.ts, 8, 1))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 10, 12))
+>x : Symbol(x, Decl(nonNullableReductionNonStrict.ts, 10, 15))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 10, 12))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 10, 12))
+
+    let z = x!;  // NonNullable<T>
+>z : Symbol(z, Decl(nonNullableReductionNonStrict.ts, 11, 7))
+>x : Symbol(x, Decl(nonNullableReductionNonStrict.ts, 10, 15))
+}
+
+function f2<T, U extends null | undefined>(x: T | U) {
+>f2 : Symbol(f2, Decl(nonNullableReductionNonStrict.ts, 12, 1))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 14, 12))
+>U : Symbol(U, Decl(nonNullableReductionNonStrict.ts, 14, 14))
+>x : Symbol(x, Decl(nonNullableReductionNonStrict.ts, 14, 43))
+>T : Symbol(T, Decl(nonNullableReductionNonStrict.ts, 14, 12))
+>U : Symbol(U, Decl(nonNullableReductionNonStrict.ts, 14, 14))
+
+    let z = x!;  // NonNullable<T>
+>z : Symbol(z, Decl(nonNullableReductionNonStrict.ts, 15, 7))
+>x : Symbol(x, Decl(nonNullableReductionNonStrict.ts, 14, 43))
+}
+
diff --git a/tests/baselines/reference/nonNullableReductionNonStrict.types b/tests/baselines/reference/nonNullableReductionNonStrict.types
new file mode 100644
index 0000000000000..075ee5a41fd1b
--- /dev/null
+++ b/tests/baselines/reference/nonNullableReductionNonStrict.types
@@ -0,0 +1,50 @@
+=== tests/cases/compiler/nonNullableReductionNonStrict.ts ===
+// Repros from #43425
+
+type Transform1<T> = ((value: string) => T) | (string extends T ? undefined : never);
+>Transform1 : Transform1<T>
+>value : string
+
+type Transform2<T> = string extends T ? ((value: string) => T) | undefined : (value: string) => T;
+>Transform2 : Transform2<T>
+>value : string
+>value : string
+
+function test<T>(f1: Transform1<T>, f2: Transform2<T>) {
+>test : <T>(f1: Transform1<T>, f2: Transform2<T>) => void
+>f1 : Transform1<T>
+>f2 : Transform2<T>
+
+    f1?.("hello");
+>f1?.("hello") : T
+>f1 : (value: string) => T
+>"hello" : "hello"
+
+    f2?.("hello");
+>f2?.("hello") : T
+>f2 : ((value: string) => T) | ((value: string) => T)
+>"hello" : "hello"
+}
+
+function f1<T>(x: T | (string extends T ? null | undefined : never)) {
+>f1 : <T>(x: T | (string extends T ? null | undefined : never)) => void
+>x : T | (string extends T ? null : never)
+>null : null
+
+    let z = x!;  // NonNullable<T>
+>z : T | (string extends T ? null : never)
+>x! : T | (string extends T ? null : never)
+>x : T | (string extends T ? null : never)
+}
+
+function f2<T, U extends null | undefined>(x: T | U) {
+>f2 : <T, U extends null>(x: T | U) => void
+>null : null
+>x : T | U
+
+    let z = x!;  // NonNullable<T>
+>z : T | U
+>x! : T | U
+>x : T | U
+}
+
diff --git a/tests/cases/compiler/nonNullableReduction.ts b/tests/cases/compiler/nonNullableReduction.ts
new file mode 100644
index 0000000000000..1465d0e650ae6
--- /dev/null
+++ b/tests/cases/compiler/nonNullableReduction.ts
@@ -0,0 +1,19 @@
+// @strict: true
+
+// Repros from #43425
+
+type Transform1<T> = ((value: string) => T) | (string extends T ? undefined : never);
+type Transform2<T> = string extends T ? ((value: string) => T) | undefined : (value: string) => T;
+
+function test<T>(f1: Transform1<T>, f2: Transform2<T>) {
+    f1?.("hello");
+    f2?.("hello");
+}
+
+function f1<T>(x: T | (string extends T ? null | undefined : never)) {
+    let z = x!;  // NonNullable<T>
+}
+
+function f2<T, U extends null | undefined>(x: T | U) {
+    let z = x!;  // NonNullable<T>
+}
diff --git a/tests/cases/compiler/nonNullableReductionNonStrict.ts b/tests/cases/compiler/nonNullableReductionNonStrict.ts
new file mode 100644
index 0000000000000..6212431709dad
--- /dev/null
+++ b/tests/cases/compiler/nonNullableReductionNonStrict.ts
@@ -0,0 +1,17 @@
+// Repros from #43425
+
+type Transform1<T> = ((value: string) => T) | (string extends T ? undefined : never);
+type Transform2<T> = string extends T ? ((value: string) => T) | undefined : (value: string) => T;
+
+function test<T>(f1: Transform1<T>, f2: Transform2<T>) {
+    f1?.("hello");
+    f2?.("hello");
+}
+
+function f1<T>(x: T | (string extends T ? null | undefined : never)) {
+    let z = x!;  // NonNullable<T>
+}
+
+function f2<T, U extends null | undefined>(x: T | U) {
+    let z = x!;  // NonNullable<T>
+}