diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index dc1bab72c3..f507b0faad 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -8869,6 +8869,7 @@ namespace ts {
         // An object type S is considered to be derived from an object type T if
         // S is a union type and every constituent of S is derived from T,
         // T is a union type and S is derived from at least one constituent of T, or
+        // S is a type variable with a base constraint that is derived from T,
         // T is one of the global types Object and Function and S is a subtype of T, or
         // T occurs directly or indirectly in an 'extends' clause of S.
         // Note that this check ignores type parameters and only considers the
@@ -8876,6 +8877,7 @@ namespace ts {
         function isTypeDerivedFrom(source: Type, target: Type): boolean {
             return source.flags & TypeFlags.Union ? every((<UnionType>source).types, t => isTypeDerivedFrom(t, target)) :
                 target.flags & TypeFlags.Union ? some((<UnionType>target).types, t => isTypeDerivedFrom(source, t)) :
+                source.flags & TypeFlags.TypeVariable ? isTypeDerivedFrom(getBaseConstraintOfType(source) || emptyObjectType, target) :
                 target === globalObjectType || target === globalFunctionType ? isTypeSubtypeOf(source, target) :
                 hasBaseType(source, getTargetType(target));
             }
diff --git a/tests/baselines/reference/narrowingConstrainedTypeVariable.js b/tests/baselines/reference/narrowingConstrainedTypeVariable.js
new file mode 100644
index 0000000000..feb2018a7b
--- /dev/null
+++ b/tests/baselines/reference/narrowingConstrainedTypeVariable.js
@@ -0,0 +1,79 @@
+//// [narrowingConstrainedTypeVariable.ts]
+// Repro from #20138
+
+class C { }
+
+function f1<T extends C>(v: T | string): void {
+    if (v instanceof C) {
+        const x: T = v;
+    }
+    else {
+        const s: string = v;
+    }
+}
+
+class D { }
+
+function f2<T extends C, U extends D>(v: T | U) {
+    if (v instanceof C) {
+        const x: T = v;
+    }
+    else {
+        const y: U = v;
+    }
+}
+
+class E { x: string }
+
+function f3<T extends E>(v: T | { x: string }) {
+    if (v instanceof E) {
+        const x: T = v;
+    }
+    else {
+        const y: { x: string } = v;
+    }
+}
+
+
+//// [narrowingConstrainedTypeVariable.js]
+"use strict";
+// Repro from #20138
+var C = /** @class */ (function () {
+    function C() {
+    }
+    return C;
+}());
+function f1(v) {
+    if (v instanceof C) {
+        var x = v;
+    }
+    else {
+        var s = v;
+    }
+}
+var D = /** @class */ (function () {
+    function D() {
+    }
+    return D;
+}());
+function f2(v) {
+    if (v instanceof C) {
+        var x = v;
+    }
+    else {
+        var y = v;
+    }
+}
+var E = /** @class */ (function () {
+    function E() {
+    }
+    return E;
+}());
+function f3(v) {
+    if (v instanceof E) {
+        var x = v;
+    }
+    else {
+        var y = v;
+    }
+}
diff --git a/tests/baselines/reference/narrowingConstrainedTypeVariable.symbols b/tests/baselines/reference/narrowingConstrainedTypeVariable.symbols
new file mode 100644
index 0000000000..e973eea702
--- /dev/null
+++ b/tests/baselines/reference/narrowingConstrainedTypeVariable.symbols
@@ -0,0 +1,88 @@
+=== tests/cases/conformance/types/typeRelationships/instanceOf/narrowingConstrainedTypeVariable.ts ===
+// Repro from #20138
+
+class C { }
+>C : Symbol(C, Decl(narrowingConstrainedTypeVariable.ts, 0, 0))
+
+function f1<T extends C>(v: T | string): void {
+>f1 : Symbol(f1, Decl(narrowingConstrainedTypeVariable.ts, 2, 11))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 4, 12))
+>C : Symbol(C, Decl(narrowingConstrainedTypeVariable.ts, 0, 0))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 4, 25))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 4, 12))
+
+    if (v instanceof C) {
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 4, 25))
+>C : Symbol(C, Decl(narrowingConstrainedTypeVariable.ts, 0, 0))
+
+        const x: T = v;
+>x : Symbol(x, Decl(narrowingConstrainedTypeVariable.ts, 6, 13))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 4, 12))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 4, 25))
+    }
+    else {
+        const s: string = v;
+>s : Symbol(s, Decl(narrowingConstrainedTypeVariable.ts, 9, 13))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 4, 25))
+    }
+}
+
+class D { }
+>D : Symbol(D, Decl(narrowingConstrainedTypeVariable.ts, 11, 1))
+
+function f2<T extends C, U extends D>(v: T | U) {
+>f2 : Symbol(f2, Decl(narrowingConstrainedTypeVariable.ts, 13, 11))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 15, 12))
+>C : Symbol(C, Decl(narrowingConstrainedTypeVariable.ts, 0, 0))
+>U : Symbol(U, Decl(narrowingConstrainedTypeVariable.ts, 15, 24))
+>D : Symbol(D, Decl(narrowingConstrainedTypeVariable.ts, 11, 1))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 15, 38))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 15, 12))
+>U : Symbol(U, Decl(narrowingConstrainedTypeVariable.ts, 15, 24))
+
+    if (v instanceof C) {
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 15, 38))
+>C : Symbol(C, Decl(narrowingConstrainedTypeVariable.ts, 0, 0))
+
+        const x: T = v;
+>x : Symbol(x, Decl(narrowingConstrainedTypeVariable.ts, 17, 13))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 15, 12))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 15, 38))
+    }
+    else {
+        const y: U = v;
+>y : Symbol(y, Decl(narrowingConstrainedTypeVariable.ts, 20, 13))
+>U : Symbol(U, Decl(narrowingConstrainedTypeVariable.ts, 15, 24))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 15, 38))
+    }
+}
+
+class E { x: string }
+>E : Symbol(E, Decl(narrowingConstrainedTypeVariable.ts, 22, 1))
+>x : Symbol(E.x, Decl(narrowingConstrainedTypeVariable.ts, 24, 9))
+
+function f3<T extends E>(v: T | { x: string }) {
+>f3 : Symbol(f3, Decl(narrowingConstrainedTypeVariable.ts, 24, 21))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 26, 12))
+>E : Symbol(E, Decl(narrowingConstrainedTypeVariable.ts, 22, 1))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 26, 25))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 26, 12))
+>x : Symbol(x, Decl(narrowingConstrainedTypeVariable.ts, 26, 33))
+
+    if (v instanceof E) {
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 26, 25))
+>E : Symbol(E, Decl(narrowingConstrainedTypeVariable.ts, 22, 1))
+
+        const x: T = v;
+>x : Symbol(x, Decl(narrowingConstrainedTypeVariable.ts, 28, 13))
+>T : Symbol(T, Decl(narrowingConstrainedTypeVariable.ts, 26, 12))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 26, 25))
+    }
+    else {
+        const y: { x: string } = v;
+>y : Symbol(y, Decl(narrowingConstrainedTypeVariable.ts, 31, 13))
+>x : Symbol(x, Decl(narrowingConstrainedTypeVariable.ts, 31, 18))
+>v : Symbol(v, Decl(narrowingConstrainedTypeVariable.ts, 26, 25))
+    }
+}
+
diff --git a/tests/baselines/reference/narrowingConstrainedTypeVariable.types b/tests/baselines/reference/narrowingConstrainedTypeVariable.types
new file mode 100644
index 0000000000..aa8e30194f
--- /dev/null
+++ b/tests/baselines/reference/narrowingConstrainedTypeVariable.types
@@ -0,0 +1,91 @@
+=== tests/cases/conformance/types/typeRelationships/instanceOf/narrowingConstrainedTypeVariable.ts ===
+// Repro from #20138
+
+class C { }
+>C : C
+
+function f1<T extends C>(v: T | string): void {
+>f1 : <T extends C>(v: string | T) => void
+>T : T
+>C : C
+>v : string | T
+>T : T
+
+    if (v instanceof C) {
+>v instanceof C : boolean
+>v : string | T
+>C : typeof C
+
+        const x: T = v;
+>x : T
+>T : T
+>v : T
+    }
+    else {
+        const s: string = v;
+>s : string
+>v : string
+    }
+}
+
+class D { }
+>D : D
+
+function f2<T extends C, U extends D>(v: T | U) {
+>f2 : <T extends C, U extends D>(v: T | U) => void
+>T : T
+>C : C
+>U : U
+>D : D
+>v : T | U
+>T : T
+>U : U
+
+    if (v instanceof C) {
+>v instanceof C : boolean
+>v : T | U
+>C : typeof C
+
+        const x: T = v;
+>x : T
+>T : T
+>v : T
+    }
+    else {
+        const y: U = v;
+>y : U
+>U : U
+>v : U
+    }
+}
+
+class E { x: string }
+>E : E
+>x : string
+
+function f3<T extends E>(v: T | { x: string }) {
+>f3 : <T extends E>(v: T | { x: string; }) => void
+>T : T
+>E : E
+>v : T | { x: string; }
+>T : T
+>x : string
+
+    if (v instanceof E) {
+>v instanceof E : boolean
+>v : T | { x: string; }
+>E : typeof E
+
+        const x: T = v;
+>x : T
+>T : T
+>v : T
+    }
+    else {
+        const y: { x: string } = v;
+>y : { x: string; }
+>x : string
+>v : { x: string; }
+    }
+}
+
diff --git a/tests/cases/conformance/types/typeRelationships/instanceOf/narrowingConstrainedTypeVariable.ts b/tests/cases/conformance/types/typeRelationships/instanceOf/narrowingConstrainedTypeVariable.ts
new file mode 100644
index 0000000000..13cc8da68c
--- /dev/null
+++ b/tests/cases/conformance/types/typeRelationships/instanceOf/narrowingConstrainedTypeVariable.ts
@@ -0,0 +1,36 @@
+// @strict: true
+
+// Repro from #20138
+
+class C { }
+
+function f1<T extends C>(v: T | string): void {
+    if (v instanceof C) {
+        const x: T = v;
+    }
+    else {
+        const s: string = v;
+    }
+}
+
+class D { }
+
+function f2<T extends C, U extends D>(v: T | U) {
+    if (v instanceof C) {
+        const x: T = v;
+    }
+    else {
+        const y: U = v;
+    }
+}
+
+class E { x: string }
+
+function f3<T extends E>(v: T | { x: string }) {
+    if (v instanceof E) {
+        const x: T = v;
+    }
+    else {
+        const y: { x: string } = v;
+    }
+}