diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index 019f6bc6307e4..b136054a6418d 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -9369,12 +9369,24 @@ namespace ts {
             // '{ [P in T]: { [Q in U]: number } }[T][U]' we want to first simplify the inner indexed access type.
             const objectType = getSimplifiedType(type.objectType);
             const indexType = getSimplifiedType(type.indexType);
-            if (objectType.flags & TypeFlags.Union) {
-                return type.simplified = mapType(objectType, t => getSimplifiedType(getIndexedAccessType(t, indexType)));
+            // T[A | B] -> T[A] | T[B]
+            if (indexType.flags & TypeFlags.Union) {
+                return type.simplified = mapType(indexType, t => getSimplifiedType(getIndexedAccessType(objectType, t)));
             }
-            if (objectType.flags & TypeFlags.Intersection) {
-                return type.simplified = getIntersectionType(map((objectType as IntersectionType).types, t => getSimplifiedType(getIndexedAccessType(t, indexType))));
+            // Only do the inner distributions if the index can no longer be instantiated to cause index distribution again
+            if (!(indexType.flags & TypeFlags.Instantiable)) {
+                // (T | U)[K] -> T[K] | U[K]
+                if (objectType.flags & TypeFlags.Union) {
+                    return type.simplified = mapType(objectType, t => getSimplifiedType(getIndexedAccessType(t, indexType)));
+                }
+                // (T & U)[K] -> T[K] & U[K]
+                if (objectType.flags & TypeFlags.Intersection) {
+                    return type.simplified = getIntersectionType(map((objectType as IntersectionType).types, t => getSimplifiedType(getIndexedAccessType(t, indexType))));
+                }
             }
+            // So ultimately:
+            // ((A & B) | C)[K1 | K2] -> ((A & B) | C)[K1] | ((A & B) | C)[K2] -> (A & B)[K1] | C[K1] | (A & B)[K2] | C[K2] -> (A[K1] & B[K1]) | C[K1] | (A[K2] & B[K2]) | C[K2]
+
             // If the object type is a mapped type { [P in K]: E }, where K is generic, instantiate E using a mapper
             // that substitutes the index type for P. For example, for an index access { [P in K]: Box<T[P]> }[X], we
             // construct the type Box<T[X]>. We do not further simplify the result because mapped types can be recursive
diff --git a/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.js b/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.js
new file mode 100644
index 0000000000000..ec101ecd3afec
--- /dev/null
+++ b/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.js
@@ -0,0 +1,25 @@
+//// [contextualTypeOfIndexedAccessParameter.ts]
+type Keys = "a" | "b";
+
+type OptionsForKey = { a: { cb: (p: number) => number } } & { b: {} };
+
+declare function f<K extends Keys>(key: K, options: OptionsForKey[K]): void;
+
+f("a", {
+    cb: p => p,
+});
+
+function g<
+    K extends "a" | "b">(x: ({ a: string } & { b: string })[K], y: string) {
+    x = y;
+}
+
+
+//// [contextualTypeOfIndexedAccessParameter.js]
+"use strict";
+f("a", {
+    cb: function (p) { return p; }
+});
+function g(x, y) {
+    x = y;
+}
diff --git a/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.symbols b/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.symbols
new file mode 100644
index 0000000000000..74cc7843f8709
--- /dev/null
+++ b/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.symbols
@@ -0,0 +1,47 @@
+=== tests/cases/compiler/contextualTypeOfIndexedAccessParameter.ts ===
+type Keys = "a" | "b";
+>Keys : Symbol(Keys, Decl(contextualTypeOfIndexedAccessParameter.ts, 0, 0))
+
+type OptionsForKey = { a: { cb: (p: number) => number } } & { b: {} };
+>OptionsForKey : Symbol(OptionsForKey, Decl(contextualTypeOfIndexedAccessParameter.ts, 0, 22))
+>a : Symbol(a, Decl(contextualTypeOfIndexedAccessParameter.ts, 2, 22))
+>cb : Symbol(cb, Decl(contextualTypeOfIndexedAccessParameter.ts, 2, 27))
+>p : Symbol(p, Decl(contextualTypeOfIndexedAccessParameter.ts, 2, 33))
+>b : Symbol(b, Decl(contextualTypeOfIndexedAccessParameter.ts, 2, 61))
+
+declare function f<K extends Keys>(key: K, options: OptionsForKey[K]): void;
+>f : Symbol(f, Decl(contextualTypeOfIndexedAccessParameter.ts, 2, 70))
+>K : Symbol(K, Decl(contextualTypeOfIndexedAccessParameter.ts, 4, 19))
+>Keys : Symbol(Keys, Decl(contextualTypeOfIndexedAccessParameter.ts, 0, 0))
+>key : Symbol(key, Decl(contextualTypeOfIndexedAccessParameter.ts, 4, 35))
+>K : Symbol(K, Decl(contextualTypeOfIndexedAccessParameter.ts, 4, 19))
+>options : Symbol(options, Decl(contextualTypeOfIndexedAccessParameter.ts, 4, 42))
+>OptionsForKey : Symbol(OptionsForKey, Decl(contextualTypeOfIndexedAccessParameter.ts, 0, 22))
+>K : Symbol(K, Decl(contextualTypeOfIndexedAccessParameter.ts, 4, 19))
+
+f("a", {
+>f : Symbol(f, Decl(contextualTypeOfIndexedAccessParameter.ts, 2, 70))
+
+    cb: p => p,
+>cb : Symbol(cb, Decl(contextualTypeOfIndexedAccessParameter.ts, 6, 8))
+>p : Symbol(p, Decl(contextualTypeOfIndexedAccessParameter.ts, 7, 7))
+>p : Symbol(p, Decl(contextualTypeOfIndexedAccessParameter.ts, 7, 7))
+
+});
+
+function g<
+>g : Symbol(g, Decl(contextualTypeOfIndexedAccessParameter.ts, 8, 3))
+
+    K extends "a" | "b">(x: ({ a: string } & { b: string })[K], y: string) {
+>K : Symbol(K, Decl(contextualTypeOfIndexedAccessParameter.ts, 10, 11))
+>x : Symbol(x, Decl(contextualTypeOfIndexedAccessParameter.ts, 11, 25))
+>a : Symbol(a, Decl(contextualTypeOfIndexedAccessParameter.ts, 11, 30))
+>b : Symbol(b, Decl(contextualTypeOfIndexedAccessParameter.ts, 11, 46))
+>K : Symbol(K, Decl(contextualTypeOfIndexedAccessParameter.ts, 10, 11))
+>y : Symbol(y, Decl(contextualTypeOfIndexedAccessParameter.ts, 11, 63))
+
+    x = y;
+>x : Symbol(x, Decl(contextualTypeOfIndexedAccessParameter.ts, 11, 25))
+>y : Symbol(y, Decl(contextualTypeOfIndexedAccessParameter.ts, 11, 63))
+}
+
diff --git a/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.types b/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.types
new file mode 100644
index 0000000000000..e2fe48b76e27c
--- /dev/null
+++ b/tests/baselines/reference/contextualTypeOfIndexedAccessParameter.types
@@ -0,0 +1,45 @@
+=== tests/cases/compiler/contextualTypeOfIndexedAccessParameter.ts ===
+type Keys = "a" | "b";
+>Keys : Keys
+
+type OptionsForKey = { a: { cb: (p: number) => number } } & { b: {} };
+>OptionsForKey : OptionsForKey
+>a : { cb: (p: number) => number; }
+>cb : (p: number) => number
+>p : number
+>b : {}
+
+declare function f<K extends Keys>(key: K, options: OptionsForKey[K]): void;
+>f : <K extends Keys>(key: K, options: OptionsForKey[K]) => void
+>key : K
+>options : OptionsForKey[K]
+
+f("a", {
+>f("a", {    cb: p => p,}) : void
+>f : <K extends Keys>(key: K, options: OptionsForKey[K]) => void
+>"a" : "a"
+>{    cb: p => p,} : { cb: (p: number) => number; }
+
+    cb: p => p,
+>cb : (p: number) => number
+>p => p : (p: number) => number
+>p : number
+>p : number
+
+});
+
+function g<
+>g : <K extends Keys>(x: ({ a: string; } & { b: string; })[K], y: string) => void
+
+    K extends "a" | "b">(x: ({ a: string } & { b: string })[K], y: string) {
+>x : ({ a: string; } & { b: string; })[K]
+>a : string
+>b : string
+>y : string
+
+    x = y;
+>x = y : string
+>x : ({ a: string; } & { b: string; })[K]
+>y : string
+}
+
diff --git a/tests/baselines/reference/infiniteConstraints.errors.txt b/tests/baselines/reference/infiniteConstraints.errors.txt
index 71034e87edfa8..36b77b2b3f611 100644
--- a/tests/baselines/reference/infiniteConstraints.errors.txt
+++ b/tests/baselines/reference/infiniteConstraints.errors.txt
@@ -1,4 +1,6 @@
-error TS2321: Excessive stack depth comparing types 'Extract<T[Exclude<keyof T, string | number | symbol>], Record<"val", string>>["val"]' and 'Extract<T[Exclude<keyof T, Exclude<keyof T, string | number | symbol>>], Record<"val", string>>["val"]'.
+error TS2321: Excessive stack depth comparing types 'Extract<T[Exclude<keyof T, number>], Record<"val", string>>["val"]' and 'Extract<T[Exclude<keyof T, Exclude<keyof T, number>>], Record<"val", string>>["val"]'.
+error TS2321: Excessive stack depth comparing types 'Extract<T[Exclude<keyof T, string>], Record<"val", string>>["val"]' and 'Extract<T[Exclude<keyof T, Exclude<keyof T, string>>], Record<"val", string>>["val"]'.
+error TS2321: Excessive stack depth comparing types 'Extract<T[Exclude<keyof T, symbol>], Record<"val", string>>["val"]' and 'Extract<T[Exclude<keyof T, Exclude<keyof T, symbol>>], Record<"val", string>>["val"]'.
 tests/cases/compiler/infiniteConstraints.ts(4,37): error TS2536: Type '"val"' cannot be used to index type 'B[Exclude<keyof B, K>]'.
 tests/cases/compiler/infiniteConstraints.ts(27,37): error TS2322: Type 'Record<"val", "test">' is not assignable to type 'never'.
 tests/cases/compiler/infiniteConstraints.ts(27,58): error TS2322: Type 'Record<"val", "test2">' is not assignable to type 'never'.
@@ -8,7 +10,9 @@ tests/cases/compiler/infiniteConstraints.ts(31,63): error TS2322: Type 'Record<"
 tests/cases/compiler/infiniteConstraints.ts(36,71): error TS2536: Type '"foo"' cannot be used to index type 'T[keyof T]'.
 
 
-!!! error TS2321: Excessive stack depth comparing types 'Extract<T[Exclude<keyof T, string | number | symbol>], Record<"val", string>>["val"]' and 'Extract<T[Exclude<keyof T, Exclude<keyof T, string | number | symbol>>], Record<"val", string>>["val"]'.
+!!! error TS2321: Excessive stack depth comparing types 'Extract<T[Exclude<keyof T, number>], Record<"val", string>>["val"]' and 'Extract<T[Exclude<keyof T, Exclude<keyof T, number>>], Record<"val", string>>["val"]'.
+!!! error TS2321: Excessive stack depth comparing types 'Extract<T[Exclude<keyof T, string>], Record<"val", string>>["val"]' and 'Extract<T[Exclude<keyof T, Exclude<keyof T, string>>], Record<"val", string>>["val"]'.
+!!! error TS2321: Excessive stack depth comparing types 'Extract<T[Exclude<keyof T, symbol>], Record<"val", string>>["val"]' and 'Extract<T[Exclude<keyof T, Exclude<keyof T, symbol>>], Record<"val", string>>["val"]'.
 ==== tests/cases/compiler/infiniteConstraints.ts (7 errors) ====
     // Both of the following types trigger the recursion limiter in getImmediateBaseConstraint
     
diff --git a/tests/cases/compiler/contextualTypeOfIndexedAccessParameter.ts b/tests/cases/compiler/contextualTypeOfIndexedAccessParameter.ts
new file mode 100644
index 0000000000000..2135ed5cb29e4
--- /dev/null
+++ b/tests/cases/compiler/contextualTypeOfIndexedAccessParameter.ts
@@ -0,0 +1,15 @@
+// @strict: true
+type Keys = "a" | "b";
+
+type OptionsForKey = { a: { cb: (p: number) => number } } & { b: {} };
+
+declare function f<K extends Keys>(key: K, options: OptionsForKey[K]): void;
+
+f("a", {
+    cb: p => p,
+});
+
+function g<
+    K extends "a" | "b">(x: ({ a: string } & { b: string })[K], y: string) {
+    x = y;
+}