Erase substitution types in type references and type alias instantiations

src/compiler/checker.ts

@@ -7316,7 +7316,16 @@ namespace ts {
             return result & TypeFlags.PropagatingFlags;
         }
 
+        // This function replaces substitution types in the given array with their underlying type parameter.
+        // We do this when creating type references and type alias instantiations because subsitution types are
+        // no longer necessary once the type arguments have been validated against their corresponding type
+        // parameter constraints.
+        function eraseSubstitutionTypes(types: Type[]) {
+            return sameMap(types, t => t.flags & TypeFlags.Substitution ? (<SubstitutionType>t).typeParameter : t);
+        }
+
         function createTypeReference(target: GenericType, typeArguments: Type[]): TypeReference {
+            typeArguments = eraseSubstitutionTypes(typeArguments);
             const id = getTypeListId(typeArguments);
             let type = target.instantiations.get(id);
             if (!type) {
@@ -7383,6 +7392,7 @@ namespace ts {
         }
 
         function getTypeAliasInstantiation(symbol: Symbol, typeArguments: Type[]): Type {
+            typeArguments = eraseSubstitutionTypes(typeArguments);
             const type = getDeclaredTypeOfSymbol(symbol);
             const links = getSymbolLinks(symbol);
             const typeParameters = links.typeParameters;

src/compiler/types.ts

@@ -3703,6 +3703,10 @@ namespace ts {
     }
 
     // Type parameter substitution (TypeFlags.Substitution)
+    // Substitution types are created for type parameter references that occur in the true branch
+    // of a conditional type. For example, in 'T extends string ? Foo<T> : Bar<T>', the reference to
+    // T in Foo<T> is resolved as a substitution type that substitutes 'string & T' for T. Thus, if
+    // Foo<T> has a 'string' constraint on its type parameter, T will satisfy it.
     export interface SubstitutionType extends InstantiableType {
         typeParameter: TypeParameter;  // Target type parameter
         substitute: Type;              // Type to substitute for type parameter