diff --git a/base/compiler/tfuncs.jl b/base/compiler/tfuncs.jl
index 4dfb29aca602be..48f712576d32f7 100644
--- a/base/compiler/tfuncs.jl
+++ b/base/compiler/tfuncs.jl
@@ -1779,31 +1779,55 @@ const _tvarnames = Symbol[:_A, :_B, :_C, :_D, :_E, :_F, :_G, :_H, :_I, :_J, :_K,
             uncertain = true
             unw = unwrap_unionall(ai)
             isT = isType(unw)
+            # compute our desired upper bound value
             if isT
-                tai = ai
-                while isa(tai, UnionAll)
-                    if contains_is(outervars, tai.var)
-                        ai = rename_unionall(ai)
-                        unw = unwrap_unionall(ai)
-                        break
+                ub = rewrap_unionall(unw.parameters[1], ai)
+            else
+                ub = Any
+            end
+            if !istuple && unionall_depth(ai) > 3
+                # Heuristic: if we are adding more than N unknown parameters here to the
+                # outer type, use the wrapper type, instead of letting it nest more
+                # complexity here. This is not monotonic, but seems to work out pretty well.
+                if isT
+                    ub = unwrap_unionall(unw.parameters[1])
+                    if ub isa DataType
+                        ub = ub.name.wrapper
+                        unw = Type{unwrap_unionall(ub)}
+                        ai = rewrap_unionall(unw, ub)
+                    else
+                        isT = false
+                        ai = unw = ub = Any
                     end
-                    tai = tai.body
+                else
+                    isT = false
+                    ai = unw = ub = Any
                 end
+            elseif !isT
+                # if we didn't have isType to compute ub directly, try to use instanceof_tfunc to refine this guess
+                ai_w = widenconst(ai)
+                ub = ai_w isa Type && ai_w <: Type ? instanceof_tfunc(ai)[1] : Any
             end
-            ai_w = widenconst(ai)
-            ub = ai_w isa Type && ai_w <: Type ? instanceof_tfunc(ai)[1] : Any
             if istuple
                 # in the last parameter of a Tuple type, if the upper bound is Any
                 # then this could be a Vararg type.
                 if i == largs && ub === Any
-                    push!(tparams, Vararg)
-                elseif isT
-                    push!(tparams, rewrap_unionall((unw::DataType).parameters[1], ai))
-                else
-                    push!(tparams, Any)
+                    ub = Vararg
                 end
+                push!(tparams, ub)
             elseif isT
-                push!(tparams, (unw::DataType).parameters[1])
+                tai = ai
+                while isa(tai, UnionAll)
+                    # make sure vars introduced here are unique
+                    if contains_is(outervars, tai.var)
+                        ai = rename_unionall(ai)
+                        unw = unwrap_unionall(ai)::DataType
+                        # ub = rewrap_unionall(unw, ai)
+                        break
+                    end
+                    tai = tai.body
+                end
+                push!(tparams, unw.parameters[1])
                 while isa(ai, UnionAll)
                     push!(outervars, ai.var)
                     ai = ai.body
diff --git a/base/compiler/typeutils.jl b/base/compiler/typeutils.jl
index 5caf0d5de80fdb..3b4975a6cb8484 100644
--- a/base/compiler/typeutils.jl
+++ b/base/compiler/typeutils.jl
@@ -308,6 +308,15 @@ function _unioncomplexity(@nospecialize x)
     end
 end
 
+function unionall_depth(@nospecialize ua) # aka subtype_env_size
+    depth = 0
+    while ua isa UnionAll
+        depth += 1
+        ua = ua.body
+    end
+    return depth
+end
+
 # convert a Union of Tuple types to a Tuple of Unions
 function unswitchtupleunion(u::Union)
     ts = uniontypes(u)
diff --git a/test/compiler/inference.jl b/test/compiler/inference.jl
index c8aed565e70890..82a56e01bccd7a 100644
--- a/test/compiler/inference.jl
+++ b/test/compiler/inference.jl
@@ -2658,10 +2658,16 @@ let 𝕃 = Core.Compiler.fallback_lattice
     @test apply_type_tfunc(𝕃, Const(Issue47089), Const(String)) === Union{}
     @test apply_type_tfunc(𝕃, Const(Issue47089), Const(AbstractString)) === Union{}
     @test apply_type_tfunc(𝕃, Const(Issue47089), Type{Ptr}, Type{Ptr{T}} where T) === Base.rewrap_unionall(Type{Issue47089.body.body}, Issue47089)
+    # check complexity size limiting
+    @test apply_type_tfunc(𝕃, Const(Val), Type{Pair{Pair{Pair{Pair{A,B},C},D},E}} where {A,B,C,D,E}) == Type{Val{Pair{A, B}}} where {A, B}
+    @test apply_type_tfunc(𝕃, Const(Pair), Base.rewrap_unionall(Type{Pair.body.body},Pair), Type{Pair{Pair{Pair{Pair{A,B},C},D},E}} where {A,B,C,D,E}) == Type{Pair{Pair{A, B}, Pair{C, D}}} where {A, B, C, D}
+    @test apply_type_tfunc(𝕃, Const(Val), Type{Union{Int,Pair{Pair{Pair{Pair{A,B},C},D},E}}} where {A,B,C,D,E}) == Type{Val{_A}} where _A
 end
 @test only(Base.return_types(keys, (Dict{String},))) == Base.KeySet{String, T} where T<:(Dict{String})
 @test only(Base.return_types((r)->similar(Array{typeof(r[])}, 1), (Base.RefValue{Array{Int}},))) == Vector{<:Array{Int}}
 @test only(Base.return_types((r)->similar(Array{typeof(r[])}, 1), (Base.RefValue{Array{<:Real}},))) == Vector{<:Array{<:Real}}
+# test complexity limit on apply_type on a function capturing functions returning functions
+@test only(Base.return_types(Base.afoldl, (typeof((m, n) -> () -> Returns(nothing)(m, n)), Function, Function, Vararg{Function}))) === Function
 
 let A = Tuple{A,B,C,D,E,F,G,H} where {A,B,C,D,E,F,G,H}
     B = Core.Compiler.rename_unionall(A)