diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index eb2c4ddeae0ae..92bb422398e44 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -12834,12 +12834,22 @@ namespace ts {
                         typeParameters.length);
                     return errorType;
                 }
+                // We refrain from associating a local type alias with an instantiation of a top-level type alias
+                // because the local alias may end up being referenced in an inferred return type where it is not
+                // accessible--which in turn may lead to a large structural expansion of the type when generating
+                // a .d.ts file. See #43622 for an example.
                 const aliasSymbol = getAliasSymbolForTypeNode(node);
-                return getTypeAliasInstantiation(symbol, typeArgumentsFromTypeReferenceNode(node), aliasSymbol, getTypeArgumentsForAliasSymbol(aliasSymbol));
+                const newAliasSymbol = aliasSymbol && (isLocalTypeAlias(symbol) || !isLocalTypeAlias(aliasSymbol)) ? aliasSymbol : undefined;
+                return getTypeAliasInstantiation(symbol, typeArgumentsFromTypeReferenceNode(node), newAliasSymbol, getTypeArgumentsForAliasSymbol(newAliasSymbol));
             }
             return checkNoTypeArguments(node, symbol) ? type : errorType;
         }
 
+        function isLocalTypeAlias(symbol: Symbol) {
+            const declaration = symbol.declarations?.find(isTypeAlias);
+            return !!(declaration && getContainingFunction(declaration));
+        }
+
         function getTypeReferenceName(node: TypeReferenceType): EntityNameOrEntityNameExpression | undefined {
             switch (node.kind) {
                 case SyntaxKind.TypeReference:
diff --git a/tests/baselines/reference/conditionalTypes1.errors.txt b/tests/baselines/reference/conditionalTypes1.errors.txt
index 810520c71030a..85f50cb0e7d05 100644
--- a/tests/baselines/reference/conditionalTypes1.errors.txt
+++ b/tests/baselines/reference/conditionalTypes1.errors.txt
@@ -50,7 +50,7 @@ tests/cases/conformance/types/conditional/conditionalTypes1.ts(159,5): error TS2
 tests/cases/conformance/types/conditional/conditionalTypes1.ts(160,5): error TS2322: Type 'T' is not assignable to type 'ZeroOf<T>'.
   Type 'string | number' is not assignable to type 'ZeroOf<T>'.
     Type 'string' is not assignable to type 'ZeroOf<T>'.
-tests/cases/conformance/types/conditional/conditionalTypes1.ts(263,9): error TS2403: Subsequent variable declarations must have the same type.  Variable 'z' must be of type 'T1', but here has type 'T2'.
+tests/cases/conformance/types/conditional/conditionalTypes1.ts(263,9): error TS2403: Subsequent variable declarations must have the same type.  Variable 'z' must be of type 'T1', but here has type 'Foo<T & U>'.
 tests/cases/conformance/types/conditional/conditionalTypes1.ts(288,43): error TS2322: Type 'T95<U>' is not assignable to type 'T94<U>'.
   Type 'number | boolean' is not assignable to type 'T94<U>'.
     Type 'number' is not assignable to type 'T94<U>'.
@@ -392,7 +392,7 @@ tests/cases/conformance/types/conditional/conditionalTypes1.ts(288,43): error TS
         var z: T1;
         var z: T2;  // Error, T2 is distributive, T1 isn't
             ~
-!!! error TS2403: Subsequent variable declarations must have the same type.  Variable 'z' must be of type 'T1', but here has type 'T2'.
+!!! error TS2403: Subsequent variable declarations must have the same type.  Variable 'z' must be of type 'T1', but here has type 'Foo<T & U>'.
 !!! related TS6203 tests/cases/conformance/types/conditional/conditionalTypes1.ts:262:9: 'z' was also declared here.
     }
     
diff --git a/tests/baselines/reference/conditionalTypes1.types b/tests/baselines/reference/conditionalTypes1.types
index e360b3dd7f33b..d655e3d6b040a 100644
--- a/tests/baselines/reference/conditionalTypes1.types
+++ b/tests/baselines/reference/conditionalTypes1.types
@@ -816,7 +816,7 @@ function f32<T, U>() {
 >T1 : T & U extends string ? boolean : number
 
     type T2 = Foo<T & U>;
->T2 : T & U extends string ? boolean : number
+>T2 : Foo<T & U>
 
     var z: T1;
 >z : T & U extends string ? boolean : number
@@ -829,16 +829,16 @@ function f33<T, U>() {
 >f33 : <T, U>() => void
 
     type T1 = Foo<T & U>;
->T1 : T & U extends string ? boolean : number
+>T1 : Foo<T & U>
 
     type T2 = Bar<T & U>;
->T2 : T & U extends string ? boolean : number
+>T2 : Bar<T & U>
 
     var z: T1;
->z : T & U extends string ? boolean : number
+>z : Foo<T & U>
 
     var z: T2;
->z : T & U extends string ? boolean : number
+>z : Foo<T & U>
 }
 
 // Repro from #21823