diff --git a/mypy/subtypes.py b/mypy/subtypes.py
index a7ff37b8a62f..7a6cd2f350d5 100644
--- a/mypy/subtypes.py
+++ b/mypy/subtypes.py
@@ -883,6 +883,10 @@ def visit_type_type(self, left: TypeType) -> bool:
         if isinstance(right, TypeType):
             return self._is_subtype(left.item, right.item)
         if isinstance(right, CallableType):
+            if self.proper_subtype and not right.is_type_obj():
+                # We can't accept `Type[X]` as a *proper* subtype of Callable[P, X]
+                # since this will break transitivity of subtyping.
+                return False
             # This is unsound, we don't check the __init__ signature.
             return self._is_subtype(left.item, right.ret_type)
         if isinstance(right, Instance):
diff --git a/test-data/unit/check-inference.test b/test-data/unit/check-inference.test
index 04c710af10d1..20c69b82d409 100644
--- a/test-data/unit/check-inference.test
+++ b/test-data/unit/check-inference.test
@@ -3264,3 +3264,13 @@ from typing import Dict, Iterable, Tuple, Union
 def foo(x: Union[Tuple[str, Dict[str, int], str], Iterable[object]]) -> None: ...
 foo(("a", {"a": "b"}, "b"))
 [builtins fixtures/dict.pyi]
+
+[case testUnionTypeCallableInference]
+from typing import Callable, Type, TypeVar, Union
+
+class A:
+    def __init__(self, x: str) -> None: ...
+
+T = TypeVar("T")
+def type_or_callable(value: T, tp: Union[Type[T], Callable[[int], T]]) -> T: ...
+reveal_type(type_or_callable(A("test"), A))  # N: Revealed type is "__main__.A"