diff --git a/packages/pyright-internal/src/analyzer/operations.ts b/packages/pyright-internal/src/analyzer/operations.ts
index d71c582b19d7..dddd9b7daf2c 100644
--- a/packages/pyright-internal/src/analyzer/operations.ts
+++ b/packages/pyright-internal/src/analyzer/operations.ts
@@ -44,6 +44,7 @@ import {
     removeNoneFromUnion,
     someSubtypes,
     specializeTupleClass,
+    specializeWithDefaultTypeArgs,
     transformPossibleRecursiveTypeAlias,
 } from './typeUtils';
 import {
@@ -366,6 +367,14 @@ export function getTypeOfBinaryOperation(
         }
 
         if (isUnionableType([adjustedLeftType, adjustedRightType])) {
+            if (isInstantiableClass(adjustedLeftType)) {
+                adjustedLeftType = specializeWithDefaultTypeArgs(adjustedLeftType);
+            }
+
+            if (isInstantiableClass(adjustedRightType)) {
+                adjustedRightType = specializeWithDefaultTypeArgs(adjustedRightType);
+            }
+
             return createUnionType(
                 evaluator,
                 node,
diff --git a/packages/pyright-internal/src/analyzer/typeUtils.ts b/packages/pyright-internal/src/analyzer/typeUtils.ts
index 6ad73150e8be..2a53674c7e81 100644
--- a/packages/pyright-internal/src/analyzer/typeUtils.ts
+++ b/packages/pyright-internal/src/analyzer/typeUtils.ts
@@ -2094,18 +2094,15 @@ export function getTypeVarArgsRecursive(type: Type, recursionCount = 0): TypeVar
 // Creates a specialized version of the class, filling in any unspecified
 // type arguments with Unknown or default value.
 export function specializeWithDefaultTypeArgs(type: ClassType): ClassType {
-    if (type.shared.typeParams.length === 0 || type.priv.typeArgs) {
+    if (type.shared.typeParams.length === 0 || type.priv.typeArgs || !type.shared.typeVarScopeId) {
         return type;
     }
 
     const solution = new ConstraintSolution();
-    const typeParams = ClassType.getTypeParams(type);
 
-    typeParams.forEach((typeParam) => {
-        solution.setType(typeParam, applySolvedTypeVars(typeParam.shared.defaultType, solution));
-    });
-
-    return applySolvedTypeVars(type, solution) as ClassType;
+    return applySolvedTypeVars(type, solution, {
+        replaceUnsolved: { scopeIds: [type.shared.typeVarScopeId], tupleClassType: undefined },
+    }) as ClassType;
 }
 
 // Builds a mapping between type parameters and their specialized
@@ -3651,6 +3648,7 @@ export class TypeVarTransformer {
         let newTypeArgs: Type[] | undefined;
         let newTupleTypeArgs: TupleTypeArg[] | undefined;
         let specializationNeeded = false;
+        let isTypeArgExplicit = true;
 
         // If type args were previously provided, specialize them.
 
@@ -3701,6 +3699,7 @@ export class TypeVarTransformer {
                     const newTypeArgType = this.apply(typeParams[0], recursionCount);
                     newTupleTypeArgs = [{ type: newTypeArgType, isUnbounded: true }];
                     specializationNeeded = true;
+                    isTypeArgExplicit = false;
                 }
             }
 
@@ -3713,6 +3712,11 @@ export class TypeVarTransformer {
 
         if (!newTypeArgs) {
             const typeArgs = classType.priv.typeArgs ?? typeParams;
+
+            if (!classType.priv.typeArgs) {
+                isTypeArgExplicit = false;
+            }
+
             newTypeArgs = typeArgs.map((oldTypeArgType) => {
                 let newTypeArgType = this.apply(oldTypeArgType, recursionCount);
                 if (newTypeArgType !== oldTypeArgType) {
@@ -3736,7 +3740,7 @@ export class TypeVarTransformer {
         return ClassType.specialize(
             classType,
             newTypeArgs,
-            /* isTypeArgExplicit */ true,
+            isTypeArgExplicit,
             /* includeSubclasses */ undefined,
             newTupleTypeArgs
         );
diff --git a/packages/pyright-internal/src/tests/samples/unions4.py b/packages/pyright-internal/src/tests/samples/unions4.py
index 12d5deab450e..3ecc2e3938f8 100644
--- a/packages/pyright-internal/src/tests/samples/unions4.py
+++ b/packages/pyright-internal/src/tests/samples/unions4.py
@@ -18,3 +18,13 @@ def func1() -> Union: ...
 
 # This should generate an error.
 var1: Union
+
+
+# This should generate two errors.
+def func2(x: (list | set)[int]):
+    reveal_type(x)
+
+
+# This should generate two errors.
+def func3(x: Union[list, set][int]):
+    reveal_type(x)
diff --git a/packages/pyright-internal/src/tests/typeEvaluator4.test.ts b/packages/pyright-internal/src/tests/typeEvaluator4.test.ts
index 0e30d6773bfe..e44714228a50 100644
--- a/packages/pyright-internal/src/tests/typeEvaluator4.test.ts
+++ b/packages/pyright-internal/src/tests/typeEvaluator4.test.ts
@@ -548,7 +548,7 @@ test('Unions3', () => {
 test('Unions4', () => {
     const analysisResults = TestUtils.typeAnalyzeSampleFiles(['unions4.py']);
 
-    TestUtils.validateResults(analysisResults, 3);
+    TestUtils.validateResults(analysisResults, 7);
 });
 
 test('Unions5', () => {