diff --git a/compiler/src/dotty/tools/dotc/core/Types.scala b/compiler/src/dotty/tools/dotc/core/Types.scala
index d005cabebcfb..840f49a19cc2 100644
--- a/compiler/src/dotty/tools/dotc/core/Types.scala
+++ b/compiler/src/dotty/tools/dotc/core/Types.scala
@@ -1574,8 +1574,6 @@ object Types {
           else NoType
         case SkolemType(tp) =>
           loop(tp)
-        case pre: WildcardType =>
-          WildcardType
         case pre: TypeRef =>
           pre.info match {
             case TypeAlias(alias) => loop(alias)
@@ -2554,10 +2552,7 @@ object Types {
       case _ => true
     }
 
-    /** (1) Reduce a type-ref `W # X` or `W { ... } # U`, where `W` is a wildcard type
-     *  to an (unbounded) wildcard type.
-     *
-     *  (2) Reduce a type-ref `T { X = U; ... } # X`  to   `U`
+    /** Reduce a type-ref `T { X = U; ... } # X`  to   `U`
      *  provided `U` does not refer with a RecThis to the
      *  refinement type `T { X = U; ... }`
      */
@@ -2679,7 +2674,7 @@ object Types {
               case _ =>
             }
         }
-        if (prefix.isInstanceOf[WildcardType]) WildcardType
+        if (prefix.isInstanceOf[WildcardType]) WildcardType.sameKindAs(this)
         else withPrefix(prefix)
       }
 
@@ -5253,6 +5248,10 @@ object Types {
       else
         result
     def emptyPolyKind(using Context): TypeBounds = apply(defn.NothingType, defn.AnyKindType)
+    /** An interval covering all types of the same kind as `tp`. */
+    def emptySameKindAs(tp: Type)(using Context): TypeBounds =
+      val top = tp.topType
+      if top.isExactlyAny then empty else apply(defn.NothingType, top)
     def upper(hi: Type)(using Context): TypeBounds = apply(defn.NothingType, hi)
     def lower(lo: Type)(using Context): TypeBounds = apply(lo, defn.AnyType)
   }
@@ -5428,6 +5427,9 @@ object Types {
         else
           result
       else unique(CachedWildcardType(bounds))
+    /** A wildcard matching any type of the same kind as `tp`. */
+    def sameKindAs(tp: Type)(using Context): WildcardType =
+      apply(TypeBounds.emptySameKindAs(tp))
   }
 
   /** An extractor for single abstract method types.
diff --git a/compiler/test/dotc/pos-test-pickling.blacklist b/compiler/test/dotc/pos-test-pickling.blacklist
index 5f7221ee0ce9..d1dd83f36ff7 100644
--- a/compiler/test/dotc/pos-test-pickling.blacklist
+++ b/compiler/test/dotc/pos-test-pickling.blacklist
@@ -20,6 +20,7 @@ i13871.scala
 i15181.scala
 i15922.scala
 t5031_2.scala
+i16997.scala
 
 # Tree is huge and blows stack for printing Text
 i7034.scala
diff --git a/tests/pos/i16997.min.scala b/tests/pos/i16997.min.scala
new file mode 100644
index 000000000000..abac648bdfd5
--- /dev/null
+++ b/tests/pos/i16997.min.scala
@@ -0,0 +1,12 @@
+class Fn:
+  class R[Y]
+
+case class Foo[F[_]](nest: Foo[F]):
+  case class Bar[G[_], R[_]](value: Foo[G])
+
+  def bar[G[_]](using fn: Fn): Bar[G, fn.R] = ???
+
+  def part[G[_]](using fn: Fn): Bar[G, fn.R] =
+    (bar[G], ()) match
+      case (Bar(value), ()) =>
+        Bar(Foo(value))
diff --git a/tests/pos/i16997.scala b/tests/pos/i16997.scala
new file mode 100644
index 000000000000..cd7b1ac8ab91
--- /dev/null
+++ b/tests/pos/i16997.scala
@@ -0,0 +1,63 @@
+class Funs {
+  sealed trait ->[A, B]
+}
+
+/**
+ * Binary tree with leafs holding values of types `F[X]`, `F[Y]`, ...
+ * The complete structure of the tree is expressed by the type `A`, using the tags for branches and leafs.
+ *
+ * @tparam <*> tag for branches
+ * @tparam T tag for leafs.
+ * @tparam F value type of leafs. Each leaf holds a value of type `F[T]`, for some type `T`.
+ * @tparam A captures the complete structure of the tree
+ */
+enum Tree[<*>[_, _], T[_], F[_], A] {
+  case Branch[<*>[_, _], T[_], F[_], A, B](
+    l: Tree[<*>, T, F, A],
+    r: Tree[<*>, T, F, B],
+  ) extends Tree[<*>, T, F, A <*> B]
+
+  case Leaf[<*>[_, _], T[_], F[_], A](
+    value: F[A],
+  ) extends Tree[<*>, T, F, T[A]]
+
+  def <*>[B](that: Tree[<*>, T, F, B]): Tree[<*>, T, F, A <*> B] =
+    Branch(this, that)
+
+  def partition[G[_], H[_]](
+    f: [x] => F[x] => Either[G[x], H[x]],
+  )(using
+    funs: Funs,
+  ): Partitioned[G, H, funs.->] =
+    this match {
+      case Leaf(a) =>
+        f(a) match
+          case Left(a)  => Partitioned.Left(Leaf(a))
+          case Right(a) => Partitioned.Right(Leaf(a))
+      case Branch(l, r) =>
+        import Partitioned.{Both, Left, Right}
+        import l.Partitioned.{Both => LBoth, Left => LLeft, Right => LRight}
+        import r.Partitioned.{Both => RBoth, Left => RLeft, Right => RRight}
+
+        (l.partition(f), r.partition(f)) match
+          case (LLeft(lg),     RLeft(rg))     => Left(lg <*> rg)
+          case (LLeft(lg),     RRight(rh))    => Both(lg, rh)
+          case (LLeft(lg),     RBoth(rg, rh)) => Both(lg <*> rg, rh)
+          case (LRight(lh),    RLeft(rg))     => Both(rg, lh)
+          case (LRight(lh),    RRight(rh))    => Right(lh <*> rh)
+          case (LRight(lh),    RBoth(rg, rh)) => Both(rg, lh <*> rh)
+          case (LBoth(lg, lh), RLeft(rg))     => Both(lg <*> rg, lh)
+          case (LBoth(lg, lh), RRight(rh))    => Both(lg, lh <*> rh)
+          case (LBoth(lg, lh), RBoth(rg, rh)) => Both(lg <*> rg, lh <*> rh)
+    }
+
+  // note that `->` is never even used, to keep this reproduction case small
+  enum Partitioned[G[_], H[_], ->[_, _]] {
+    case Left(value: Tree[<*>, T, G, A])
+    case Right(value: Tree[<*>, T, H, A])
+    case Both[G[_], H[_], X, Y, ->[_, _]](
+      l: Tree[<*>, T, G, X],
+      r: Tree[<*>, T, H, Y],
+    ) extends Partitioned[G, H, ->]
+  }
+}