diff --git a/src/subtype.c b/src/subtype.c
index 5b05bb288ffc4..efff6218dfb71 100644
--- a/src/subtype.c
+++ b/src/subtype.c
@@ -2721,32 +2721,33 @@ static jl_value_t *omit_bad_union(jl_value_t *u, jl_tvar_t *t)
         jl_tvar_t *var = ((jl_unionall_t *)u)->var;
         jl_value_t *ub = var->ub, *body = ((jl_unionall_t *)u)->body;
         assert(var != t);
-        if (!jl_has_typevar(var->lb, t)) {
-            JL_GC_PUSH3(&ub, &body, &var);
-            body = omit_bad_union(body, t);
-            if (!jl_has_typevar(body, var)) {
-                res = body;
+        JL_GC_PUSH3(&ub, &body, &var);
+        body = omit_bad_union(body, t);
+        if (!jl_has_typevar(body, var)) {
+            res = body;
+        }
+        else if (jl_has_typevar(var->lb, t)) {
+            res = jl_bottom_type;
+        }
+        else {
+            ub = omit_bad_union(ub, t);
+            if (ub == jl_bottom_type && var->lb != ub) {
+                res = jl_bottom_type;
             }
-            else {
-                ub = omit_bad_union(ub, t);
-                if (ub == jl_bottom_type && var->lb != ub) {
-                    res = jl_bottom_type;
+            else if (obviously_egal(var->lb, ub)) {
+                JL_TRY {
+                    res = jl_substitute_var(body, var, ub);
                 }
-                else if (obviously_egal(var->lb, ub)) {
-                    JL_TRY {
-                        res = jl_substitute_var(body, var, ub);
-                    }
-                    JL_CATCH {
-                        res = jl_bottom_type;
-                    }
+                JL_CATCH {
+                    res = jl_bottom_type;
                 }
-                else {
-                    if (ub != var->ub) {
-                        var = jl_new_typevar(var->name, var->lb, ub);
-                        body = jl_substitute_var(body, ((jl_unionall_t *)u)->var, (jl_value_t *)var);
-                    }
-                    res = jl_new_struct(jl_unionall_type, var, body);
+            }
+            else {
+                if (ub != var->ub) {
+                    var = jl_new_typevar(var->name, var->lb, ub);
+                    body = jl_substitute_var(body, ((jl_unionall_t *)u)->var, (jl_value_t *)var);
                 }
+                res = jl_new_struct(jl_unionall_type, var, body);
             }
         }
         JL_GC_POP();
@@ -2770,9 +2771,9 @@ static jl_value_t *omit_bad_union(jl_value_t *u, jl_tvar_t *t)
 // Caller might not have rooted `res`
 static jl_value_t *finish_unionall(jl_value_t *res JL_MAYBE_UNROOTED, jl_varbinding_t *vb, jl_unionall_t *u, jl_stenv_t *e)
 {
-    jl_value_t *varval = NULL;
+    jl_value_t *varval = NULL, *ilb = NULL, *iub = NULL, *nivar = NULL;
     jl_tvar_t *newvar = vb->var;
-    JL_GC_PUSH2(&res, &newvar);
+    JL_GC_PUSH5(&res, &newvar, &ilb, &iub, &nivar);
     // try to reduce var to a single value
     if (jl_is_long(vb->ub) && jl_is_typevar(vb->lb)) {
         varval = vb->ub;
@@ -2806,19 +2807,99 @@ static jl_value_t *finish_unionall(jl_value_t *res JL_MAYBE_UNROOTED, jl_varbind
         newvar = jl_new_typevar(vb->var->name, vb->lb, vb->ub);
 
     // remove/replace/rewrap free occurrences of this var in the environment
+
+    // I. Handle indirect innervars (make them behave like direct innervars).
+    //   1) record if btemp->lb/ub has indirect innervars.
+    //   2) subtitute `vb->var` with `varval`/`varval`
+    //   note: We only store the innervar in the outmost `varbinding`,
+    //       thus we must check all inner env to ensure the recording/subtitution
+    //       is complete
+    int len = current_env_length(e);
+    int8_t *blinding_has_innerdep = (int8_t *)alloca(len);
+    memset(blinding_has_innerdep, 0, len);
+    for (jl_varbinding_t *btemp = e->vars; btemp != NULL; btemp = btemp->prev) {
+        if (btemp->innervars != NULL) {
+            for (size_t i = 0; i < jl_array_len(btemp->innervars); i++) {
+                jl_tvar_t *ivar = (jl_tvar_t*)jl_array_ptr_ref(btemp->innervars, i);
+                ilb = ivar->lb; iub = ivar->ub;
+                int has_innerdep = 0;
+                if (jl_has_typevar(ilb, vb->var)) {
+                    has_innerdep = 1;
+                    if (varval) {
+                        JL_TRY {
+                            ilb = jl_substitute_var(ilb, vb->var, varval);
+                        }
+                        JL_CATCH {
+                            res = jl_bottom_type;
+                        }
+                    }
+                    else if (newvar != vb->var) {
+                        ilb = jl_substitute_var(ilb, vb->var, (jl_value_t*)newvar);
+                    }
+                }
+                if (jl_has_typevar(iub, vb->var)) {
+                    has_innerdep = 1;
+                    if (varval) {
+                        JL_TRY {
+                            iub = jl_substitute_var(iub, vb->var, varval);
+                        }
+                        JL_CATCH {
+                            res = jl_bottom_type;
+                        }
+                    }
+                    else if (newvar != vb->var) {
+                        iub = jl_substitute_var(iub, vb->var, (jl_value_t*)newvar);
+                    }
+                }
+                if (!has_innerdep) continue;
+                int need_subtitution = 0;
+                if (ilb != ivar->lb || iub != ivar->ub) {
+                    need_subtitution = 1;
+                    nivar = (jl_value_t *)jl_new_typevar(ivar->name, ilb, iub);
+                    jl_array_ptr_set(btemp->innervars, i, nivar);
+                    if (jl_has_typevar(res, ivar))
+                        res = jl_substitute_var(res, ivar, nivar);
+                }
+                int envind = 0;
+                for (jl_varbinding_t *btemp2 = e->vars; btemp2 != btemp->prev; btemp2 = btemp2->prev) {
+                    if (jl_has_typevar(btemp2->lb, ivar)) {
+                        if (need_subtitution)
+                            btemp2->lb = jl_substitute_var(btemp2->lb, ivar, nivar);
+                        blinding_has_innerdep[envind] |= 1;
+                    }
+                    if (jl_has_typevar(btemp2->ub, ivar)) {
+                        if (need_subtitution)
+                            btemp2->ub = jl_substitute_var(btemp2->ub, ivar, nivar);
+                        blinding_has_innerdep[envind] |= 2;
+                    }
+                    envind++;
+                }
+            }
+        }
+    }
+    // II. Handle direct innervars.
     jl_varbinding_t *wrap = NULL;
+    int envind = 0;
     for (jl_varbinding_t *btemp = e->vars; btemp != NULL; btemp = btemp->prev) {
-        if (jl_has_typevar(btemp->lb, vb->var)) {
+        int has_innerdep = blinding_has_innerdep[envind++];
+        int lb_has_innerdep = has_innerdep & 1;
+        int ub_has_innerdep = has_innerdep & 2;
+        assert(!has_innerdep || btemp->depth0 == vb->depth0);
+        int lb_has_dep = jl_has_typevar(btemp->lb, vb->var);
+        int ub_has_dep = jl_has_typevar(btemp->ub, vb->var);
+        if (lb_has_innerdep || lb_has_dep) {
             if (vb->lb == (jl_value_t*)btemp->var) {
                 JL_GC_POP();
                 return jl_bottom_type;
             }
             if (varval) {
-                JL_TRY {
-                    btemp->lb = jl_substitute_var(btemp->lb, vb->var, varval);
-                }
-                JL_CATCH {
-                    res = jl_bottom_type;
+                if (lb_has_dep) { // inner substitution has been handled
+                    JL_TRY {
+                        btemp->lb = jl_substitute_var(btemp->lb, vb->var, varval);
+                    }
+                    JL_CATCH {
+                        res = jl_bottom_type;
+                    }
                 }
             }
             else if (btemp->lb == (jl_value_t*)vb->var) {
@@ -2827,7 +2908,7 @@ static jl_value_t *finish_unionall(jl_value_t *res JL_MAYBE_UNROOTED, jl_varbind
             else if (btemp->depth0 == vb->depth0 && !jl_has_typevar(vb->lb, btemp->var) && !jl_has_typevar(vb->ub, btemp->var)) {
                 // if our variable is T, and some outer variable has constraint S = Ref{T},
                 // move the `where T` outside `where S` instead of putting it here. issue #21243.
-                if (newvar != vb->var)
+                if (newvar != vb->var && lb_has_dep) // inner substitution has been handled
                     btemp->lb = jl_substitute_var(btemp->lb, vb->var, (jl_value_t*)newvar);
                 wrap = btemp;
             }
@@ -2836,8 +2917,9 @@ static jl_value_t *finish_unionall(jl_value_t *res JL_MAYBE_UNROOTED, jl_varbind
             }
             assert((jl_value_t*)btemp->var != btemp->lb);
         }
-        if (jl_has_typevar(btemp->ub, vb->var)) {
+        if (ub_has_innerdep || ub_has_dep) {
             if (vb->ub == (jl_value_t*)btemp->var) {
+                // TODO: handle `omit_bad_union` correctly if `ub_has_innerdep`
                 btemp->ub = omit_bad_union(btemp->ub, vb->var);
                 if (btemp->ub == jl_bottom_type && btemp->ub != btemp->lb) {
                     JL_GC_POP();
@@ -2845,11 +2927,13 @@ static jl_value_t *finish_unionall(jl_value_t *res JL_MAYBE_UNROOTED, jl_varbind
                 }
             }
             if (varval) {
-                JL_TRY {
-                    btemp->ub = jl_substitute_var(btemp->ub, vb->var, varval);
-                }
-                JL_CATCH {
-                    res = jl_bottom_type;
+                if (ub_has_dep) { // inner substitution has been handled
+                    JL_TRY {
+                        btemp->ub = jl_substitute_var(btemp->ub, vb->var, varval);
+                    }
+                    JL_CATCH {
+                        res = jl_bottom_type;
+                    }
                 }
             }
             else if (btemp->ub == (jl_value_t*)vb->var) {
@@ -2860,7 +2944,7 @@ static jl_value_t *finish_unionall(jl_value_t *res JL_MAYBE_UNROOTED, jl_varbind
                 btemp->ub = vb->ub;
             }
             else if (btemp->depth0 == vb->depth0 && !jl_has_typevar(vb->lb, btemp->var) && !jl_has_typevar(vb->ub, btemp->var)) {
-                if (newvar != vb->var)
+                if (newvar != vb->var && ub_has_dep) // inner substitution has been handled
                     btemp->ub = jl_substitute_var(btemp->ub, vb->var, (jl_value_t*)newvar);
                 wrap = btemp;
             }
diff --git a/test/subtype.jl b/test/subtype.jl
index de11689e9e7c4..19901897ebaaa 100644
--- a/test/subtype.jl
+++ b/test/subtype.jl
@@ -2552,8 +2552,13 @@ end
 @test !<:(Type{Vector{Union{Base.BitInteger, Base.IEEEFloat, StridedArray, Missing, Nothing, Val{T}}}} where {T}, Type{Array{T}} where {T})
 
 #issue 50195
-T50195{S} = Pair{S,Set{S}}
 let a = Tuple{Type{X} where X<:Union{Nothing, Val{X1} where {X4, X1<:(Pair{X2, Val{X2}} where X2<:Val{X4})}}},
     b = Tuple{Type{Y} where Y<:(Val{Y1} where {Y4<:Src, Y1<:(Pair{Y2, Val{Y2}} where Y2<:Union{Val{Y4}, Y4})})} where Src
     @test typeintersect(a, b) <: Any
 end
+
+#issue 50195
+let a = Tuple{Union{Nothing, Type{Pair{T1}} where T1}}
+    b = Tuple{Type{X2} where X2<:(Pair{T2, Y2} where {Src, Z2<:Src, Y2<:Union{Val{Z2}, Z2}})} where T2
+    @test !Base.has_free_typevars(typeintersect(a, b))
+end