A function should be context-sensitive if its return expression is

src/compiler/checker.ts

@@ -8405,16 +8405,17 @@ namespace ts {
             if (forEach(node.parameters, p => !getEffectiveTypeAnnotationNode(p))) {
                 return true;
             }
-            // For arrow functions we now know we're not context sensitive.
-            if (node.kind === SyntaxKind.ArrowFunction) {
-                return false;
+            if (node.kind !== SyntaxKind.ArrowFunction) {
+                // If the first parameter is not an explicit 'this' parameter, then the function has
+                // an implicit 'this' parameter which is subject to contextual typing.
+                const parameter = firstOrUndefined(node.parameters);
+                if (!(parameter && parameterIsThisKeyword(parameter))) {
+                    return true;
+                }
             }
-            // If the first parameter is not an explicit 'this' parameter, then the function has
-            // an implicit 'this' parameter which is subject to contextual typing. Otherwise we
-            // know that all parameters (including 'this') have type annotations and nothing is
-            // subject to contextual typing.
-            const parameter = firstOrUndefined(node.parameters);
-            return !(parameter && parameterIsThisKeyword(parameter));
+
+            // TODO(anhans): A block should be context-sensitive if it has a context-sensitive return value.
+            return node.body.kind === SyntaxKind.Block ? false : isContextSensitive(node.body);
         }
 
         function isContextSensitiveFunctionOrObjectLiteralMethod(func: Node): func is FunctionExpression | ArrowFunction | MethodDeclaration {

tests/baselines/reference/contextualTypingFunctionReturningFunction2.js

@@ -0,0 +1,9 @@
+//// [contextualTypingFunctionReturningFunction2.ts]
+declare function f(n: number): void;
+declare function f(cb: () => (n: number) => number): void;
+
+f(() => n => n);
+
+
+//// [contextualTypingFunctionReturningFunction2.js]
+f(function () { return function (n) { return n; }; });

tests/baselines/reference/contextualTypingFunctionReturningFunction2.symbols

@@ -0,0 +1,15 @@
+=== tests/cases/compiler/contextualTypingFunctionReturningFunction2.ts ===
+declare function f(n: number): void;
+>f : Symbol(f, Decl(contextualTypingFunctionReturningFunction2.ts, 0, 0), Decl(contextualTypingFunctionReturningFunction2.ts, 0, 36))
+>n : Symbol(n, Decl(contextualTypingFunctionReturningFunction2.ts, 0, 19))
+
+declare function f(cb: () => (n: number) => number): void;
+>f : Symbol(f, Decl(contextualTypingFunctionReturningFunction2.ts, 0, 0), Decl(contextualTypingFunctionReturningFunction2.ts, 0, 36))
+>cb : Symbol(cb, Decl(contextualTypingFunctionReturningFunction2.ts, 1, 19))
+>n : Symbol(n, Decl(contextualTypingFunctionReturningFunction2.ts, 1, 30))
+
+f(() => n => n);
+>f : Symbol(f, Decl(contextualTypingFunctionReturningFunction2.ts, 0, 0), Decl(contextualTypingFunctionReturningFunction2.ts, 0, 36))
+>n : Symbol(n, Decl(contextualTypingFunctionReturningFunction2.ts, 3, 7))
+>n : Symbol(n, Decl(contextualTypingFunctionReturningFunction2.ts, 3, 7))
+

tests/baselines/reference/contextualTypingFunctionReturningFunction2.types

@@ -0,0 +1,18 @@
+=== tests/cases/compiler/contextualTypingFunctionReturningFunction2.ts ===
+declare function f(n: number): void;
+>f : { (n: number): void; (cb: () => (n: number) => number): void; }
+>n : number
+
+declare function f(cb: () => (n: number) => number): void;
+>f : { (n: number): void; (cb: () => (n: number) => number): void; }
+>cb : () => (n: number) => number
+>n : number
+
+f(() => n => n);
+>f(() => n => n) : void
+>f : { (n: number): void; (cb: () => (n: number) => number): void; }
+>() => n => n : () => (n: number) => number
+>n => n : (n: number) => number
+>n : number
+>n : number
+

tests/baselines/reference/contextualTypingWithFixedTypeParameters1.errors.txt

@@ -1,15 +1,15 @@
 tests/cases/compiler/contextualTypingWithFixedTypeParameters1.ts(2,22): error TS2339: Property 'foo' does not exist on type 'string'.
-tests/cases/compiler/contextualTypingWithFixedTypeParameters1.ts(3,32): error TS2339: Property 'foo' does not exist on type 'string'.
-tests/cases/compiler/contextualTypingWithFixedTypeParameters1.ts(3,38): error TS2345: Argument of type '1' is not assignable to parameter of type 'string'.
+tests/cases/compiler/contextualTypingWithFixedTypeParameters1.ts(3,32): error TS2339: Property 'foo' does not exist on type '""'.
+tests/cases/compiler/contextualTypingWithFixedTypeParameters1.ts(3,38): error TS2345: Argument of type '1' is not assignable to parameter of type '""'.
 
 
 ==== tests/cases/compiler/contextualTypingWithFixedTypeParameters1.ts (3 errors) ====
     var f10: <T>(x: T, b: () => (a: T) => void, y: T) => T;
-    f10('', () => a => a.foo, ''); // a is string
+    f10('', () => a => a.foo, ''); // a is ""
                          ~~~
 !!! error TS2339: Property 'foo' does not exist on type 'string'.
     var r9 = f10('', () => (a => a.foo), 1); // error
                                    ~~~
-!!! error TS2339: Property 'foo' does not exist on type 'string'.
+!!! error TS2339: Property 'foo' does not exist on type '""'.
                                          ~
-!!! error TS2345: Argument of type '1' is not assignable to parameter of type 'string'.
+!!! error TS2345: Argument of type '1' is not assignable to parameter of type '""'.

tests/baselines/reference/contextualTypingWithFixedTypeParameters1.js

@@ -1,9 +1,9 @@
 //// [contextualTypingWithFixedTypeParameters1.ts]
 var f10: <T>(x: T, b: () => (a: T) => void, y: T) => T;
-f10('', () => a => a.foo, ''); // a is string
+f10('', () => a => a.foo, ''); // a is ""
 var r9 = f10('', () => (a => a.foo), 1); // error
 
 //// [contextualTypingWithFixedTypeParameters1.js]
 var f10;
-f10('', function () { return function (a) { return a.foo; }; }, ''); // a is string
+f10('', function () { return function (a) { return a.foo; }; }, ''); // a is ""
 var r9 = f10('', function () { return (function (a) { return a.foo; }); }, 1); // error

tests/cases/compiler/contextualTypingFunctionReturningFunction.ts

@@ -1,11 +1,11 @@
-interface I {
-	a(s: string): void;
-	b(): (n: number) => void;
-}
-
-declare function f(i: I): void;
-
-f({
-	a: s => {},
-	b: () => n => {},
-});
+interface I {
+	a(s: string): void;
+	b(): (n: number) => void;
+}
+
+declare function f(i: I): void;
+
+f({
+	a: s => {},
+	b: () => n => {},
+});

tests/cases/compiler/contextualTypingFunctionReturningFunction2.ts

@@ -0,0 +1,4 @@
+declare function f(n: number): void;
+declare function f(cb: () => (n: number) => number): void;
+
+f(() => n => n);

tests/cases/compiler/contextualTypingWithFixedTypeParameters1.ts

@@ -1,3 +1,3 @@
 var f10: <T>(x: T, b: () => (a: T) => void, y: T) => T;
-f10('', () => a => a.foo, ''); // a is string
+f10('', () => a => a.foo, ''); // a is ""
 var r9 = f10('', () => (a => a.foo), 1); // error