diff --git a/compiler/src/dotty/tools/dotc/typer/Inliner.scala b/compiler/src/dotty/tools/dotc/typer/Inliner.scala
index d5027192b269..7bad2b4a9fce 100644
--- a/compiler/src/dotty/tools/dotc/typer/Inliner.scala
+++ b/compiler/src/dotty/tools/dotc/typer/Inliner.scala
@@ -1376,7 +1376,11 @@ class Inliner(call: tpd.Tree, rhsToInline: tpd.Tree)(using Context) {
       super.typedValDef(vdef1, sym)
 
     override def typedApply(tree: untpd.Apply, pt: Type)(using Context): Tree =
-      val res = constToLiteral(betaReduce(super.typedApply(tree, pt))) match {
+      def cancelQuotes(tree: Tree): Tree =
+        tree match
+          case Quoted(Spliced(inner)) => inner
+          case _ => tree
+      val res = cancelQuotes(constToLiteral(betaReduce(super.typedApply(tree, pt)))) match {
         case res: Apply if res.symbol == defn.QuotedRuntime_exprSplice
                         && level == 0
                         && !hasInliningErrors =>
diff --git a/tests/pos-macros/i12173.scala b/tests/pos-macros/i12173.scala
new file mode 100644
index 000000000000..c5c56ed3e0e7
--- /dev/null
+++ b/tests/pos-macros/i12173.scala
@@ -0,0 +1,7 @@
+object TestMacro {
+  inline def test[T](inline t: T): T = ${ '{ ${ 't } } }
+}
+
+object Test {
+  TestMacro.test("x")
+}
diff --git a/tests/pos-macros/i12173b.scala b/tests/pos-macros/i12173b.scala
new file mode 100644
index 000000000000..ce638485b74c
--- /dev/null
+++ b/tests/pos-macros/i12173b.scala
@@ -0,0 +1,7 @@
+object TestMacro {
+  inline def test[T](inline t: T): T = ${ '{ ${ '{ ${ 't } } } } }
+}
+
+object Test {
+  TestMacro.test("x")
+}
diff --git a/tests/pos-macros/i12173c.scala b/tests/pos-macros/i12173c.scala
new file mode 100644
index 000000000000..2806a2183fdb
--- /dev/null
+++ b/tests/pos-macros/i12173c.scala
@@ -0,0 +1,7 @@
+object TestMacro {
+  inline def test[T](inline t: T): T = ${ '{ ${ '{ ${ '{ ${ '{ ${ '{ ${ '{ ${ '{ ${ 't } } } } } } } } } } } } } } }
+}
+
+object Test {
+  TestMacro.test("x")
+}