diff --git a/compiler/src/dotty/tools/dotc/core/Types.scala b/compiler/src/dotty/tools/dotc/core/Types.scala
index b8f81f1bb2cc..639f5d1423b6 100644
--- a/compiler/src/dotty/tools/dotc/core/Types.scala
+++ b/compiler/src/dotty/tools/dotc/core/Types.scala
@@ -3546,6 +3546,13 @@ object Types {
     def apply(tp: Type) = tp
   }
 
+  /** A type map that approximates NoTypes by upper or lower known bounds depending on
+   *  variance.
+   *
+   *  if variance > 0 : approximate by upper bound
+   *     variance < 0 : approximate by lower bound
+   *     variance = 0 : propagate NoType to next outer level
+   */
   abstract class ApproximatingTypeMap(implicit ctx: Context) extends TypeMap { thisMap =>
     def approx(lo: Type = defn.NothingType, hi: Type = defn.AnyType) =
       if (variance == 0) NoType
diff --git a/compiler/src/dotty/tools/dotc/transform/TreeChecker.scala b/compiler/src/dotty/tools/dotc/transform/TreeChecker.scala
index 7a4af647f039..51e2469b2314 100644
--- a/compiler/src/dotty/tools/dotc/transform/TreeChecker.scala
+++ b/compiler/src/dotty/tools/dotc/transform/TreeChecker.scala
@@ -446,7 +446,7 @@ class TreeChecker extends Phase with SymTransformer {
       super.typedStats(trees, exprOwner)
     }
 
-    override def ensureNoLocalRefs(tree: Tree, pt: Type, localSyms: => List[Symbol], forcedDefined: Boolean = false)(implicit ctx: Context): Tree =
+    override def ensureNoLocalRefs(tree: Tree, pt: Type, localSyms: => List[Symbol])(implicit ctx: Context): Tree =
       tree
 
     override def adapt(tree: Tree, pt: Type, original: untpd.Tree = untpd.EmptyTree)(implicit ctx: Context) = {
diff --git a/compiler/src/dotty/tools/dotc/typer/Typer.scala b/compiler/src/dotty/tools/dotc/typer/Typer.scala
index ba14b7498a42..9a561ec733ed 100644
--- a/compiler/src/dotty/tools/dotc/typer/Typer.scala
+++ b/compiler/src/dotty/tools/dotc/typer/Typer.scala
@@ -625,14 +625,17 @@ class Typer extends Namer with TypeAssigner with Applications with Implicits wit
     block.tpe namedPartsWith (tp => locals.contains(tp.symbol))
   }
 
-  /** Check that expression's type can be expressed without references to locally defined
-   *  symbols. The following two remedies are tried before giving up:
-   *  1. If the expected type of the expression is fully defined, pick it as the
-   *     type of the result expressed by adding a type ascription.
-   *  2. If (1) fails, force all type variables so that the block's type is
-   *     fully defined and try again.
+  /** Ensure that an expression's type can be expressed without references to locally defined
+   *  symbols. This is done by adding a type ascription of a widened type that does
+   *  not refer to the locally defined symbols. The widened type is computed using
+   *  `TyperAssigner#avoid`. However, if the expected type is fully defined and not
+   *  a supertype of the widened type, we ascribe with the expected type instead.
+   *
+   *  There's a special case having to do with anonymous classes. Sometimes the
+   *  expected type of a block is the anonymous class defined inside it. In that
+   *  case there's technically a leak which is not removed by the ascription.
    */
-  protected def ensureNoLocalRefs(tree: Tree, pt: Type, localSyms: => List[Symbol], forcedDefined: Boolean = false)(implicit ctx: Context): Tree = {
+  protected def ensureNoLocalRefs(tree: Tree, pt: Type, localSyms: => List[Symbol])(implicit ctx: Context): Tree = {
     def ascribeType(tree: Tree, pt: Type): Tree = tree match {
       case block @ Block(stats, expr) =>
         val expr1 = ascribeType(expr, pt)
@@ -640,16 +643,18 @@ class Typer extends Namer with TypeAssigner with Applications with Implicits wit
       case _ =>
         Typed(tree, TypeTree(pt.simplified))
     }
-    val leaks = escapingRefs(tree, localSyms)
-    if (leaks.isEmpty) tree
-    else if (isFullyDefined(pt, ForceDegree.none)) ascribeType(tree, pt)
-    else if (!forcedDefined) {
+    def noLeaks(t: Tree): Boolean = escapingRefs(t, localSyms).isEmpty
+    if (noLeaks(tree)) tree
+    else {
       fullyDefinedType(tree.tpe, "block", tree.pos)
-      val tree1 = ascribeType(tree, avoid(tree.tpe, localSyms))
-      ensureNoLocalRefs(tree1, pt, localSyms, forcedDefined = true)
-    } else
-      errorTree(tree,
-          em"local definition of ${leaks.head.name} escapes as part of expression's type ${tree.tpe}"/*; full type: ${result.tpe.toString}"*/)
+      var avoidingType = avoid(tree.tpe, localSyms)
+      val ptDefined = isFullyDefined(pt, ForceDegree.none)
+      if (ptDefined && !(avoidingType <:< pt)) avoidingType = pt
+      val tree1 = ascribeType(tree, avoidingType)
+      assert(ptDefined || noLeaks(tree1), // `ptDefined` needed because of special case of anonymous classes
+          i"leak: ${escapingRefs(tree1, localSyms).toList}%, % in $tree1")
+      tree1
+    }
   }
 
   def typedIf(tree: untpd.If, pt: Type)(implicit ctx: Context): Tree = track("typedIf") {
diff --git a/tests/neg/t1569-failedAvoid.scala b/tests/neg/t1569-failedAvoid.scala
deleted file mode 100644
index 45bb96f36002..000000000000
--- a/tests/neg/t1569-failedAvoid.scala
+++ /dev/null
@@ -1,9 +0,0 @@
-// This was t1569.scala.
-// It fails in dotty because the expected type of the anonymous function in the last line
-// is fully determined (C). So that type is taken as the type of the anonymous function.
-// See pos/t1569a.scala for related examples that work.
-object Bug {
-  class C { type T }
-  def foo(x: Int)(y: C)(z: y.T): Unit = {}
-  foo(3)(new C { type T = String })("hello")          // error
-}
diff --git a/tests/pos/t1569.scala b/tests/pos/t1569.scala
new file mode 100644
index 000000000000..a2fbcf11f593
--- /dev/null
+++ b/tests/pos/t1569.scala
@@ -0,0 +1,12 @@
+// See pos/t1569a.scala for related examples that work.
+object Bug {
+  class C { type T }
+  def foo(x: Int)(y: C)(z: y.T): Unit = {}
+  foo(3)(new C { type T = String })("hello")
+}
+object Bug2 {
+  class C { type T }
+  class D extends C { type T = String }
+  def foo(x: Int)(y: C)(z: y.T): Unit = {}
+  foo(3)(new D {})("hello")
+}