diff --git a/compiler/src/dotty/tools/dotc/typer/Typer.scala b/compiler/src/dotty/tools/dotc/typer/Typer.scala
index 66845e343f7f..b49418661261 100644
--- a/compiler/src/dotty/tools/dotc/typer/Typer.scala
+++ b/compiler/src/dotty/tools/dotc/typer/Typer.scala
@@ -833,12 +833,18 @@ class Typer extends Namer
       case _: WildcardType => untpd.TypeTree()
       case _ => untpd.TypeTree(tp)
     }
+    def interpolateWildcards = new TypeMap {
+      def apply(t: Type): Type = t match
+        case WildcardType(bounds: TypeBounds) =>
+          newTypeVar(apply(bounds.orElse(TypeBounds.empty)).bounds)
+        case _ => mapOver(t)
+    }
     pt.stripTypeVar.dealias match {
       case pt1 if defn.isNonRefinedFunction(pt1) =>
         // if expected parameter type(s) are wildcards, approximate from below.
         // if expected result type is a wildcard, approximate from above.
         // this can type the greatest set of admissible closures.
-        (pt1.argTypesLo.init, typeTree(pt1.argTypesHi.last))
+        (pt1.argTypesLo.init, typeTree(interpolateWildcards(pt1.argTypesHi.last)))
       case SAMType(sam @ MethodTpe(_, formals, restpe)) =>
         (formals,
          if (sam.isResultDependent)
@@ -1900,7 +1906,6 @@ class Typer extends Namer
         else tree1
     }
 
-
   def typedAsFunction(tree: untpd.PostfixOp, pt: Type)(implicit ctx: Context): Tree = {
     val untpd.PostfixOp(qual, Ident(nme.WILDCARD)) = tree
     val pt1 = if (defn.isFunctionType(pt)) pt else AnyFunctionProto
diff --git a/tests/pos/i7392.scala b/tests/pos/i7392.scala
new file mode 100644
index 000000000000..579e4422d2f7
--- /dev/null
+++ b/tests/pos/i7392.scala
@@ -0,0 +1,16 @@
+object Test {
+
+  trait ZStream[-R, +E, +A]
+
+  object ZStream {
+    def empty: ZStream[Any, Nothing, Nothing] =
+      ???
+  }
+
+  trait Gen[-R, +A](sample: ZStream[R, Nothing, A])
+
+  def fromIterable[R, A](
+    as: Iterable[A],
+    shrinker: (A => ZStream[R, Nothing, A]) = (_: A) => ZStream.empty
+  ): Gen[R, A] = ???
+}
\ No newline at end of file