diff --git a/compiler/src/dotty/tools/dotc/core/ConstraintHandling.scala b/compiler/src/dotty/tools/dotc/core/ConstraintHandling.scala
index e8c9c91cc144..e4d85074dc65 100644
--- a/compiler/src/dotty/tools/dotc/core/ConstraintHandling.scala
+++ b/compiler/src/dotty/tools/dotc/core/ConstraintHandling.scala
@@ -508,6 +508,17 @@ trait ConstraintHandling[AbstractContext] {
             case inst =>
               prune(inst)
           }
+        case bound: ExprType =>
+          // ExprTypes are not value types, so type parameters should not
+          // be instantiated to ExprTypes. A scenario where such an attempted
+          // instantiation can happen is if we unify (=> T) => () with A => ()
+          // where A is a TypeParamRef. See the comment on EtaExpansion.etaExpand
+          // why types such as (=> T) => () can be constructed and i7969.scala
+          // as a test where this happens.
+          // Note that scalac by contrast allows such instantiations. But letting
+          // type variables be ExprTypes has its own problems (e.g. you can't write
+          // the resulting types down) and is largely unknown terrain.
+          NoType
         case _ =>
           pruneLambdaParams(bound)
       }
diff --git a/compiler/src/dotty/tools/dotc/typer/EtaExpansion.scala b/compiler/src/dotty/tools/dotc/typer/EtaExpansion.scala
index a180fb8cd922..33e112db700a 100644
--- a/compiler/src/dotty/tools/dotc/typer/EtaExpansion.scala
+++ b/compiler/src/dotty/tools/dotc/typer/EtaExpansion.scala
@@ -198,6 +198,19 @@ object EtaExpansion extends LiftImpure {
    *  In each case, the result is an untyped tree, with `es` and `expr` as typed splices.
    *
    *    F[V](x) ==> (x => F[X])
+   *
+   *  Note: We allow eta expanding a method with a call by name parameter like
+   *
+   *    def m(x: => T): T
+   *
+   *  to a value of type (=> T) => T. This type cannot be written in source, since
+   *  by-name types => T are not legal argument types.
+   *
+   *  It would be simpler to not allow to eta expand by-name methods. That was the rule
+   *  initially, but at some point, the rule was dropped. Enforcing the restriction again
+   *  now would break existing code. Allowing by-name parameters in function types seems to
+   *  be OK. After elimByName they are all converted to regular function types anyway.
+   *  But see comment on the `ExprType` case in function `prune` in class `ConstraintHandling`.
    */
   def etaExpand(tree: Tree, mt: MethodType, xarity: Int)(implicit ctx: Context): untpd.Tree = {
     import untpd._
diff --git a/tests/neg/i7969.scala b/tests/neg/i7969.scala
new file mode 100644
index 000000000000..72e5609a9931
--- /dev/null
+++ b/tests/neg/i7969.scala
@@ -0,0 +1,5 @@
+object O{
+  def f(i: => Int): Int = 1
+  def m[A](a: A => Int) = 2
+  def n = m(f)  // error: cannot eta expand
+}
\ No newline at end of file