diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index bff0c137e24..e9430a058f8 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -2904,16 +2904,17 @@ module ts {
         }
 
         function getPropertiesOfType(type: Type): Symbol[] {
-            if (type.flags & TypeFlags.Union) {
-                return getPropertiesOfUnionType(<UnionType>type);
-            }
-            return getPropertiesOfObjectType(getApparentType(type));
+            type = getApparentType(type);
+            return type.flags & TypeFlags.Union ? getPropertiesOfUnionType(<UnionType>type) : getPropertiesOfObjectType(type);
         }
 
         // For a type parameter, return the base constraint of the type parameter. For the string, number,
         // boolean, and symbol primitive types, return the corresponding object types. Otherwise return the
         // type itself. Note that the apparent type of a union type is the union type itself.
         function getApparentType(type: Type): Type {
+            if (type.flags & TypeFlags.Union) {
+                type = getReducedTypeOfUnionType(<UnionType>type);
+            }
             if (type.flags & TypeFlags.TypeParameter) {
                 do {
                     type = getConstraintOfTypeParameter(<TypeParameter>type);
@@ -2986,27 +2987,27 @@ module ts {
         // necessary, maps primitive types and type parameters are to their apparent types, and augments with properties from
         // Object and Function as appropriate.
         function getPropertyOfType(type: Type, name: string): Symbol {
+            type = getApparentType(type);
+            if (type.flags & TypeFlags.ObjectType) {
+                let resolved = resolveObjectOrUnionTypeMembers(type);
+                if (hasProperty(resolved.members, name)) {
+                    let symbol = resolved.members[name];
+                    if (symbolIsValue(symbol)) {
+                        return symbol;
+                    }
+                }
+                if (resolved === anyFunctionType || resolved.callSignatures.length || resolved.constructSignatures.length) {
+                    let symbol = getPropertyOfObjectType(globalFunctionType, name);
+                    if (symbol) {
+                        return symbol;
+                    }
+                }
+                return getPropertyOfObjectType(globalObjectType, name);
+            }
             if (type.flags & TypeFlags.Union) {
                 return getPropertyOfUnionType(<UnionType>type, name);
             }
-            if (!(type.flags & TypeFlags.ObjectType)) {
-                type = getApparentType(type);
-                if (!(type.flags & TypeFlags.ObjectType)) {
-                    return undefined;
-                }
-            }
-            let resolved = resolveObjectOrUnionTypeMembers(type);
-            if (hasProperty(resolved.members, name)) {
-                let symbol = resolved.members[name];
-                if (symbolIsValue(symbol)) {
-                    return symbol;
-                }
-            }
-            if (resolved === anyFunctionType || resolved.callSignatures.length || resolved.constructSignatures.length) {
-                let symbol = getPropertyOfObjectType(globalFunctionType, name);
-                if (symbol) return symbol;
-            }
-            return getPropertyOfObjectType(globalObjectType, name);
+            return undefined;
         }
 
         function getSignaturesOfObjectOrUnionType(type: Type, kind: SignatureKind): Signature[] {
@@ -3581,6 +3582,10 @@ module ts {
             }
         }
 
+        // The noSubtypeReduction flag is there because it isn't possible to always do subtype reduction. The flag
+        // is true when creating a union type from a type node and when instantiating a union type. In both of those
+        // cases subtype reduction has to be deferred to properly support recursive union types. For example, a
+        // type alias of the form "type Item = string | (() => Item)" cannot be reduced during its declaration.
         function getUnionType(types: Type[], noSubtypeReduction?: boolean): Type {
             if (types.length === 0) {
                 return emptyObjectType;
@@ -3605,10 +3610,19 @@ module ts {
             if (!type) {
                 type = unionTypes[id] = <UnionType>createObjectType(TypeFlags.Union | getWideningFlagsOfTypes(sortedTypes));
                 type.types = sortedTypes;
+                type.reducedType = noSubtypeReduction ? undefined : type;
             }
             return type;
         }
 
+        function getReducedTypeOfUnionType(type: UnionType): Type {
+            // If union type was created without subtype reduction, perform the deferred reduction now
+            if (!type.reducedType) {
+                type.reducedType = getUnionType(type.types, /*noSubtypeReduction*/ false);
+            }
+            return type.reducedType;
+        }
+
         function getTypeFromUnionTypeNode(node: UnionTypeNode): Type {
             let links = getNodeLinks(node);
             if (!links.resolvedType) {
diff --git a/src/compiler/types.ts b/src/compiler/types.ts
index 43c210331a5..bb0909f5252 100644
--- a/src/compiler/types.ts
+++ b/src/compiler/types.ts
@@ -1512,6 +1512,8 @@ module ts {
     export interface UnionType extends Type {
         types: Type[];                    // Constituent types
         /* @internal */
+        reducedType: Type;                // Reduced union type (all subtypes removed)
+        /* @internal */
         resolvedProperties: SymbolTable;  // Cache of resolved properties
     }
 
diff --git a/tests/baselines/reference/unionTypeReduction.js b/tests/baselines/reference/unionTypeReduction.js
new file mode 100644
index 00000000000..1c914489ecc
--- /dev/null
+++ b/tests/baselines/reference/unionTypeReduction.js
@@ -0,0 +1,25 @@
+//// [unionTypeReduction.ts]
+interface I2 {
+    (): number;
+    (q): boolean;
+}
+
+interface I3 {
+    (): number;
+}
+
+var i2: I2, i3: I3;
+
+var e1: I2 | I3;
+var e2 = i2 || i3;  // Type of e2 immediately reduced to I3
+
+var r1 = e1();  // Type of e1 reduced to I3 upon accessing property or signature
+var r2 = e2();
+
+
+//// [unionTypeReduction.js]
+var i2, i3;
+var e1;
+var e2 = i2 || i3; // Type of e2 immediately reduced to I3
+var r1 = e1(); // Type of e1 reduced to I3 upon accessing property or signature
+var r2 = e2();
diff --git a/tests/baselines/reference/unionTypeReduction.types b/tests/baselines/reference/unionTypeReduction.types
new file mode 100644
index 00000000000..e4dffff8174
--- /dev/null
+++ b/tests/baselines/reference/unionTypeReduction.types
@@ -0,0 +1,42 @@
+=== tests/cases/conformance/types/union/unionTypeReduction.ts ===
+interface I2 {
+>I2 : I2, Symbol(I2, Decl(unionTypeReduction.ts, 0, 0))
+
+    (): number;
+    (q): boolean;
+>q : any, Symbol(q, Decl(unionTypeReduction.ts, 2, 5))
+}
+
+interface I3 {
+>I3 : I3, Symbol(I3, Decl(unionTypeReduction.ts, 3, 1))
+
+    (): number;
+}
+
+var i2: I2, i3: I3;
+>i2 : I2, Symbol(i2, Decl(unionTypeReduction.ts, 9, 3))
+>I2 : I2, Symbol(I2, Decl(unionTypeReduction.ts, 0, 0))
+>i3 : I3, Symbol(i3, Decl(unionTypeReduction.ts, 9, 11))
+>I3 : I3, Symbol(I3, Decl(unionTypeReduction.ts, 3, 1))
+
+var e1: I2 | I3;
+>e1 : I2 | I3, Symbol(e1, Decl(unionTypeReduction.ts, 11, 3))
+>I2 : I2, Symbol(I2, Decl(unionTypeReduction.ts, 0, 0))
+>I3 : I3, Symbol(I3, Decl(unionTypeReduction.ts, 3, 1))
+
+var e2 = i2 || i3;  // Type of e2 immediately reduced to I3
+>e2 : I3, Symbol(e2, Decl(unionTypeReduction.ts, 12, 3))
+>i2 || i3 : I3
+>i2 : I2, Symbol(i2, Decl(unionTypeReduction.ts, 9, 3))
+>i3 : I3, Symbol(i3, Decl(unionTypeReduction.ts, 9, 11))
+
+var r1 = e1();  // Type of e1 reduced to I3 upon accessing property or signature
+>r1 : number, Symbol(r1, Decl(unionTypeReduction.ts, 14, 3))
+>e1() : number
+>e1 : I2 | I3, Symbol(e1, Decl(unionTypeReduction.ts, 11, 3))
+
+var r2 = e2();
+>r2 : number, Symbol(r2, Decl(unionTypeReduction.ts, 15, 3))
+>e2() : number
+>e2 : I3, Symbol(e2, Decl(unionTypeReduction.ts, 12, 3))
+
diff --git a/tests/cases/conformance/types/union/unionTypeReduction.ts b/tests/cases/conformance/types/union/unionTypeReduction.ts
new file mode 100644
index 00000000000..8bc3d1cdc8c
--- /dev/null
+++ b/tests/cases/conformance/types/union/unionTypeReduction.ts
@@ -0,0 +1,16 @@
+interface I2 {
+    (): number;
+    (q): boolean;
+}
+
+interface I3 {
+    (): number;
+}
+
+var i2: I2, i3: I3;
+
+var e1: I2 | I3;
+var e2 = i2 || i3;  // Type of e2 immediately reduced to I3
+
+var r1 = e1();  // Type of e1 reduced to I3 upon accessing property or signature
+var r2 = e2();
diff --git a/tests/cases/fourslash/completionEntryForPropertyFromUnionOfModuleType.ts b/tests/cases/fourslash/completionEntryForPropertyFromUnionOfModuleType.ts
index 1e072acd1fa..a9205b97f1f 100644
--- a/tests/cases/fourslash/completionEntryForPropertyFromUnionOfModuleType.ts
+++ b/tests/cases/fourslash/completionEntryForPropertyFromUnionOfModuleType.ts
@@ -2,9 +2,11 @@
 
 ////module E {
 ////    export var n = 1;
+////    export var x = 0;
 ////}
 ////module F {
 ////    export var n = 1;
+////    export var y = 0;
 ////}
 ////var q: typeof E | typeof F;
 ////var j = q./*1*/
diff --git a/tests/cases/fourslash/goToDefinitionUnionTypeProperty2.ts b/tests/cases/fourslash/goToDefinitionUnionTypeProperty2.ts
index 674d5f4b623..0e18e543ec3 100644
--- a/tests/cases/fourslash/goToDefinitionUnionTypeProperty2.ts
+++ b/tests/cases/fourslash/goToDefinitionUnionTypeProperty2.ts
@@ -19,8 +19,8 @@
 goTo.marker("propertyReference");
 verify.definitionCountIs(2);
 goTo.definition(0);
-verify.caretAtMarker("propertyDefinition2");
+verify.caretAtMarker("propertyDefinition1");
 
 goTo.marker("propertyReference");
 goTo.definition(1);
-verify.caretAtMarker("propertyDefinition1");
+verify.caretAtMarker("propertyDefinition2");