diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index 87d95b64d31..a4cfac416fc 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -5123,11 +5123,11 @@ namespace ts {
             return type.resolvedBaseTypes;
         }
 
-        function resolveBaseTypesOfClass(type: InterfaceType): void {
-            type.resolvedBaseTypes = emptyArray;
+        function resolveBaseTypesOfClass(type: InterfaceType) {
+            type.resolvedBaseTypes = resolvingEmptyArray;
             const baseConstructorType = getApparentType(getBaseConstructorTypeOfClass(type));
             if (!(baseConstructorType.flags & (TypeFlags.Object | TypeFlags.Intersection | TypeFlags.Any))) {
-                return;
+                return type.resolvedBaseTypes = emptyArray;
             }
             const baseTypeNode = getBaseTypeNodeOfClass(type);
             const typeArgs = typeArgumentsFromTypeReferenceNode(baseTypeNode);
@@ -5150,24 +5150,31 @@ namespace ts {
                 const constructors = getInstantiatedConstructorsForTypeArguments(baseConstructorType, baseTypeNode.typeArguments, baseTypeNode);
                 if (!constructors.length) {
                     error(baseTypeNode.expression, Diagnostics.No_base_constructor_has_the_specified_number_of_type_arguments);
-                    return;
+                    return type.resolvedBaseTypes = emptyArray;
                 }
                 baseType = getReturnTypeOfSignature(constructors[0]);
             }
 
             if (baseType === unknownType) {
-                return;
+                return type.resolvedBaseTypes = emptyArray;
             }
             if (!isValidBaseType(baseType)) {
                 error(baseTypeNode.expression, Diagnostics.Base_constructor_return_type_0_is_not_a_class_or_interface_type, typeToString(baseType));
-                return;
+                return type.resolvedBaseTypes = emptyArray;
             }
             if (type === baseType || hasBaseType(baseType, type)) {
                 error(type.symbol.valueDeclaration, Diagnostics.Type_0_recursively_references_itself_as_a_base_type,
                     typeToString(type, /*enclosingDeclaration*/ undefined, TypeFormatFlags.WriteArrayAsGenericType));
-                return;
+                return type.resolvedBaseTypes = emptyArray;
             }
-            type.resolvedBaseTypes = [baseType];
+            if (type.resolvedBaseTypes === resolvingEmptyArray) {
+                // Circular reference, likely through instantiation of default parameters
+                // (otherwise there'd be an error from hasBaseType) - this is fine, but `.members` should be reset
+                // as `getIndexedAccessType` via `instantiateType` via `getTypeFromClassOrInterfaceReference` forces a
+                // partial instantiation of the members without the base types fully resolved
+                (type as Type as ResolvedType).members = undefined;
+            }
+            return type.resolvedBaseTypes = [baseType];
         }
 
         function areAllOuterTypeParametersApplied(type: Type): boolean {
diff --git a/src/compiler/utilities.ts b/src/compiler/utilities.ts
index 4a3816f04d2..8a3e3132315 100644
--- a/src/compiler/utilities.ts
+++ b/src/compiler/utilities.ts
@@ -3,6 +3,7 @@
 /* @internal */
 namespace ts {
     export const emptyArray: never[] = [] as never[];
+    export const resolvingEmptyArray: never[] = [] as never[];
     export const emptyMap: ReadonlyMap<never> = createMap<never>();
 
     export const externalHelpersModuleNameText = "tslib";
diff --git a/tests/baselines/reference/circularConstraintYieldsAppropriateError.js b/tests/baselines/reference/circularConstraintYieldsAppropriateError.js
new file mode 100644
index 00000000000..a8583219dba
--- /dev/null
+++ b/tests/baselines/reference/circularConstraintYieldsAppropriateError.js
@@ -0,0 +1,52 @@
+//// [circularConstraintYieldsAppropriateError.ts]
+// https://github.com/Microsoft/TypeScript/issues/16861
+class BaseType<T> {
+    bar: T
+}
+
+class NextType<C extends { someProp: any }, T = C['someProp']> extends BaseType<T> {
+    baz: string;
+}
+
+class Foo extends NextType<Foo> {
+    someProp: {
+        test: true
+    }
+}
+
+const foo = new Foo();
+foo.bar.test
+
+//// [circularConstraintYieldsAppropriateError.js]
+var __extends = (this && this.__extends) || (function () {
+    var extendStatics = Object.setPrototypeOf ||
+        ({ __proto__: [] } instanceof Array && function (d, b) { d.__proto__ = b; }) ||
+        function (d, b) { for (var p in b) if (b.hasOwnProperty(p)) d[p] = b[p]; };
+    return function (d, b) {
+        extendStatics(d, b);
+        function __() { this.constructor = d; }
+        d.prototype = b === null ? Object.create(b) : (__.prototype = b.prototype, new __());
+    };
+})();
+// https://github.com/Microsoft/TypeScript/issues/16861
+var BaseType = /** @class */ (function () {
+    function BaseType() {
+    }
+    return BaseType;
+}());
+var NextType = /** @class */ (function (_super) {
+    __extends(NextType, _super);
+    function NextType() {
+        return _super !== null && _super.apply(this, arguments) || this;
+    }
+    return NextType;
+}(BaseType));
+var Foo = /** @class */ (function (_super) {
+    __extends(Foo, _super);
+    function Foo() {
+        return _super !== null && _super.apply(this, arguments) || this;
+    }
+    return Foo;
+}(NextType));
+var foo = new Foo();
+foo.bar.test;
diff --git a/tests/baselines/reference/circularConstraintYieldsAppropriateError.symbols b/tests/baselines/reference/circularConstraintYieldsAppropriateError.symbols
new file mode 100644
index 00000000000..7f485dd282c
--- /dev/null
+++ b/tests/baselines/reference/circularConstraintYieldsAppropriateError.symbols
@@ -0,0 +1,48 @@
+=== tests/cases/compiler/circularConstraintYieldsAppropriateError.ts ===
+// https://github.com/Microsoft/TypeScript/issues/16861
+class BaseType<T> {
+>BaseType : Symbol(BaseType, Decl(circularConstraintYieldsAppropriateError.ts, 0, 0))
+>T : Symbol(T, Decl(circularConstraintYieldsAppropriateError.ts, 1, 15))
+
+    bar: T
+>bar : Symbol(BaseType.bar, Decl(circularConstraintYieldsAppropriateError.ts, 1, 19))
+>T : Symbol(T, Decl(circularConstraintYieldsAppropriateError.ts, 1, 15))
+}
+
+class NextType<C extends { someProp: any }, T = C['someProp']> extends BaseType<T> {
+>NextType : Symbol(NextType, Decl(circularConstraintYieldsAppropriateError.ts, 3, 1))
+>C : Symbol(C, Decl(circularConstraintYieldsAppropriateError.ts, 5, 15))
+>someProp : Symbol(someProp, Decl(circularConstraintYieldsAppropriateError.ts, 5, 26))
+>T : Symbol(T, Decl(circularConstraintYieldsAppropriateError.ts, 5, 43))
+>C : Symbol(C, Decl(circularConstraintYieldsAppropriateError.ts, 5, 15))
+>BaseType : Symbol(BaseType, Decl(circularConstraintYieldsAppropriateError.ts, 0, 0))
+>T : Symbol(T, Decl(circularConstraintYieldsAppropriateError.ts, 5, 43))
+
+    baz: string;
+>baz : Symbol(NextType.baz, Decl(circularConstraintYieldsAppropriateError.ts, 5, 84))
+}
+
+class Foo extends NextType<Foo> {
+>Foo : Symbol(Foo, Decl(circularConstraintYieldsAppropriateError.ts, 7, 1))
+>NextType : Symbol(NextType, Decl(circularConstraintYieldsAppropriateError.ts, 3, 1))
+>Foo : Symbol(Foo, Decl(circularConstraintYieldsAppropriateError.ts, 7, 1))
+
+    someProp: {
+>someProp : Symbol(Foo.someProp, Decl(circularConstraintYieldsAppropriateError.ts, 9, 33))
+
+        test: true
+>test : Symbol(test, Decl(circularConstraintYieldsAppropriateError.ts, 10, 15))
+    }
+}
+
+const foo = new Foo();
+>foo : Symbol(foo, Decl(circularConstraintYieldsAppropriateError.ts, 15, 5))
+>Foo : Symbol(Foo, Decl(circularConstraintYieldsAppropriateError.ts, 7, 1))
+
+foo.bar.test
+>foo.bar.test : Symbol(test, Decl(circularConstraintYieldsAppropriateError.ts, 10, 15))
+>foo.bar : Symbol(BaseType.bar, Decl(circularConstraintYieldsAppropriateError.ts, 1, 19))
+>foo : Symbol(foo, Decl(circularConstraintYieldsAppropriateError.ts, 15, 5))
+>bar : Symbol(BaseType.bar, Decl(circularConstraintYieldsAppropriateError.ts, 1, 19))
+>test : Symbol(test, Decl(circularConstraintYieldsAppropriateError.ts, 10, 15))
+
diff --git a/tests/baselines/reference/circularConstraintYieldsAppropriateError.types b/tests/baselines/reference/circularConstraintYieldsAppropriateError.types
new file mode 100644
index 00000000000..7aa57d21b1a
--- /dev/null
+++ b/tests/baselines/reference/circularConstraintYieldsAppropriateError.types
@@ -0,0 +1,50 @@
+=== tests/cases/compiler/circularConstraintYieldsAppropriateError.ts ===
+// https://github.com/Microsoft/TypeScript/issues/16861
+class BaseType<T> {
+>BaseType : BaseType<T>
+>T : T
+
+    bar: T
+>bar : T
+>T : T
+}
+
+class NextType<C extends { someProp: any }, T = C['someProp']> extends BaseType<T> {
+>NextType : NextType<C, T>
+>C : C
+>someProp : any
+>T : T
+>C : C
+>BaseType : BaseType<T>
+>T : T
+
+    baz: string;
+>baz : string
+}
+
+class Foo extends NextType<Foo> {
+>Foo : Foo
+>NextType : NextType<Foo, { test: true; }>
+>Foo : Foo
+
+    someProp: {
+>someProp : { test: true; }
+
+        test: true
+>test : true
+>true : true
+    }
+}
+
+const foo = new Foo();
+>foo : Foo
+>new Foo() : Foo
+>Foo : typeof Foo
+
+foo.bar.test
+>foo.bar.test : true
+>foo.bar : { test: true; }
+>foo : Foo
+>bar : { test: true; }
+>test : true
+
diff --git a/tests/cases/compiler/circularConstraintYieldsAppropriateError.ts b/tests/cases/compiler/circularConstraintYieldsAppropriateError.ts
new file mode 100644
index 00000000000..848df9642c5
--- /dev/null
+++ b/tests/cases/compiler/circularConstraintYieldsAppropriateError.ts
@@ -0,0 +1,17 @@
+// https://github.com/Microsoft/TypeScript/issues/16861
+class BaseType<T> {
+    bar: T
+}
+
+class NextType<C extends { someProp: any }, T = C['someProp']> extends BaseType<T> {
+    baz: string;
+}
+
+class Foo extends NextType<Foo> {
+    someProp: {
+        test: true
+    }
+}
+
+const foo = new Foo();
+foo.bar.test
\ No newline at end of file