diff --git a/pyrefly/lib/alt/narrow.rs b/pyrefly/lib/alt/narrow.rs
index 285ddbc733..650799717c 100644
--- a/pyrefly/lib/alt/narrow.rs
+++ b/pyrefly/lib/alt/narrow.rs
@@ -398,6 +398,11 @@ impl<'a, Ans: LookupAnswer> AnswersSolver<'a, Ans> {
         for right in self.as_class_info(right.clone()) {
             res.push(self.distribute_over_union(left, |l| {
                 if let Some((tparams, right)) = self.unwrap_isinstance_target(l, &right) {
+                    if matches!(&right, Type::ClassType(cls) if cls.is_builtin("type"))
+                        && matches!(l, Type::Type(_) | Type::ClassDef(_))
+                    {
+                        return l.clone();
+                    }
                     let (vs, right) = self
                         .solver()
                         .fresh_quantified(&tparams, right, self.uniques);
@@ -627,14 +632,24 @@ impl<'a, Ans: LookupAnswer> AnswersSolver<'a, Ans> {
         let mut res = Vec::new();
         for (right, allows_negative_narrow) in self.expr_as_class_info(right_expr, errors) {
             if allows_negative_narrow
-                && let Some(left_untyped) =
-                    self.untype_opt(left.clone(), right_expr.range(), errors)
                 && let Some((tparams, right)) = self.unwrap_class_object_silently(&right)
             {
                 let (vs, right) = self
                     .solver()
                     .fresh_quantified(&tparams, right, self.uniques);
-                res.push(self.issubclass_result(self.subtract(&left_untyped, &right), left));
+                res.push(self.distribute_over_union(left, |left| {
+                    let Some(left_untyped) =
+                        self.untype_opt(left.clone(), right_expr.range(), errors)
+                    else {
+                        return left.clone();
+                    };
+                    let instance_result = self.subtract(&left_untyped, &right);
+                    if instance_result.is_never() {
+                        instance_result
+                    } else {
+                        self.issubclass_result(instance_result, left)
+                    }
+                }));
                 // These are safe to ignore, as the only possible specialization errors are handled elsewhere:
                 // * If `left` is an invalid specialization, the error has already been reported at its definition site.
                 // * Unsafe runtime protocol overlaps are separately checked for in special_calls.rs.
diff --git a/pyrefly/lib/test/narrow.rs b/pyrefly/lib/test/narrow.rs
index a787b97a4e..25278d95fd 100644
--- a/pyrefly/lib/test/narrow.rs
+++ b/pyrefly/lib/test/narrow.rs
@@ -1392,6 +1392,22 @@ def test_isinstance_then_issubclass(x: object) -> None:
     "#,
 );
 
+testcase!(
+    test_isinstance_type_and_issubclass_else,
+    r#"
+from typing import Iterable, assert_type
+import enum
+
+def main(categories: Iterable[str] | type[enum.Enum]) -> None:
+    cached_categories: tuple[str, ...]
+    if isinstance(categories, type) and issubclass(categories, enum.Enum):
+        cached_categories = tuple(member.value for member in categories)
+    else:
+        assert_type(categories, Iterable[str])
+        cached_categories = tuple(categories)
+    "#,
+);
+
 testcase!(
     test_issubclass_with_metaclass_instance,
     r#"