diff --git a/pyrefly/lib/solver/solver.rs b/pyrefly/lib/solver/solver.rs
index bc080605d7..2a03d7c892 100644
--- a/pyrefly/lib/solver/solver.rs
+++ b/pyrefly/lib/solver/solver.rs
@@ -1434,6 +1434,19 @@ impl<'a, Ans: LookupAnswer> Subset<'a, Ans> {
                         let name = q.name.clone();
                         let bound = q.restriction().as_type(self.type_order.stdlib());
                         drop(v1_ref);
+                        drop(variables);
+                        // When checking `$T <: t2` where `$T` has bound `B`:
+                        // If `B <: t2`, then any value of `$T` (which is a subtype of `B`)
+                        // is also a subtype of `t2`, so the constraint is satisfied.
+                        // This handles cases like `$T: int` vs `Any | SomeType` where
+                        // the bound `int` is a subtype of the target type.
+                        // We set the variable to the bound to ensure it gets resolved.
+                        if self.is_subset_eq(&bound, t2).is_ok() {
+                            let variables = self.solver.variables.lock();
+                            variables.update(*v1, Variable::Answer(bound));
+                            return Ok(());
+                        }
+                        let variables = self.solver.variables.lock();
                         variables.update(*v1, Variable::Answer(t2.clone()));
                         drop(variables);
                         if let Err(e) = self.is_subset_eq(t2, &bound) {
diff --git a/pyrefly/lib/test/callable.rs b/pyrefly/lib/test/callable.rs
index 34e32c396f..e06a4b85da 100644
--- a/pyrefly/lib/test/callable.rs
+++ b/pyrefly/lib/test/callable.rs
@@ -1164,3 +1164,32 @@ class A:
 assert_type(f(), int)
     "#,
 );
+
+// Regression test for https://github.com/facebook/pyrefly/issues/1960
+// When a class with bounded type parameters is used as a constructor
+// and the __init__ parameter type is a union involving the type parameter,
+// the bound check should pass when the bound is assignable to the expected type.
+testcase!(
+    test_callable_constructor_bounded_typevar_with_union_param,
+    r#"
+from collections.abc import Callable
+
+
+class Box[U]:
+    pass
+
+
+class Result[T: int]:
+    def __init__(self, x: T | Box[T]) -> None:
+        pass
+
+
+def f[T: int](factory: Callable[[T], Result[T]]) -> None:
+    pass
+
+
+# This should not error - Result's constructor satisfies the Callable constraint
+# because Result.__init__ takes (T | Box[T]) which is a supertype of T
+f(factory=Result)
+"#,
+);