diff --git a/python/psi-api/src/com/jetbrains/python/psi/PyFunction.java b/python/psi-api/src/com/jetbrains/python/psi/PyFunction.java
index 23399c5e79e2..fa668a445105 100644
--- a/python/psi-api/src/com/jetbrains/python/psi/PyFunction.java
+++ b/python/psi-api/src/com/jetbrains/python/psi/PyFunction.java
@@ -72,6 +72,11 @@ public interface PyFunction extends PsiNamedElement, StubBasedPsiElement<PyFunct
   @Nullable
   Modifier getModifier();
 
+  /**
+   * Checks whether the function contains a yield expression in its body.
+   */
+  boolean isGenerator();
+
   boolean isAsync();
 
   boolean isAsyncAllowed();
diff --git a/python/src/com/jetbrains/python/inspections/PyTypeCheckerInspection.java b/python/src/com/jetbrains/python/inspections/PyTypeCheckerInspection.java
index 0e43e4969937..be2502b27cf5 100644
--- a/python/src/com/jetbrains/python/inspections/PyTypeCheckerInspection.java
+++ b/python/src/com/jetbrains/python/inspections/PyTypeCheckerInspection.java
@@ -115,10 +115,16 @@ public class PyTypeCheckerInspection extends PyInspection {
         if (PyNames.FAKE_COROUTINE.equals(genericType.getName())) {
           return genericType.getIteratedItemType();
         }
-        else if (PyNames.FAKE_GENERATOR.equals(genericType.getName()) ||
-                 genericType instanceof PyClassType && "typing.Generator".equals(((PyClassType)genericType).getClassQName())) {
-          // Generator's type is parametrized as [YieldType, SendType, ReturnType]
-          return ContainerUtil.getOrElse(genericType.getElementTypes(myTypeEvalContext), 2, null);
+        else if (function.isGenerator()) {
+          if (PyNames.FAKE_GENERATOR.equals(genericType.getName()) ||
+              genericType instanceof PyClassType && "typing.Generator".equals(((PyClassType)genericType).getClassQName())) {
+            // Generator's type is parametrized as [YieldType, SendType, ReturnType]
+            return ContainerUtil.getOrElse(genericType.getElementTypes(myTypeEvalContext), 2, null);
+          }
+          else {
+            // Assume that any other return type annotation for a generator cannot contain its return type
+            return null;
+          }
         }
       }
 
diff --git a/python/src/com/jetbrains/python/psi/impl/PyFunctionImpl.java b/python/src/com/jetbrains/python/psi/impl/PyFunctionImpl.java
index 44e45ed23a39..682d22b3710f 100644
--- a/python/src/com/jetbrains/python/psi/impl/PyFunctionImpl.java
+++ b/python/src/com/jetbrains/python/psi/impl/PyFunctionImpl.java
@@ -693,6 +693,30 @@ public class PyFunctionImpl extends PyBaseElementImpl<PyFunctionStub> implements
     return null;
   }
 
+  @Override
+  public boolean isGenerator() {
+    final Ref<Boolean> result = new Ref<>(false);
+    getStatementList().accept(new PyRecursiveElementVisitor() {
+      @Override
+      public void visitPyYieldExpression(PyYieldExpression node) {
+        result.set(true);
+      }
+
+      @Override
+      public void visitPyFunction(PyFunction node) {
+        // Ignore nested functions
+      }
+
+      @Override
+      public void visitElement(PsiElement element) {
+        if (!result.get()) {
+          super.visitElement(element);
+        }
+      }
+    });
+    return result.get();
+  }
+
   @Override
   public boolean isAsync() {
     final PyFunctionStub stub = getStub();
diff --git a/python/testData/inspections/PyTypeCheckerInspection/GeneratorAnnotatedToReturnIterable.py b/python/testData/inspections/PyTypeCheckerInspection/GeneratorAnnotatedToReturnIterable.py
new file mode 100644
index 000000000000..0d6b9f8fba81
--- /dev/null
+++ b/python/testData/inspections/PyTypeCheckerInspection/GeneratorAnnotatedToReturnIterable.py
@@ -0,0 +1,6 @@
+from typing import Iterable
+
+
+def f() -> Iterable[int]:
+    for i in range(10):
+        yield i
\ No newline at end of file
diff --git a/python/testSrc/com/jetbrains/python/inspections/Py3TypeCheckerInspectionTest.java b/python/testSrc/com/jetbrains/python/inspections/Py3TypeCheckerInspectionTest.java
index a4f060ca6903..554a3387219e 100644
--- a/python/testSrc/com/jetbrains/python/inspections/Py3TypeCheckerInspectionTest.java
+++ b/python/testSrc/com/jetbrains/python/inspections/Py3TypeCheckerInspectionTest.java
@@ -179,6 +179,11 @@ public class Py3TypeCheckerInspectionTest extends PyTestCase {
     doTest();
   }
 
+  // PY-20657
+  public void testGeneratorAnnotatedToReturnIterable() {
+    doTest();
+  }
+
   // PY-21083
   public void testFloatFromhex() {
     doTest();