diff --git a/python/python-psi-impl/src/com/jetbrains/python/psi/types/PyTypeChecker.java b/python/python-psi-impl/src/com/jetbrains/python/psi/types/PyTypeChecker.java
index 1cd0e68fab1c..09a60b0b8f50 100644
--- a/python/python-psi-impl/src/com/jetbrains/python/psi/types/PyTypeChecker.java
+++ b/python/python-psi-impl/src/com/jetbrains/python/psi/types/PyTypeChecker.java
@@ -636,9 +636,8 @@ public final class PyTypeChecker {
 
       final PyType rawProtocolElementType =
         dropSelfIfNeeded(expected, protocolMember.getType(), matchContext.context);
-      final GenericSubstitutions concreteExpectedSubstitutions = expectedSubstitutions.withOnlySolvedSubstitutions(matchContext.context);
 
-      final PyType protocolElementType = substitute(rawProtocolElementType, concreteExpectedSubstitutions, matchContext.context);
+      final PyType protocolElementType = substitute(rawProtocolElementType, expectedSubstitutions, matchContext.context);
       final boolean elementResult = ContainerUtil.exists(subclassElementMembers, subclassElementMember -> {
         if (protocolMember.isWritable() && !subclassElementMember.isWritable()) {
           return false;
@@ -664,14 +663,15 @@ public final class PyTypeChecker {
     }
 
 
-    if (expected instanceof PyCollectionType) {
-      PyCollectionType genericSuperClass = findGenericDefinitionType(expected.getPyClass(), matchContext.context);
-      if (genericSuperClass != null) {
-        PyCollectionType concreteSuperClass =
-          (PyCollectionType)substitute(genericSuperClass, protocolContext.mySubstitutions, protocolContext.context);
-        assert concreteSuperClass != null;
-        return matchGenericClassesParameterWise((PyCollectionType)expected, concreteSuperClass, matchContext);
-      }
+    if (expected instanceof PyCollectionType genericExpected && hasGenerics(expected, matchContext.context)) {
+      PyCollectionType concreteExpected =
+        (PyCollectionType)substitute(expected, protocolContext.mySubstitutions, protocolContext.context);
+      assert concreteExpected != null;
+      // This match is supposed to succeed since all protocol members were compatible. 
+      // Effectively, we're just copying substitutions for the terminal type parameters e.g.
+      // extracting: T@func -> str 
+      // from: Iterable[T@func] <- Iterable[str]
+      return matchGenericClassesParameterWise(genericExpected, concreteExpected, matchContext);
     }
 
     return true;
@@ -2021,29 +2021,6 @@ public final class PyTypeChecker {
       return qualifierType;
     }
 
-    private @NotNull GenericSubstitutions withOnlySolvedSubstitutions(@NotNull TypeEvalContext context) {
-      GenericSubstitutions concreteExpectedSubs = new GenericSubstitutions();
-      for (Map.Entry<PyTypeVarType, Ref<PyType>> e : this.typeVars.entrySet()) {
-        PyType mapped = Ref.deref(e.getValue());
-        if (mapped != null && !hasGenerics(mapped, context)) {
-          concreteExpectedSubs.typeVars.put(e.getKey(), Ref.create(mapped));
-        }
-      }
-      for (Map.Entry<PyParamSpecType, PyCallableParameterVariadicType> e : this.paramSpecs.entrySet()) {
-        PyCallableParameterVariadicType mapped = e.getValue();
-        if (mapped != null && !hasGenerics(mapped, context)) {
-          concreteExpectedSubs.paramSpecs.put(e.getKey(), mapped);
-        }
-      }
-      for (Map.Entry<PyTypeVarTupleType, PyPositionalVariadicType> e : this.typeVarTuples.entrySet()) {
-        PyPositionalVariadicType mapped = e.getValue();
-        if (mapped != null && !hasGenerics(mapped, context)) {
-          concreteExpectedSubs.typeVarTuples.put(e.getKey(), mapped);
-        }
-      }
-      return concreteExpectedSubs;
-    }
-
     @Override
     public String toString() {
       return "GenericSubstitutions{" +
diff --git a/python/testSrc/com/jetbrains/python/PyTypingTest.java b/python/testSrc/com/jetbrains/python/PyTypingTest.java
index 24946f5ccbb7..16d3a3717301 100644
--- a/python/testSrc/com/jetbrains/python/PyTypingTest.java
+++ b/python/testSrc/com/jetbrains/python/PyTypingTest.java
@@ -6836,6 +6836,29 @@ public class PyTypingTest extends PyTestCase {
       """);
   }
 
+  // PY-86463
+  public void testMatchingWithInheritedGenericProtocol() {
+    doTest("int", """
+      from typing import Protocol
+      
+      class P[T](Protocol):
+          def method(self, x: T) -> T:
+              pass
+      
+      class P2[T](P[T], Protocol):
+          pass
+      
+      class Impl:
+          def method(self, x: int) -> int:
+              return 42
+      
+      def expects_generic[T](x: P2[T]) -> T:
+          return x.method()
+      
+      expr = expects_generic(Impl())
+      """);
+  }
+
   private void doTestNoInjectedText(@NotNull String text) {
     myFixture.configureByText(PythonFileType.INSTANCE, text);
     final InjectedLanguageManager languageManager = InjectedLanguageManager.getInstance(myFixture.getProject());
diff --git a/python/testSrc/com/jetbrains/python/inspections/Py3TypeCheckerInspectionTest.java b/python/testSrc/com/jetbrains/python/inspections/Py3TypeCheckerInspectionTest.java
index 3e8912aefbea..7fef125a4c9b 100644
--- a/python/testSrc/com/jetbrains/python/inspections/Py3TypeCheckerInspectionTest.java
+++ b/python/testSrc/com/jetbrains/python/inspections/Py3TypeCheckerInspectionTest.java
@@ -3398,6 +3398,29 @@ public class Py3TypeCheckerInspectionTest extends PyInspectionTestCase {
                    """);
   }
 
+  // PY-86463
+  public void testInheritedGenericProtocol() {
+    doTestByText("""
+      from typing import Protocol, overload
+      
+      class P[T](Protocol):
+          def method(self, x: T) -> T:
+              pass
+      
+      class P2[T](P[T], Protocol):
+          pass
+      
+      class Impl:
+          def method(self, x: int) -> int:
+              ...
+      
+      def expects_P2_str(x: P2[str]):
+          pass
+      
+      expr = expects_P2_str(<warning descr="Expected type 'P2[str]', got 'Impl' instead">Impl()</warning>)
+      """);
+  }
+
   // PY-76822
   public void testExplicitAnyInConcreteType() {
     doTestByText("""