diff --git a/python/python-psi-impl/src/com/jetbrains/python/psi/types/PyLiteralType.kt b/python/python-psi-impl/src/com/jetbrains/python/psi/types/PyLiteralType.kt
index d01bd344396b..71e4ad12c793 100644
--- a/python/python-psi-impl/src/com/jetbrains/python/psi/types/PyLiteralType.kt
+++ b/python/python-psi-impl/src/com/jetbrains/python/psi/types/PyLiteralType.kt
@@ -43,6 +43,7 @@ import com.jetbrains.python.psi.impl.PyPsiFacadeImpl
 import com.jetbrains.python.psi.resolve.PyResolveContext
 import com.jetbrains.python.psi.resolve.PyResolveUtil
 import com.jetbrains.python.psi.stubs.PyLiteralKind
+import com.jetbrains.python.psi.types.PyTypeUtil.asUnionSequence
 import com.jetbrains.python.psi.types.PyTypeUtil.toStream
 import org.jetbrains.annotations.ApiStatus
 import java.math.BigInteger
@@ -276,11 +277,13 @@ class PyLiteralType private constructor(
       }
 
       private fun promoteDictLiteral(expectedType: PyType?, dictLiteral: PyDictLiteralExpression): PyType? {
-        if (expectedType is PyTypedDictType) {
-          val typeCheckingResult = PyTypedDictType.TypeCheckingResult()
-          PyTypedDictType.checkExpression(expectedType, dictLiteral, context, typeCheckingResult)
-          if (!typeCheckingResult.hasErrors) {
-            return expectedType
+        for (candidate in expectedType.asUnionSequence()) {
+          if (candidate is PyTypedDictType) {
+            val typeCheckingResult = PyTypedDictType.TypeCheckingResult()
+            PyTypedDictType.checkExpression(candidate, dictLiteral, context, typeCheckingResult)
+            if (!typeCheckingResult.hasErrors) {
+              return candidate
+            }
           }
         }
         return promoteDictLiteralOrDictComprehension(expectedType, dictLiteral, dictLiteral.elements.asList())
diff --git a/python/testSrc/com/jetbrains/python/types/PyTypedDictTypeTest.kt b/python/testSrc/com/jetbrains/python/types/PyTypedDictTypeTest.kt
index f386565b940a..d9b197916b8b 100644
--- a/python/testSrc/com/jetbrains/python/types/PyTypedDictTypeTest.kt
+++ b/python/testSrc/com/jetbrains/python/types/PyTypedDictTypeTest.kt
@@ -528,6 +528,39 @@ class PyTypedDictTypeTest : PyCodeInsightTestCase() {
       #              ^^^^^^^^^^^^^^^^^^^^^^^^^^ WARNING TypedDict 'Movie' has missing key: 'name'
       """)
 
+    @Test
+    @TestFor(issues = ["PY-88391"])
+    fun `dict literal assignable to optional TypedDict`() = test("""
+      from typing import TypedDict
+
+      class Address(TypedDict):
+          street: str
+
+      a: Address | None = {"street": "Pine"}
+      b: Address | None = {"color": "red"}
+      #                   ^^^^^^^^^^^^^^^^ WARNING Expected type 'Address | None', got 'dict[Literal["color"], Literal["red"]]' instead
+      """)
+
+    @Test
+    @TestFor(issues = ["PY-88391"])
+    fun `dict literal assignable to one of several TypedDicts`() = test("""
+      from typing import TypedDict
+
+      class A(TypedDict):
+          a: str
+
+      class B(TypedDict):
+          b: int
+
+      class C(TypedDict):
+          c: int
+
+      first: A | B | C = {"a": "x"}
+      last:  A | B | C = {"c": 1}
+      none:  A | B | C = {"z": 1}
+      #                  ^^^^^^^^ WARNING Expected type 'A | B | C', got 'dict[Literal["z"], Literal[1]]' instead
+      """)
+
     @Test
     @TestFor(issues = ["PY-38873"])
     fun `value access through list field`() = test(TestOptions(enablePyAnyType = false), """