diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index c6a9f7e75a633..3361ad3f12eb4 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -18274,6 +18274,11 @@ namespace ts {
                     }
                 }
                 else if (target.flags & TypeFlags.TemplateLiteral) {
+                    if (source.flags & TypeFlags.TemplateLiteral) {
+                        // Report unreliable variance for type variables referenced in template literal type placeholders.
+                        // For example, `foo-${number}` is related to `foo-${string}` even though number isn't related to string.
+                        instantiateType(source, makeFunctionTypeMapper(reportUnreliableMarkers));
+                    }
                     const result = inferTypesFromTemplateLiteralType(source, target as TemplateLiteralType);
                     if (result && every(result, (r, i) => isValidTypeForTemplateLiteralPlaceholder(r, (target as TemplateLiteralType).types[i]))) {
                         return Ternary.True;
@@ -18318,20 +18323,6 @@ namespace ts {
                         return result;
                     }
                 }
-                else if (source.flags & TypeFlags.TemplateLiteral) {
-                    if (target.flags & TypeFlags.TemplateLiteral &&
-                        (source as TemplateLiteralType).texts.length === (target as TemplateLiteralType).texts.length &&
-                        (source as TemplateLiteralType).types.length === (target as TemplateLiteralType).types.length &&
-                        every((source as TemplateLiteralType).texts, (t, i) => t === (target as TemplateLiteralType).texts[i]) &&
-                        every((instantiateType(source, makeFunctionTypeMapper(reportUnreliableMarkers)) as TemplateLiteralType).types, (t, i) => !!((target as TemplateLiteralType).types[i].flags & (TypeFlags.Any | TypeFlags.String)) || !!isRelatedTo(t, (target as TemplateLiteralType).types[i], /*reportErrors*/ false))) {
-                        return Ternary.True;
-                    }
-                    const constraint = getBaseConstraintOfType(source);
-                    if (constraint && constraint !== source && (result = isRelatedTo(constraint, target, reportErrors))) {
-                        resetErrorInfo(saveErrorInfo);
-                        return result;
-                    }
-                }
                 else if (source.flags & TypeFlags.StringMapping) {
                     if (target.flags & TypeFlags.StringMapping && (<StringMappingType>source).symbol === (<StringMappingType>target).symbol) {
                         if (result = isRelatedTo((<StringMappingType>source).type, (<StringMappingType>target).type, reportErrors)) {
diff --git a/tests/baselines/reference/templateLiteralTypes2.errors.txt b/tests/baselines/reference/templateLiteralTypes2.errors.txt
index 662b6704d6352..7e9308d47e659 100644
--- a/tests/baselines/reference/templateLiteralTypes2.errors.txt
+++ b/tests/baselines/reference/templateLiteralTypes2.errors.txt
@@ -1,13 +1,9 @@
 tests/cases/conformance/types/literal/templateLiteralTypes2.ts(23,11): error TS2322: Type 'string' is not assignable to type '`abc${string}`'.
 tests/cases/conformance/types/literal/templateLiteralTypes2.ts(29,11): error TS2322: Type 'string' is not assignable to type '`foo${string}` | `bar${string}`'.
 tests/cases/conformance/types/literal/templateLiteralTypes2.ts(32,11): error TS2322: Type 'string' is not assignable to type '`foo${string}` | `bar${string}` | `baz${string}`'.
-tests/cases/conformance/types/literal/templateLiteralTypes2.ts(67,9): error TS2322: Type '`foo${number}`' is not assignable to type 'String'.
-tests/cases/conformance/types/literal/templateLiteralTypes2.ts(68,9): error TS2322: Type '`foo${number}`' is not assignable to type 'Object'.
-tests/cases/conformance/types/literal/templateLiteralTypes2.ts(69,9): error TS2322: Type '`foo${number}`' is not assignable to type '{}'.
-tests/cases/conformance/types/literal/templateLiteralTypes2.ts(70,9): error TS2322: Type '`foo${number}`' is not assignable to type '{ length: number; }'.
 
 
-==== tests/cases/conformance/types/literal/templateLiteralTypes2.ts (7 errors) ====
+==== tests/cases/conformance/types/literal/templateLiteralTypes2.ts (3 errors) ====
     function ft1<T extends string>(s: string, n: number, u: 'foo' | 'bar' | 'baz', t: T) {
         const c1 = `abc${s}`;  // `abc${string}`
         const c2 = `abc${n}`;  // `abc${number}`
@@ -81,17 +77,9 @@ tests/cases/conformance/types/literal/templateLiteralTypes2.ts(70,9): error TS23
     function ft14(t: `foo${number}`) {
         let x1: string = t;
         let x2: String = t;
-            ~~
-!!! error TS2322: Type '`foo${number}`' is not assignable to type 'String'.
         let x3: Object = t;
-            ~~
-!!! error TS2322: Type '`foo${number}`' is not assignable to type 'Object'.
         let x4: {} = t;
-            ~~
-!!! error TS2322: Type '`foo${number}`' is not assignable to type '{}'.
         let x6: { length: number } = t;
-            ~~
-!!! error TS2322: Type '`foo${number}`' is not assignable to type '{ length: number; }'.
     }
     
     declare function g1<T>(x: T): T;
@@ -134,4 +122,10 @@ tests/cases/conformance/types/literal/templateLiteralTypes2.ts(70,9): error TS23
     function getCardTitle(title: string): `test-${string}` {
         return `test-${title}`;
     }
+    
+    // Repro from #43424
+    
+    const interpolatedStyle = { rotate: 12 };
+    function C2(transform: "-moz-initial" | (string & {})) { return 12; }
+    C2(`rotate(${interpolatedStyle.rotate}dig)`);
     
\ No newline at end of file
diff --git a/tests/baselines/reference/templateLiteralTypes2.js b/tests/baselines/reference/templateLiteralTypes2.js
index 87be2dbe4fa76..37c101be26923 100644
--- a/tests/baselines/reference/templateLiteralTypes2.js
+++ b/tests/baselines/reference/templateLiteralTypes2.js
@@ -111,6 +111,12 @@ const pixelStringWithTemplate: PixelValueType = `${pixelValue}px`;
 function getCardTitle(title: string): `test-${string}` {
     return `test-${title}`;
 }
+
+// Repro from #43424
+
+const interpolatedStyle = { rotate: 12 };
+function C2(transform: "-moz-initial" | (string & {})) { return 12; }
+C2(`rotate(${interpolatedStyle.rotate}dig)`);
 
 
 //// [templateLiteralTypes2.js]
@@ -194,6 +200,10 @@ var pixelStringWithTemplate = pixelValue + "px";
 function getCardTitle(title) {
     return "test-" + title;
 }
+// Repro from #43424
+var interpolatedStyle = { rotate: 12 };
+function C2(transform) { return 12; }
+C2("rotate(" + interpolatedStyle.rotate + "dig)");
 
 
 //// [templateLiteralTypes2.d.ts]
@@ -225,3 +235,7 @@ declare type PixelValueType = `${number}px`;
 declare const pixelString: PixelValueType;
 declare const pixelStringWithTemplate: PixelValueType;
 declare function getCardTitle(title: string): `test-${string}`;
+declare const interpolatedStyle: {
+    rotate: number;
+};
+declare function C2(transform: "-moz-initial" | (string & {})): number;
diff --git a/tests/baselines/reference/templateLiteralTypes2.symbols b/tests/baselines/reference/templateLiteralTypes2.symbols
index 6348ebce7f95b..4ac9d428a0618 100644
--- a/tests/baselines/reference/templateLiteralTypes2.symbols
+++ b/tests/baselines/reference/templateLiteralTypes2.symbols
@@ -361,3 +361,19 @@ function getCardTitle(title: string): `test-${string}` {
 >title : Symbol(title, Decl(templateLiteralTypes2.ts, 109, 22))
 }
 
+// Repro from #43424
+
+const interpolatedStyle = { rotate: 12 };
+>interpolatedStyle : Symbol(interpolatedStyle, Decl(templateLiteralTypes2.ts, 115, 5))
+>rotate : Symbol(rotate, Decl(templateLiteralTypes2.ts, 115, 27))
+
+function C2(transform: "-moz-initial" | (string & {})) { return 12; }
+>C2 : Symbol(C2, Decl(templateLiteralTypes2.ts, 115, 41))
+>transform : Symbol(transform, Decl(templateLiteralTypes2.ts, 116, 12))
+
+C2(`rotate(${interpolatedStyle.rotate}dig)`);
+>C2 : Symbol(C2, Decl(templateLiteralTypes2.ts, 115, 41))
+>interpolatedStyle.rotate : Symbol(rotate, Decl(templateLiteralTypes2.ts, 115, 27))
+>interpolatedStyle : Symbol(interpolatedStyle, Decl(templateLiteralTypes2.ts, 115, 5))
+>rotate : Symbol(rotate, Decl(templateLiteralTypes2.ts, 115, 27))
+
diff --git a/tests/baselines/reference/templateLiteralTypes2.types b/tests/baselines/reference/templateLiteralTypes2.types
index 274e3eb4f0b1b..24096c9d782ec 100644
--- a/tests/baselines/reference/templateLiteralTypes2.types
+++ b/tests/baselines/reference/templateLiteralTypes2.types
@@ -392,3 +392,24 @@ function getCardTitle(title: string): `test-${string}` {
 >title : string
 }
 
+// Repro from #43424
+
+const interpolatedStyle = { rotate: 12 };
+>interpolatedStyle : { rotate: number; }
+>{ rotate: 12 } : { rotate: number; }
+>rotate : number
+>12 : 12
+
+function C2(transform: "-moz-initial" | (string & {})) { return 12; }
+>C2 : (transform: "-moz-initial" | (string & {})) => number
+>transform : (string & {}) | "-moz-initial"
+>12 : 12
+
+C2(`rotate(${interpolatedStyle.rotate}dig)`);
+>C2(`rotate(${interpolatedStyle.rotate}dig)`) : number
+>C2 : (transform: (string & {}) | "-moz-initial") => number
+>`rotate(${interpolatedStyle.rotate}dig)` : `rotate(${number}dig)`
+>interpolatedStyle.rotate : number
+>interpolatedStyle : { rotate: number; }
+>rotate : number
+
diff --git a/tests/cases/conformance/types/literal/templateLiteralTypes2.ts b/tests/cases/conformance/types/literal/templateLiteralTypes2.ts
index 75ab1485a05fa..5e51c5b30b227 100644
--- a/tests/cases/conformance/types/literal/templateLiteralTypes2.ts
+++ b/tests/cases/conformance/types/literal/templateLiteralTypes2.ts
@@ -113,3 +113,9 @@ const pixelStringWithTemplate: PixelValueType = `${pixelValue}px`;
 function getCardTitle(title: string): `test-${string}` {
     return `test-${title}`;
 }
+
+// Repro from #43424
+
+const interpolatedStyle = { rotate: 12 };
+function C2(transform: "-moz-initial" | (string & {})) { return 12; }
+C2(`rotate(${interpolatedStyle.rotate}dig)`);