diff --git a/packages/pyright-internal/src/analyzer/typeGuards.ts b/packages/pyright-internal/src/analyzer/typeGuards.ts
index 7ee3a18d5b37..f6158a68646e 100644
--- a/packages/pyright-internal/src/analyzer/typeGuards.ts
+++ b/packages/pyright-internal/src/analyzer/typeGuards.ts
@@ -1246,6 +1246,19 @@ export function getIsInstanceClassTypes(
 
                 if (isInstantiableClass(subtype) && ClassType.isBuiltIn(subtype, 'Callable')) {
                     subtype = convertToInstantiable(getUnknownTypeForCallable());
+                } else if (TypeBase.isInstance(subtype) && ClassType.isBuiltIn(subtype, 'type')) {
+                    if (subtype.priv.typeArgs && subtype.priv.typeArgs.length > 0) {
+                        const typeArg = subtype.priv.typeArgs[0];
+                        if (isAnyOrUnknown(typeArg)) {
+                            foundNonClassType = true;
+                            return;
+                        }
+                        if (isInstantiableClass(typeArg)) {
+                            subtype = typeArg;
+                        } else if (isClass(typeArg) && TypeBase.isInstance(typeArg)) {
+                            subtype = convertToInstantiable(typeArg);
+                        }
+                    }
                 }
             }
 
@@ -1540,8 +1553,12 @@ function narrowTypeForInstance(
                 // note this case specially so we don't do any narrowing, which
                 // will generate false positives.
                 if (filterIsSuperclass) {
-                    if (!isTypeIsCheck && concreteFilterType.priv.includeSubclasses) {
-                        // If the filter type includes subclasses, we can't eliminate
+                    if (
+                        !isTypeIsCheck &&
+                        concreteFilterType.priv.includeSubclasses &&
+                        !ClassType.isFinal(concreteFilterType)
+                    ) {
+                        // If the filter type includes subclasses and is not final, we can't eliminate
                         // this type in the negative direction. We'll relax this for
                         // TypeIs checks.
                         isClassRelationshipIndeterminate = true;
diff --git a/packages/pyright-internal/src/tests/samples/typeNarrowingIsinstance22.py b/packages/pyright-internal/src/tests/samples/typeNarrowingIsinstance22.py
new file mode 100644
index 000000000000..fef67ef0989b
--- /dev/null
+++ b/packages/pyright-internal/src/tests/samples/typeNarrowingIsinstance22.py
@@ -0,0 +1,37 @@
+# This sample tests type narrowing for isinstance and issubclass when
+# the class argument is passed as a type[T] variable or tuple of type[T].
+
+# pyright: reportMissingModuleSource=false
+
+from typing import final
+from typing_extensions import reveal_type
+
+
+class A:
+    pass
+
+
+class B:
+    pass
+
+
+@final
+class FinalClass:
+    pass
+
+
+def test_positive_narrowing(x: A | B, cls: type[A]):
+    if isinstance(x, cls):
+        reveal_type(x, expected_text="A")
+
+
+def test_positive_tuple_param(x: A | B, types: tuple[type[A], type[B]]):
+    if isinstance(x, types):
+        reveal_type(x, expected_text="A | B")
+
+
+def test_final_class_param(x: FinalClass | B, cls: type[FinalClass]):
+    if isinstance(x, cls):
+        reveal_type(x, expected_text="FinalClass")
+    else:
+        reveal_type(x, expected_text="B")
diff --git a/packages/pyright-internal/src/tests/typeEvaluator1.test.ts b/packages/pyright-internal/src/tests/typeEvaluator1.test.ts
index 73306b3b11a4..e010e41267d8 100644
--- a/packages/pyright-internal/src/tests/typeEvaluator1.test.ts
+++ b/packages/pyright-internal/src/tests/typeEvaluator1.test.ts
@@ -507,6 +507,12 @@ test('TypeNarrowingIsinstance21', () => {
     TestUtils.validateResults(analysisResults, 0);
 });
 
+test('TypeNarrowingIsinstance22', () => {
+    const analysisResults = TestUtils.typeAnalyzeSampleFiles(['typeNarrowingIsinstance22.py']);
+
+    TestUtils.validateResults(analysisResults, 0);
+});
+
 test('TypeNarrowingTupleLength1', () => {
     const analysisResults = TestUtils.typeAnalyzeSampleFiles(['typeNarrowingTupleLength1.py']);