diff --git a/compiler/rustc_next_trait_solver/src/solve/eval_ctxt/mod.rs b/compiler/rustc_next_trait_solver/src/solve/eval_ctxt/mod.rs
index 156dfc4fc1e69..0ca31272fdfec 100644
--- a/compiler/rustc_next_trait_solver/src/solve/eval_ctxt/mod.rs
+++ b/compiler/rustc_next_trait_solver/src/solve/eval_ctxt/mod.rs
@@ -1526,7 +1526,7 @@ where
     ) -> QueryResultOrRerunNonErased<I> {
         self.inspect.make_canonical_response(shallow_certainty);
 
-        let goals_certainty = self.try_evaluate_added_goals()?;
+        let added_goals_certainty = self.try_evaluate_added_goals()?;
         assert_eq!(
             self.tainted,
             Ok(()),
@@ -1534,11 +1534,8 @@ where
             previous call to `try_evaluate_added_goals!`"
         );
 
-        let goals_certainty = match self.delegate.cx().assumptions_on_binders() {
-            true => {
-                let certainty = self.eagerly_handle_placeholders()?;
-                certainty.and(goals_certainty)
-            }
+        let placeholder_certainty = match self.delegate.cx().assumptions_on_binders() {
+            true => self.eagerly_handle_placeholders()?,
             false => {
                 // We only check for leaks from universes which were entered inside
                 // of the query.
@@ -1547,9 +1544,10 @@ where
                     NoSolution
                 })?;
 
-                goals_certainty
+                Certainty::Yes
             }
         };
+        let goals_certainty = placeholder_certainty.and(added_goals_certainty);
 
         let (certainty, normalization_nested_goals) =
             match (self.current_goal_kind, shallow_certainty) {
@@ -1563,12 +1561,13 @@ where
                 (CurrentGoalKind::ProjectionComputeAssocTermCandidate, Certainty::Yes) => {
                     let goals = std::mem::take(&mut self.nested_goals);
                     // As we return all ambiguous nested goals, we can ignore the certainty
-                    // returned by `self.try_evaluate_added_goals()`.
+                    // returned by `self.try_evaluate_added_goals()`. However, placeholder
+                    // handling may independently be ambiguous, so preserve its certainty.
                     if goals.is_empty() {
-                        assert!(matches!(goals_certainty, Certainty::Yes));
+                        assert!(matches!(added_goals_certainty, Certainty::Yes));
                     }
                     (
-                        Certainty::Yes,
+                        placeholder_certainty,
                         NestedNormalizationGoals(
                             goals.into_iter().map(|(s, g, _)| (s, g)).collect(),
                         ),
diff --git a/compiler/rustc_trait_selection/src/regions.rs b/compiler/rustc_trait_selection/src/regions.rs
index c63b7773739d0..4242f475c5a9e 100644
--- a/compiler/rustc_trait_selection/src/regions.rs
+++ b/compiler/rustc_trait_selection/src/regions.rs
@@ -5,9 +5,11 @@ use rustc_infer::infer::{
     InferCtxt, RegionResolutionError, SubregionOrigin, TyCtxtInferExt, TypeOutlivesConstraint,
 };
 use rustc_macros::extension;
-use rustc_middle::ty::{self, Ty, TyCtxt, TypeVisitableExt, TypingMode, elaborate};
+use rustc_middle::traits::ObligationCause;
+use rustc_middle::ty::{self, Ty, TyCtxt, TypingMode, Unnormalized, elaborate};
 use rustc_span::DUMMY_SP;
 
+use crate::traits::ScrubbedTraitError;
 use crate::traits::outlives_bounds::InferCtxtExt;
 
 #[extension(pub trait OutlivesEnvironmentBuildExt<'tcx>)]
@@ -31,8 +33,19 @@ impl<'tcx> OutlivesEnvironment<'tcx> {
         let mut bounds = vec![];
 
         for bound in param_env.caller_bounds() {
-            if let Some(type_outlives) = bound.as_type_outlives_clause() {
-                debug_assert!(!infcx.next_trait_solver() || !type_outlives.has_non_rigid_aliases());
+            if let Some(mut type_outlives) = bound.as_type_outlives_clause() {
+                if infcx.next_trait_solver() {
+                    match crate::solve::deeply_normalize::<_, ScrubbedTraitError<'tcx>>(
+                        infcx.at(&ObligationCause::dummy(), param_env),
+                        Unnormalized::new_wip(type_outlives),
+                    ) {
+                        Ok(normalized) => type_outlives = normalized,
+                        Err(_) => {
+                            infcx.dcx().delayed_bug(format!("could not normalize `{bound}`"));
+                        }
+                    }
+                }
+
                 bounds.push(type_outlives);
             }
         }
diff --git a/tests/ui/assumptions_on_binders/ambiguous-placeholder-certainty-issue-159896.rs b/tests/ui/assumptions_on_binders/ambiguous-placeholder-certainty-issue-159896.rs
new file mode 100644
index 0000000000000..afe7b1808a96b
--- /dev/null
+++ b/tests/ui/assumptions_on_binders/ambiguous-placeholder-certainty-issue-159896.rs
@@ -0,0 +1,28 @@
+// Regression test for issue #159896.
+//
+// An ambiguous result from eagerly handling placeholders must be preserved
+// when returning nested normalization goals, instead of causing an ICE.
+
+//@ check-fail
+//@ dont-check-compiler-stderr
+//@ dont-require-annotations: ERROR
+//@ compile-flags: -Znext-solver=globally -Zassumptions-on-binders
+//@ edition: 2021
+
+#![feature(type_alias_impl_trait)]
+
+type FooArg<'a> = &'a impl Iterator<Item = FooItem>;
+type FooRet = impl Iterator<Item = FooItem>;
+type FooItem = Box<dyn Fn(FooArg) -> FooRet>;
+
+struct Bar;
+
+impl Iterator for Bar {
+    type Item = FooItem;
+
+    fn next(&mut self) -> Option<Self::Item> {
+        todo!()
+    }
+}
+
+fn main() {}