diff --git a/compiler/src/dotty/tools/dotc/ast/Desugar.scala b/compiler/src/dotty/tools/dotc/ast/Desugar.scala
index ba00689f5c36..1097cb0129f3 100644
--- a/compiler/src/dotty/tools/dotc/ast/Desugar.scala
+++ b/compiler/src/dotty/tools/dotc/ast/Desugar.scala
@@ -1464,7 +1464,10 @@ object desugar {
     val param = makeSyntheticParameter(
       tpt =
         if params.exists(_.tpt.isEmpty) then TypeTree()
-        else Tuple(params.map(_.tpt)))
+        else Tuple(params.map(_.tpt)),
+      flags =
+        if params.nonEmpty && params.head.mods.is(Given) then SyntheticTermParam | Given
+        else SyntheticTermParam)
     def selector(n: Int) =
       if (isGenericTuple) Apply(Select(refOfDef(param), nme.apply), Literal(Constant(n)))
       else Select(refOfDef(param), nme.selectorName(n))
diff --git a/compiler/src/dotty/tools/dotc/typer/Applications.scala b/compiler/src/dotty/tools/dotc/typer/Applications.scala
index 20ae81a74655..35b8b1f9719d 100644
--- a/compiler/src/dotty/tools/dotc/typer/Applications.scala
+++ b/compiler/src/dotty/tools/dotc/typer/Applications.scala
@@ -1923,7 +1923,9 @@ trait Applications extends Compatibility {
     /** The shape of given tree as a type; cannot handle named arguments. */
     def typeShape(tree: untpd.Tree): Type = tree match {
       case untpd.Function(args, body) =>
-        defn.FunctionOf(args map Function.const(defn.AnyType), typeShape(body))
+        defn.FunctionOf(
+          args.map(Function.const(defn.AnyType)), typeShape(body),
+          isContextual = untpd.isContextualClosure(tree))
       case Match(EmptyTree, _) =>
         defn.PartialFunctionClass.typeRef.appliedTo(defn.AnyType :: defn.NothingType :: Nil)
       case _ =>
@@ -2232,7 +2234,7 @@ trait Applications extends Compatibility {
               false
           val commonFormal =
             if (isPartial) defn.PartialFunctionOf(commonParamTypes.head, WildcardType)
-            else defn.FunctionOf(commonParamTypes, WildcardType)
+            else defn.FunctionOf(commonParamTypes, WildcardType, isContextual = untpd.isContextualClosure(arg))
           overload.println(i"pretype arg $arg with expected type $commonFormal")
           if (commonParamTypes.forall(isFullyDefined(_, ForceDegree.flipBottom)))
             withMode(Mode.ImplicitsEnabled) {
diff --git a/tests/pos/i16506.scala b/tests/pos/i16506.scala
new file mode 100644
index 000000000000..2f3cea682e44
--- /dev/null
+++ b/tests/pos/i16506.scala
@@ -0,0 +1,14 @@
+import scala.annotation.targetName
+
+trait Ctx
+
+def foo(f: Ctx => Int) = ???
+
+@targetName("fooContextual")
+def foo(f: Ctx ?=> Int) = ???
+
+def bar1 = foo(ctx => 123)
+def bar2 = foo((ctx: Ctx) => 123)
+def bar3 = foo(ctx ?=> 123)
+def bar4 = foo((ctx: Ctx) ?=> 123)
+// def bar5 = foo(123)   does not work