diff --git a/pyrefly/lib/alt/solve.rs b/pyrefly/lib/alt/solve.rs
index 48e83d40a..e4696ffb6 100644
--- a/pyrefly/lib/alt/solve.rs
+++ b/pyrefly/lib/alt/solve.rs
@@ -4028,6 +4028,25 @@ impl<'a, Ans: LookupAnswer> AnswersSolver<'a, Ans> {
                 "Type variable bounds and constraints must be concrete".to_owned(),
             );
         }
+        if type_form_context == TypeFormContext::TypeArgumentForType {
+            if let Some(cls) = match &ty {
+                Type::ClassType(cls) | Type::SelfType(cls) => Some(cls.class_object().clone()),
+                Type::ClassDef(cls) => Some(cls.clone()),
+                _ => None,
+            } {
+                if self.get_metadata_for_class(&cls).is_new_type() {
+                    return self.error(
+                        errors,
+                        range,
+                        ErrorInfo::Kind(ErrorKind::InvalidAnnotation),
+                        format!(
+                            "NewType `{}` is not a class and cannot be used with `type` or `Type`",
+                            cls.name()
+                        ),
+                    );
+                }
+            }
+        }
         ty
     }
 
diff --git a/pyrefly/lib/test/new_type.rs b/pyrefly/lib/test/new_type.rs
index 2b87d95c3..a740d26ca 100644
--- a/pyrefly/lib/test/new_type.rs
+++ b/pyrefly/lib/test/new_type.rs
@@ -136,6 +136,22 @@ y: type[Any] = Foo  # E: `type[Foo]` is not assignable to `type[Any]`
     "#,
 );
 
+testcase!(
+    test_new_type_type_argument,
+    r#"
+from typing import NewType, Type
+
+Thing = NewType("Thing", int)
+ThingType = type[Thing]  # E: NewType `Thing` is not a class and cannot be used with `type` or `Type`
+OtherThingType = Type[Thing]  # E: NewType `Thing` is not a class and cannot be used with `type` or `Type`
+
+mapping: dict[int, ThingType] = {1: Thing}  # E: `dict[int, type[Thing]]` is not assignable to `dict[int, type[Unknown]]`
+
+def func(x: ThingType) -> None: ...
+func(Thing)  # E: Argument `type[Thing]` is not assignable to parameter `x` with type `type[Unknown]` in function `func`
+    "#,
+);
+
 testcase!(
     test_new_type_runtime_attrs,
     r#"