diff --git a/compiler/src/dotty/tools/dotc/ast/Desugar.scala b/compiler/src/dotty/tools/dotc/ast/Desugar.scala
index 870af91e083c..8522fcd781b9 100644
--- a/compiler/src/dotty/tools/dotc/ast/Desugar.scala
+++ b/compiler/src/dotty/tools/dotc/ast/Desugar.scala
@@ -1632,12 +1632,12 @@ object desugar {
       }
     }
 
-    def makePolyFunction(targs: List[Tree], body: Tree): Tree = body match {
+    def makePolyFunction(targs: List[Tree], body: Tree): Tree = body match
       case Parens(body1) =>
         makePolyFunction(targs, body1)
       case Block(Nil, body1) =>
         makePolyFunction(targs, body1)
-      case Function(vargs, res) =>
+      case _ =>
         assert(targs.nonEmpty)
         // TODO: Figure out if we need a `PolyFunctionWithMods` instead.
         val mods = body match {
@@ -1646,33 +1646,37 @@ object desugar {
         }
         val polyFunctionTpt = ref(defn.PolyFunctionType)
         val applyTParams = targs.asInstanceOf[List[TypeDef]]
-        if (ctx.mode.is(Mode.Type)) {
+        if ctx.mode.is(Mode.Type) then
           // Desugar [T_1, ..., T_M] -> (P_1, ..., P_N) => R
           // Into    scala.PolyFunction { def apply[T_1, ..., T_M](x$1: P_1, ..., x$N: P_N): R }
-
-          val applyVParams = vargs.zipWithIndex.map {
-            case (p: ValDef, _) => p.withAddedFlags(mods.flags)
-            case (p, n) => makeSyntheticParameter(n + 1, p).withAddedFlags(mods.flags)
-          }
+          val (res, applyVParamss) = body match
+            case Function(vargs, res) =>
+              ( res,
+                vargs.zipWithIndex.map {
+                  case (p: ValDef, _) => p.withAddedFlags(mods.flags)
+                  case (p, n) => makeSyntheticParameter(n + 1, p).withAddedFlags(mods.flags)
+                } :: Nil
+              )
+            case _ =>
+              (body, Nil)
           RefinedTypeTree(polyFunctionTpt, List(
-            DefDef(nme.apply, applyTParams :: applyVParams :: Nil, res, EmptyTree)
+            DefDef(nme.apply, applyTParams :: applyVParamss, res, EmptyTree)
           ))
-        }
-        else {
+        else
           // Desugar [T_1, ..., T_M] -> (x_1: P_1, ..., x_N: P_N) => body
           // Into    new scala.PolyFunction { def apply[T_1, ..., T_M](x_1: P_1, ..., x_N: P_N) = body }
-
-          val applyVParams = vargs.asInstanceOf[List[ValDef]]
-            .map(varg => varg.withAddedFlags(mods.flags | Param))
-            New(Template(emptyConstructor, List(polyFunctionTpt), Nil, EmptyValDef,
-              List(DefDef(nme.apply, applyTParams :: applyVParams :: Nil, TypeTree(), res))
-              ))
-        }
-      case _ =>
-        // may happen for erroneous input. An error will already have been reported.
-        assert(ctx.reporter.errorsReported)
-        EmptyTree
-    }
+          val (res, applyVParamss) = body match
+            case Function(vargs, res) =>
+              ( res,
+                vargs.asInstanceOf[List[ValDef]]
+                  .map(varg => varg.withAddedFlags(mods.flags | Param))
+                :: Nil
+              )
+            case _ =>
+              (body, Nil)
+          New(Template(emptyConstructor, List(polyFunctionTpt), Nil, EmptyValDef,
+            List(DefDef(nme.apply, applyTParams :: applyVParamss, TypeTree(), res))
+            ))
 
     // begin desugar
 
diff --git a/compiler/src/dotty/tools/dotc/core/TypeErasure.scala b/compiler/src/dotty/tools/dotc/core/TypeErasure.scala
index 3a077407d0b5..291419d5c400 100644
--- a/compiler/src/dotty/tools/dotc/core/TypeErasure.scala
+++ b/compiler/src/dotty/tools/dotc/core/TypeErasure.scala
@@ -549,6 +549,7 @@ class TypeErasure(sourceLanguage: SourceLanguage, semiEraseVCs: Boolean, isConst
    *      - otherwise, if T is a type parameter coming from Java, []Object
    *      - otherwise, Object
    *   - For a term ref p.x, the type <noprefix> # x.
+   *   - For a refined type scala.PolyFunction { def apply[...]: R }, scala.Function0
    *   - For a refined type scala.PolyFunction { def apply[...](x_1, ..., x_N): R }, scala.FunctionN
    *   - For a typeref scala.Any, scala.AnyVal, scala.Singleton, scala.Tuple, or scala.*: : |java.lang.Object|
    *   - For a typeref scala.Unit, |scala.runtime.BoxedUnit|.
@@ -600,8 +601,9 @@ class TypeErasure(sourceLanguage: SourceLanguage, semiEraseVCs: Boolean, isConst
       assert(refinedInfo.isInstanceOf[PolyType])
       val res = refinedInfo.resultType
       val paramss = res.paramNamess
-      assert(paramss.length == 1)
-      this(defn.FunctionType(paramss.head.length, isContextual = res.isImplicitMethod, isErased = res.isErasedMethod))
+      assert(paramss.length <= 1)
+      val arity = if paramss.isEmpty then 0 else paramss.head.length
+      this(defn.FunctionType(arity, isContextual = res.isImplicitMethod, isErased = res.isErasedMethod))
     case tp: TypeProxy =>
       this(tp.underlying)
     case tp @ AndType(tp1, tp2) =>
diff --git a/compiler/src/dotty/tools/dotc/parsing/Parsers.scala b/compiler/src/dotty/tools/dotc/parsing/Parsers.scala
index 8f0a57dc2fc8..cf49704619de 100644
--- a/compiler/src/dotty/tools/dotc/parsing/Parsers.scala
+++ b/compiler/src/dotty/tools/dotc/parsing/Parsers.scala
@@ -1434,14 +1434,7 @@ object Parsers {
           else if (in.token == ARROW) {
             val arrowOffset = in.skipToken()
             val body = toplevelTyp()
-            atSpan(start, arrowOffset) {
-              if (isFunction(body))
-                PolyFunction(tparams, body)
-              else {
-                syntaxError("Implementation restriction: polymorphic function types must have a value parameter", arrowOffset)
-                Ident(nme.ERROR.toTypeName)
-              }
-            }
+            atSpan(start, arrowOffset) { PolyFunction(tparams, body) }
           }
           else { accept(TLARROW); typ() }
         }
@@ -1917,14 +1910,7 @@ object Parsers {
           val tparams = typeParamClause(ParamOwner.TypeParam)
           val arrowOffset = accept(ARROW)
           val body = expr(location)
-          atSpan(start, arrowOffset) {
-            if (isFunction(body))
-              PolyFunction(tparams, body)
-            else {
-              syntaxError("Implementation restriction: polymorphic function literals must have a value parameter", arrowOffset)
-              errorTermTree
-            }
-          }
+          atSpan(start, arrowOffset) { PolyFunction(tparams, body) }
         case _ =>
           val saved = placeholderParams
           placeholderParams = Nil
diff --git a/tests/neg/i2887b.scala b/tests/neg/i2887b.scala
index 3984949bf580..fea973c9e7cf 100644
--- a/tests/neg/i2887b.scala
+++ b/tests/neg/i2887b.scala
@@ -1,5 +1,5 @@
-trait A { type S[X[_] <: [_] => Any, Y[_]] <: [_] => Any; type I[_] } // error // error
-trait B { type S[X[_],Y[_]]; type I[_] <: [_] => Any } // error
+trait A { type S[X[_] <: [_] => Any, Y[_]] <: [_] => Any; type I[_] }
+trait B { type S[X[_],Y[_]]; type I[_] <: [_] => Any }
 trait C { type M <: B }
 trait D { type M >: A }
 
diff --git a/tests/neg/polymorphic-functions.scala b/tests/pos/polymorphic-functions.scala
similarity index 100%
rename from tests/neg/polymorphic-functions.scala
rename to tests/pos/polymorphic-functions.scala