diff --git a/vlib/v/ast/table.v b/vlib/v/ast/table.v
index 43da13e413..e6d216b526 100644
--- a/vlib/v/ast/table.v
+++ b/vlib/v/ast/table.v
@@ -1570,6 +1570,7 @@ pub fn (mut t Table) resolve_generic_to_concrete(generic_type Type, generic_name
 				}
 			}
 			func.name = ''
+			func.generic_names = []
 			idx := t.find_or_register_fn_type(func, true, false)
 			if has_generic {
 				return new_type(idx).derive_add_muls(generic_type).set_flag(.generic)
@@ -2163,18 +2164,11 @@ pub fn (mut t Table) generic_insts_to_concrete() {
 					}
 				}
 				FnType {
-					// TODO: Cache function's generic types (parameters and return type) like Struct and Interface etc. do?
 					mut parent_info := parent.info as FnType
 					mut function := parent_info.func
-					mut generic_types := []Type{cap: function.params.len + 1}
-					generic_types << function.params.filter(it.typ.has_flag(.generic)).map(it.typ)
-					if function.return_type.has_flag(.generic) {
-						generic_types << function.return_type
-					}
-					generic_names := t.get_generic_names(generic_types)
 					for mut param in function.params {
 						if param.typ.has_flag(.generic) {
-							if t_typ := t.resolve_generic_to_concrete(param.typ, generic_names,
+							if t_typ := t.resolve_generic_to_concrete(param.typ, function.generic_names,
 								info.concrete_types)
 							{
 								param.typ = t_typ
@@ -2183,11 +2177,12 @@ pub fn (mut t Table) generic_insts_to_concrete() {
 					}
 					if function.return_type.has_flag(.generic) {
 						if t_typ := t.resolve_generic_to_concrete(function.return_type,
-							generic_names, info.concrete_types)
+							function.generic_names, info.concrete_types)
 						{
 							function.return_type = t_typ
 						}
 					}
+					function.generic_names = []
 					sym.info = FnType{
 						...parent_info
 						func: function
diff --git a/vlib/v/parser/parse_type.v b/vlib/v/parser/parse_type.v
index 451cf08fb9..2d744d938e 100644
--- a/vlib/v/parser/parse_type.v
+++ b/vlib/v/parser/parse_type.v
@@ -229,7 +229,7 @@ pub fn (mut p Parser) parse_multi_return_type() ast.Type {
 }
 
 // given anon name based off signature when `name` is blank
-pub fn (mut p Parser) parse_fn_type(name string) ast.Type {
+pub fn (mut p Parser) parse_fn_type(name string, generic_types []ast.Type) ast.Type {
 	p.check(.key_fn)
 
 	for attr in p.attrs {
@@ -273,6 +273,7 @@ pub fn (mut p Parser) parse_fn_type(name string) ast.Type {
 		is_variadic: is_variadic
 		return_type: return_type
 		return_type_pos: return_type_pos
+		generic_names: generic_types.map(p.table.sym(it).name)
 		is_method: false
 		attrs: p.attrs
 	}
@@ -543,7 +544,7 @@ pub fn (mut p Parser) parse_any_type(language ast.Language, is_ptr bool, check_d
 	match p.tok.kind {
 		.key_fn {
 			// func
-			return p.parse_fn_type('')
+			return p.parse_fn_type('', []ast.Type{})
 		}
 		.lsbr, .nilsbr {
 			// array
diff --git a/vlib/v/parser/parser.v b/vlib/v/parser/parser.v
index 0a3d45d525..246d7230b6 100644
--- a/vlib/v/parser/parser.v
+++ b/vlib/v/parser/parser.v
@@ -4013,7 +4013,7 @@ fn (mut p Parser) type_decl() ast.TypeDecl {
 	if p.tok.kind == .key_fn && p.is_fn_type_decl() {
 		// function type: `type mycallback = fn(string, int)`
 		fn_name := p.prepend_mod(name)
-		fn_type := p.parse_fn_type(fn_name)
+		fn_type := p.parse_fn_type(fn_name, generic_types)
 		p.table.sym(fn_type).is_pub = is_pub
 		type_pos = type_pos.extend(p.tok.pos())
 		comments = p.eat_comments(same_line: true)
diff --git a/vlib/v/tests/concrete_type_as_generic_type_test.v b/vlib/v/tests/concrete_type_as_generic_fn_type_1_test.v
similarity index 72%
rename from vlib/v/tests/concrete_type_as_generic_type_test.v
rename to vlib/v/tests/concrete_type_as_generic_fn_type_1_test.v
index bf046db393..89642344e0 100644
--- a/vlib/v/tests/concrete_type_as_generic_type_test.v
+++ b/vlib/v/tests/concrete_type_as_generic_fn_type_1_test.v
@@ -1,8 +1,8 @@
-type Fn = fn (T)
+type Fn[T] = fn (T)
 
-type FnReturn = fn (T) R
+type FnReturn[T, R] = fn (T) R
 
-type FnMultiReturn = fn (I) (O, R)
+type FnMultiReturn[I, O, R] = fn (I) (O, R)
 
 fn func_fn_concrete() Fn[string] {
 	return fn (_s string) {}
@@ -12,12 +12,11 @@ fn func_fn_dynamic[T]() Fn[T] {
 	return fn [T](_t T) {}
 }
 
-// FIXME: FnReturn[string, string] fails to stencil
-// fn func_fn_return_concrete() FnReturn[string, string] {
-// 	return fn (s string) string {
-// 		return s
-// 	}
-// }
+fn func_fn_return_concrete() FnReturn[string, string] {
+	return fn (s string) string {
+		return s
+	}
+}
 
 fn func_fn_return_dynamic[T, R]() FnReturn[T, R] {
 	return fn [T, R](t T) R {
@@ -35,6 +34,7 @@ fn test_concrete_function_type_as_generic_type() {
 	func_fn_concrete()('V')
 	func_fn_dynamic[string]()('V')
 
+	func_fn_return_concrete()('V')
 	assert func_fn_return_dynamic[string, int]()('100') == 100
 
 	s1, s2 := func_fn_multi_return_concrete()('VLang')
diff --git a/vlib/v/tests/concrete_type_as_generic_fn_type_2_test.v b/vlib/v/tests/concrete_type_as_generic_fn_type_2_test.v
new file mode 100644
index 0000000000..fc0915f65f
--- /dev/null
+++ b/vlib/v/tests/concrete_type_as_generic_fn_type_2_test.v
@@ -0,0 +1,33 @@
+struct ParseResult[T] {
+	result T
+	rest   string
+}
+
+type ParseFunction[T] = fn (string) !ParseResult[T]
+
+fn literal(l string) ParseFunction[string] {
+	return fn [l] (input string) !ParseResult[string] {
+		if !input.starts_with(l) {
+			return error(input)
+		}
+
+		return ParseResult[string]{
+			result: l
+			rest: input.all_after_first(l)
+		}
+	}
+}
+
+fn test_concrete_function_type_as_generic_type() {
+	l_func := literal('start')
+	val1 := l_func('start test') or { ParseResult[string]{} }
+	val2 := l_func('test') or { ParseResult[string]{} }
+
+	println(val1)
+	assert val1.result == 'start'
+	assert val1.rest == ' test'
+
+	println(val2)
+	assert val2.result == ''
+	assert val2.rest == ''
+}