diff --git a/pkg/front_end/lib/src/fasta/builder/nullability_builder.dart b/pkg/front_end/lib/src/fasta/builder/nullability_builder.dart
index 54a2786e653..4d7b983d819 100644
--- a/pkg/front_end/lib/src/fasta/builder/nullability_builder.dart
+++ b/pkg/front_end/lib/src/fasta/builder/nullability_builder.dart
@@ -35,6 +35,8 @@ class NullabilityBuilder {
   const NullabilityBuilder.omitted()
       : _syntacticNullability = SyntacticNullability.omitted;
 
+  bool get isOmitted => _syntacticNullability == SyntacticNullability.omitted;
+
   factory NullabilityBuilder.fromNullability(Nullability nullability) {
     switch (nullability) {
       case Nullability.nullable:
@@ -47,13 +49,10 @@ class NullabilityBuilder {
     }
   }
 
-  Nullability build(LibraryBuilder libraryBuilder, {Nullability ifOmitted}) {
-    // TODO(dmitryas): Ensure that either ifOmitted is set or libraryBuilder is
-    // provided;
-    //assert(libraryBuilder != null || ifOmitted != null);
-    ifOmitted ??= (libraryBuilder == null ? Nullability.legacy : null);
+  Nullability build(LibraryBuilder libraryBuilder) {
+    assert(libraryBuilder != null);
 
-    ifOmitted ??= libraryBuilder.isNonNullableByDefault
+    Nullability ifOmitted = libraryBuilder.isNonNullableByDefault
         ? Nullability.nonNullable
         : Nullability.legacy;
     switch (_syntacticNullability) {
diff --git a/pkg/front_end/lib/src/fasta/builder/type_variable_builder.dart b/pkg/front_end/lib/src/fasta/builder/type_variable_builder.dart
index 8ec76cbce8b..b73ea200f26 100644
--- a/pkg/front_end/lib/src/fasta/builder/type_variable_builder.dart
+++ b/pkg/front_end/lib/src/fasta/builder/type_variable_builder.dart
@@ -89,16 +89,22 @@ class TypeVariableBuilder extends TypeDeclarationBuilderImpl {
     }
     // If the bound is not set yet, the actual value is not important yet as it
     // will be set later.
-    Nullability nullabilityIfOmitted = parameter.bound != null &&
-            library != null &&
-            library.isNonNullableByDefault
-        ? TypeParameterType.computeNullabilityFromBound(parameter)
-        : Nullability.legacy;
-    DartType type = buildTypesWithBuiltArguments(
-        library,
-        nullabilityBuilder.build(library, ifOmitted: nullabilityIfOmitted),
-        null);
-    if (parameter.bound == null) {
+    bool needsPostUpdate = false;
+    Nullability nullability;
+    if (nullabilityBuilder.isOmitted) {
+      if (parameter.bound != null) {
+        nullability = library.isNonNullableByDefault
+            ? TypeParameterType.computeNullabilityFromBound(parameter)
+            : Nullability.legacy;
+      } else {
+        nullability = Nullability.legacy;
+        needsPostUpdate = true;
+      }
+    } else {
+      nullability = nullabilityBuilder.build(library);
+    }
+    DartType type = buildTypesWithBuiltArguments(library, nullability, null);
+    if (needsPostUpdate) {
       if (library is SourceLibraryBuilder) {
         library.pendingNullabilities.add(type);
       } else {
diff --git a/pkg/front_end/testcases/nnbd/issue42143.dart b/pkg/front_end/testcases/nnbd/issue42143.dart
new file mode 100644
index 00000000000..a711b13e8cc
--- /dev/null
+++ b/pkg/front_end/testcases/nnbd/issue42143.dart
@@ -0,0 +1,6 @@
+import 'dart:async';
+
+void h1<T extends FutureOr<T?>?>(T? t) {}
+void h2<S extends FutureOr<S?>>(S? s) {}
+
+main() {}
diff --git a/pkg/front_end/testcases/nnbd/issue42143.dart.outline.expect b/pkg/front_end/testcases/nnbd/issue42143.dart.outline.expect
new file mode 100644
index 00000000000..a3735a10ef5
--- /dev/null
+++ b/pkg/front_end/testcases/nnbd/issue42143.dart.outline.expect
@@ -0,0 +1,11 @@
+library /*isNonNullableByDefault*/;
+import self as self;
+
+import "dart:async";
+
+static method h1<T extends FutureOr<self::h1::T?>? = FutureOr<dynamic>?>(self::h1::T? t) → void
+  ;
+static method h2<S extends FutureOr<self::h2::S?> = FutureOr<dynamic>>(self::h2::S? s) → void
+  ;
+static method main() → dynamic
+  ;
diff --git a/pkg/front_end/testcases/nnbd/issue42143.dart.strong.expect b/pkg/front_end/testcases/nnbd/issue42143.dart.strong.expect
new file mode 100644
index 00000000000..dd9388c37d7
--- /dev/null
+++ b/pkg/front_end/testcases/nnbd/issue42143.dart.strong.expect
@@ -0,0 +1,8 @@
+library /*isNonNullableByDefault*/;
+import self as self;
+
+import "dart:async";
+
+static method h1<T extends FutureOr<self::h1::T?>? = FutureOr<dynamic>?>(self::h1::T? t) → void {}
+static method h2<S extends FutureOr<self::h2::S?> = FutureOr<dynamic>>(self::h2::S? s) → void {}
+static method main() → dynamic {}
diff --git a/pkg/front_end/testcases/nnbd/issue42143.dart.strong.transformed.expect b/pkg/front_end/testcases/nnbd/issue42143.dart.strong.transformed.expect
new file mode 100644
index 00000000000..dd9388c37d7
--- /dev/null
+++ b/pkg/front_end/testcases/nnbd/issue42143.dart.strong.transformed.expect
@@ -0,0 +1,8 @@
+library /*isNonNullableByDefault*/;
+import self as self;
+
+import "dart:async";
+
+static method h1<T extends FutureOr<self::h1::T?>? = FutureOr<dynamic>?>(self::h1::T? t) → void {}
+static method h2<S extends FutureOr<self::h2::S?> = FutureOr<dynamic>>(self::h2::S? s) → void {}
+static method main() → dynamic {}
diff --git a/pkg/front_end/testcases/nnbd/issue42143.dart.textual_outline.expect b/pkg/front_end/testcases/nnbd/issue42143.dart.textual_outline.expect
new file mode 100644
index 00000000000..ea78e4726a5
--- /dev/null
+++ b/pkg/front_end/testcases/nnbd/issue42143.dart.textual_outline.expect
@@ -0,0 +1,5 @@
+import 'dart:async';
+
+void h1<T extends FutureOr<T?>?>(T? t) {}
+void h2<S extends FutureOr<S?>>(S? s) {}
+main() {}
diff --git a/pkg/front_end/testcases/nnbd/issue42143.dart.textual_outline_modelled.expect b/pkg/front_end/testcases/nnbd/issue42143.dart.textual_outline_modelled.expect
new file mode 100644
index 00000000000..993350a05b7
--- /dev/null
+++ b/pkg/front_end/testcases/nnbd/issue42143.dart.textual_outline_modelled.expect
@@ -0,0 +1,5 @@
+import 'dart:async';
+
+main() {}
+void h1<T extends FutureOr<T?>?>(T? t) {}
+void h2<S extends FutureOr<S?>>(S? s) {}
diff --git a/pkg/front_end/testcases/nnbd/issue42143.dart.weak.expect b/pkg/front_end/testcases/nnbd/issue42143.dart.weak.expect
new file mode 100644
index 00000000000..dd9388c37d7
--- /dev/null
+++ b/pkg/front_end/testcases/nnbd/issue42143.dart.weak.expect
@@ -0,0 +1,8 @@
+library /*isNonNullableByDefault*/;
+import self as self;
+
+import "dart:async";
+
+static method h1<T extends FutureOr<self::h1::T?>? = FutureOr<dynamic>?>(self::h1::T? t) → void {}
+static method h2<S extends FutureOr<self::h2::S?> = FutureOr<dynamic>>(self::h2::S? s) → void {}
+static method main() → dynamic {}
diff --git a/pkg/front_end/testcases/nnbd/issue42143.dart.weak.transformed.expect b/pkg/front_end/testcases/nnbd/issue42143.dart.weak.transformed.expect
new file mode 100644
index 00000000000..dd9388c37d7
--- /dev/null
+++ b/pkg/front_end/testcases/nnbd/issue42143.dart.weak.transformed.expect
@@ -0,0 +1,8 @@
+library /*isNonNullableByDefault*/;
+import self as self;
+
+import "dart:async";
+
+static method h1<T extends FutureOr<self::h1::T?>? = FutureOr<dynamic>?>(self::h1::T? t) → void {}
+static method h2<S extends FutureOr<self::h2::S?> = FutureOr<dynamic>>(self::h2::S? s) → void {}
+static method main() → dynamic {}