diff --git a/compiler/rustc_next_trait_solver/src/solve/eval_ctxt/mod.rs b/compiler/rustc_next_trait_solver/src/solve/eval_ctxt/mod.rs
index 148ba02252d94..9994c85d0d0d4 100644
--- a/compiler/rustc_next_trait_solver/src/solve/eval_ctxt/mod.rs
+++ b/compiler/rustc_next_trait_solver/src/solve/eval_ctxt/mod.rs
@@ -286,18 +286,23 @@ where
             // fixing it may cause inference breakage or introduce ambiguity.
             GoalSource::Misc => PathKind::Unknown,
             GoalSource::NormalizeGoal(path_kind) => path_kind,
-            GoalSource::ImplWhereBound => {
+            GoalSource::ImplWhereBound => match self.current_goal_kind {
                 // We currently only consider a cycle coinductive if it steps
                 // into a where-clause of a coinductive trait.
+                CurrentGoalKind::CoinductiveTrait => PathKind::Coinductive,
+                // While normalizing via an impl does step into a where-clause of
+                // an impl, accessing the associated item immediately steps out of
+                // it again. This means cycles/recursive calls are not guarded
+                // by impls used for normalization.
                 //
+                // See tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.rs
+                // for how this can go wrong.
+                CurrentGoalKind::NormalizesTo => PathKind::Inductive,
                 // We probably want to make all traits coinductive in the future,
-                // so we treat cycles involving their where-clauses as ambiguous.
-                if let CurrentGoalKind::CoinductiveTrait = self.current_goal_kind {
-                    PathKind::Coinductive
-                } else {
-                    PathKind::Unknown
-                }
-            }
+                // so we treat cycles involving where-clauses of not-yet coinductive
+                // traits as ambiguous for now.
+                CurrentGoalKind::Misc => PathKind::Unknown,
+            },
             // Relating types is always unproductive. If we were to map proof trees to
             // corecursive functions as explained in #136824, relating types never
             // introduces a constructor which could cause the recursion to be guarded.
diff --git a/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive-2.rs b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive-2.rs
new file mode 100644
index 0000000000000..bb3540f9a214f
--- /dev/null
+++ b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive-2.rs
@@ -0,0 +1,24 @@
+//@ revisions: current next
+//@ ignore-compare-mode-next-solver (explicit revisions)
+//@[next] compile-flags: -Znext-solver
+//@ check-pass
+
+// Regression test for trait-system-refactor-initiative#176.
+//
+// Normalizing `<Vec<T> as IntoIterator>::IntoIter` has two candidates
+// inside of the function:
+// - `impl<T> IntoIterator for Vec<T>` which trivially applies
+// - `impl<I: Iterator> IntoIterator for I`
+//   - requires `Vec<T>: Iterator`
+//     - where-clause requires `<Vec<T> as IntoIterator>::IntoIter eq Vec<T>`
+//       - normalize `<Vec<T> as IntoIterator>::IntoIter` again, cycle
+//
+// We need to treat this cycle as an error to be able to use the actual impl.
+
+fn test<T>()
+where
+    <Vec<T> as IntoIterator>::IntoIter: Iterator,
+{
+}
+
+fn main() {}
diff --git a/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.current.stderr b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.current.stderr
new file mode 100644
index 0000000000000..0a5b90f3d12bf
--- /dev/null
+++ b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.current.stderr
@@ -0,0 +1,48 @@
+error[E0277]: the trait bound `Foo: Bound` is not satisfied
+  --> $DIR/normalizes-to-is-not-productive.rs:41:1
+   |
+LL | / fn generic<T>()
+LL | | where
+LL | |     <Foo as Trait<T>>::Assoc: Bound,
+   | |____________________________________^ the trait `Bound` is not implemented for `Foo`
+   |
+   = help: the trait `Bound` is implemented for `u32`
+note: required for `Foo` to implement `Trait<T>`
+  --> $DIR/normalizes-to-is-not-productive.rs:24:19
+   |
+LL | impl<T: Bound, U> Trait<U> for T {
+   |         -----     ^^^^^^^^     ^
+   |         |
+   |         unsatisfied trait bound introduced here
+
+error[E0277]: the trait bound `Foo: Bound` is not satisfied
+  --> $DIR/normalizes-to-is-not-productive.rs:41:4
+   |
+LL | fn generic<T>()
+   |    ^^^^^^^ the trait `Bound` is not implemented for `Foo`
+   |
+   = help: the trait `Bound` is implemented for `u32`
+note: required for `Foo` to implement `Trait<T>`
+  --> $DIR/normalizes-to-is-not-productive.rs:24:19
+   |
+LL | impl<T: Bound, U> Trait<U> for T {
+   |         -----     ^^^^^^^^     ^
+   |         |
+   |         unsatisfied trait bound introduced here
+
+error[E0277]: the trait bound `Foo: Bound` is not satisfied
+  --> $DIR/normalizes-to-is-not-productive.rs:48:19
+   |
+LL |     impls_bound::<Foo>();
+   |                   ^^^ the trait `Bound` is not implemented for `Foo`
+   |
+   = help: the trait `Bound` is implemented for `u32`
+note: required by a bound in `impls_bound`
+  --> $DIR/normalizes-to-is-not-productive.rs:28:19
+   |
+LL | fn impls_bound<T: Bound>() {
+   |                   ^^^^^ required by this bound in `impls_bound`
+
+error: aborting due to 3 previous errors
+
+For more information about this error, try `rustc --explain E0277`.
diff --git a/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.next.stderr b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.next.stderr
new file mode 100644
index 0000000000000..d888fbf9db183
--- /dev/null
+++ b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.next.stderr
@@ -0,0 +1,31 @@
+error[E0277]: the trait bound `Foo: Bound` is not satisfied
+  --> $DIR/normalizes-to-is-not-productive.rs:43:31
+   |
+LL |     <Foo as Trait<T>>::Assoc: Bound,
+   |                               ^^^^^ the trait `Bound` is not implemented for `Foo`
+   |
+   = help: the trait `Bound` is implemented for `u32`
+note: required for `Foo` to implement `Trait<T>`
+  --> $DIR/normalizes-to-is-not-productive.rs:24:19
+   |
+LL | impl<T: Bound, U> Trait<U> for T {
+   |         -----     ^^^^^^^^     ^
+   |         |
+   |         unsatisfied trait bound introduced here
+
+error[E0277]: the trait bound `Foo: Bound` is not satisfied
+  --> $DIR/normalizes-to-is-not-productive.rs:48:19
+   |
+LL |     impls_bound::<Foo>();
+   |                   ^^^ the trait `Bound` is not implemented for `Foo`
+   |
+   = help: the trait `Bound` is implemented for `u32`
+note: required by a bound in `impls_bound`
+  --> $DIR/normalizes-to-is-not-productive.rs:28:19
+   |
+LL | fn impls_bound<T: Bound>() {
+   |                   ^^^^^ required by this bound in `impls_bound`
+
+error: aborting due to 2 previous errors
+
+For more information about this error, try `rustc --explain E0277`.
diff --git a/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.rs b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.rs
new file mode 100644
index 0000000000000..ffbbecaf89570
--- /dev/null
+++ b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.rs
@@ -0,0 +1,54 @@
+//@ ignore-compare-mode-next-solver (explicit)
+//@ compile-flags: -Znext-solver
+
+// Make sure that stepping into impl where-clauses of `NormalizesTo`
+// goals is unproductive. This must not compile, see the inline
+// comments.
+
+trait Bound {
+    fn method();
+}
+impl Bound for u32 {
+    fn method() {}
+}
+trait Trait<T> {
+    type Assoc: Bound;
+}
+
+struct Foo;
+
+impl Trait<u32> for Foo {
+    type Assoc = u32;
+}
+impl<T: Bound, U> Trait<U> for T {
+    type Assoc = T;
+}
+
+fn impls_bound<T: Bound>() {
+    T::method();
+}
+
+// The where-clause requires `Foo: Trait<T>` to hold to be wf.
+// If stepping into where-clauses during normalization is considered
+// to be productive, this would be the case:
+//
+// - `Foo: Trait<T>`
+//   - via blanket impls, requires `Foo: Bound`
+//     - via where-bound, requires `Foo eq <Foo as Trait<T>>::Assoc`
+//       - normalize `<Foo as Trait<T>>::Assoc`
+//         - via blanket impl, requires where-clause `Foo: Bound` -> cycle
+fn generic<T>()
+where
+    <Foo as Trait<T>>::Assoc: Bound,
+    //~^ ERROR the trait bound `Foo: Bound` is not satisfied
+{
+    // Requires proving `Foo: Bound` by normalizing
+    // `<Foo as Trait<T>>::Assoc` to `Foo`.
+    impls_bound::<Foo>();
+    //~^ ERROR the trait bound `Foo: Bound` is not satisfied
+}
+fn main() {
+    // Requires proving `<Foo as Trait<u32>>::Assoc: Bound`.
+    // This is trivially true.
+    generic::<u32>();
+}
diff --git a/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.stderr b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.stderr
new file mode 100644
index 0000000000000..8901805a20f5f
--- /dev/null
+++ b/tests/ui/traits/next-solver/cycles/normalizes-to-is-not-productive.stderr
@@ -0,0 +1,31 @@
+error[E0277]: the trait bound `Foo: Bound` is not satisfied
+  --> $DIR/normalizes-to-is-not-productive.rs:42:31
+   |
+LL |     <Foo as Trait<T>>::Assoc: Bound,
+   |                               ^^^^^ the trait `Bound` is not implemented for `Foo`
+   |
+   = help: the trait `Bound` is implemented for `u32`
+note: required for `Foo` to implement `Trait<T>`
+  --> $DIR/normalizes-to-is-not-productive.rs:23:19
+   |
+LL | impl<T: Bound, U> Trait<U> for T {
+   |         -----     ^^^^^^^^     ^
+   |         |
+   |         unsatisfied trait bound introduced here
+
+error[E0277]: the trait bound `Foo: Bound` is not satisfied
+  --> $DIR/normalizes-to-is-not-productive.rs:47:19
+   |
+LL |     impls_bound::<Foo>();
+   |                   ^^^ the trait `Bound` is not implemented for `Foo`
+   |
+   = help: the trait `Bound` is implemented for `u32`
+note: required by a bound in `impls_bound`
+  --> $DIR/normalizes-to-is-not-productive.rs:27:19
+   |
+LL | fn impls_bound<T: Bound>() {
+   |                   ^^^^^ required by this bound in `impls_bound`
+
+error: aborting due to 2 previous errors
+
+For more information about this error, try `rustc --explain E0277`.