diff --git a/compiler/src/dotty/tools/dotc/core/Types.scala b/compiler/src/dotty/tools/dotc/core/Types.scala
index 50e01e0f2c68..e78cd15aa706 100644
--- a/compiler/src/dotty/tools/dotc/core/Types.scala
+++ b/compiler/src/dotty/tools/dotc/core/Types.scala
@@ -3966,7 +3966,6 @@ object Types {
    *  and `X_1,...X_n` are the type variables bound in `patternType`
    */
   abstract case class MatchType(bound: Type, scrutinee: Type, cases: List[Type]) extends CachedProxyType with ValueType {
-
     def derivedMatchType(bound: Type, scrutinee: Type, cases: List[Type])(implicit ctx: Context): MatchType =
       if (bound.eq(this.bound) && scrutinee.eq(this.scrutinee) && cases.eqElements(this.cases)) this
       else MatchType(bound, scrutinee, cases)
@@ -4945,6 +4944,15 @@ object Types {
     override protected def derivedWildcardType(tp: WildcardType, bounds: Type): WildcardType =
       tp.derivedWildcardType(rangeToBounds(bounds))
 
+    override protected def derivedMatchType(tp: MatchType, bound: Type, scrutinee: Type, cases: List[Type]): Type =
+      bound match
+        case Range(lo, hi) =>
+          range(derivedMatchType(tp, lo, scrutinee, cases), derivedMatchType(tp, hi, scrutinee, cases))
+        case _ =>
+          scrutinee match
+            case Range(lo, hi) => range(bound.bounds.lo, bound.bounds.hi)
+            case _ => tp.derivedMatchType(bound, scrutinee, cases)
+
     override protected def derivedSkolemType(tp: SkolemType, info: Type): Type = info match {
       case Range(lo, hi) =>
         range(tp.derivedSkolemType(lo), tp.derivedSkolemType(hi))
diff --git a/tests/pos/i7807.scala b/tests/pos/i7807.scala
new file mode 100644
index 000000000000..36193f26a972
--- /dev/null
+++ b/tests/pos/i7807.scala
@@ -0,0 +1,16 @@
+object Test with
+
+  def flip: (x: 0 | 1) => x.type match { case 0 => 1 case 1 => 0 } = ???
+
+  flip(0): 1
+  flip(1): 0
+
+  flip(if ??? then 0 else 1)
+  val n: 0 | 1 = if ??? then 0 else 1
+  flip(n)
+
+  val m: n.type match { case 0 => 1 case 1 => 0 } = flip(n)
+
+  // The following do not work, see discussion in https://github.com/lampepfl/dotty/pull/7835/files/6e60814e69be5c8d60265d4ce4bc1758863c23d8#r361741296:
+  // flip(m)
+  // flip(flip(n))