diff --git a/phpunit/code/inheritance_error_return_intersection_missing.php b/phpunit/code/inheritance_error_return_intersection_missing.php
new file mode 100644
index 00000000..03ac56c2
--- /dev/null
+++ b/phpunit/code/inheritance_error_return_intersection_missing.php
@@ -0,0 +1,23 @@
+<?php
+
+interface IntersectionLeft
+{
+}
+
+interface IntersectionRight
+{
+}
+
+interface IntersectionReturnParent
+{
+    public function value(): IntersectionLeft&IntersectionRight;
+}
+
+class IntersectionReturnChild implements IntersectionReturnParent
+{
+    public function value(): IntersectionLeft
+    {
+        return new class implements IntersectionLeft {
+        };
+    }
+}
diff --git a/phpunit/code/inheritance_error_return_never_widened.php b/phpunit/code/inheritance_error_return_never_widened.php
new file mode 100644
index 00000000..f453f333
--- /dev/null
+++ b/phpunit/code/inheritance_error_return_never_widened.php
@@ -0,0 +1,13 @@
+<?php
+
+abstract class NeverReturnParent
+{
+    abstract public function stop(): never;
+}
+
+abstract class NeverReturnChild extends NeverReturnParent
+{
+    public function stop(): void
+    {
+    }
+}
diff --git a/phpunit/code/inheritance_error_return_static_widened.php b/phpunit/code/inheritance_error_return_static_widened.php
new file mode 100644
index 00000000..c1377fdb
--- /dev/null
+++ b/phpunit/code/inheritance_error_return_static_widened.php
@@ -0,0 +1,17 @@
+<?php
+
+class StaticReturnParent
+{
+    public function value(): static
+    {
+        return $this;
+    }
+}
+
+class StaticReturnChild extends StaticReturnParent
+{
+    public function value(): self
+    {
+        return $this;
+    }
+}
diff --git a/phpunit/code/inheritance_error_return_union_widened.php b/phpunit/code/inheritance_error_return_union_widened.php
new file mode 100644
index 00000000..2db69e1a
--- /dev/null
+++ b/phpunit/code/inheritance_error_return_union_widened.php
@@ -0,0 +1,14 @@
+<?php
+
+interface UnionReturnParent
+{
+    public function value(): int|string;
+}
+
+class UnionReturnChild implements UnionReturnParent
+{
+    public function value(): bool
+    {
+        return true;
+    }
+}
diff --git a/phpunit/code/return_type_covariance_intersection.php b/phpunit/code/return_type_covariance_intersection.php
new file mode 100644
index 00000000..2c26a062
--- /dev/null
+++ b/phpunit/code/return_type_covariance_intersection.php
@@ -0,0 +1,39 @@
+<?php
+
+interface CovarianceLeft
+{
+}
+
+interface CovarianceRight
+{
+}
+
+class CovarianceBoth implements CovarianceLeft, CovarianceRight
+{
+}
+
+interface IntersectionNarrowingContract
+{
+    public function intersection(): CovarianceLeft;
+}
+
+class IntersectionNarrowingImpl implements IntersectionNarrowingContract
+{
+    public function intersection(): CovarianceLeft&CovarianceRight
+    {
+        return new CovarianceBoth();
+    }
+}
+
+interface IntersectionContract
+{
+    public function concrete(): CovarianceLeft&CovarianceRight;
+}
+
+class IntersectionImpl implements IntersectionContract
+{
+    public function concrete(): CovarianceBoth
+    {
+        return new CovarianceBoth();
+    }
+}
diff --git a/phpunit/src/InheritanceErrorTest.php b/phpunit/src/InheritanceErrorTest.php
index 59c07e14..d5aeb9f5 100644
--- a/phpunit/src/InheritanceErrorTest.php
+++ b/phpunit/src/InheritanceErrorTest.php
@@ -53,6 +53,31 @@ class InheritanceErrorTest extends TestCase
         $this->exec('must be compatible', 'inheritance_error_return_contravariant_class.php');
     }
 
+    public function testUnionReturnTypeCannotBeWidenedToUnrelatedType(): void
+    {
+        $this->exec('must be compatible', 'inheritance_error_return_union_widened.php');
+    }
+
+    public function testIntersectionReturnTypeCannotDropAMember(): void
+    {
+        $this->exec('must be compatible', 'inheritance_error_return_intersection_missing.php');
+    }
+
+    public function testStaticReturnTypeCannotBeWidenedToSelf(): void
+    {
+        $this->exec('must be compatible', 'inheritance_error_return_static_widened.php');
+    }
+
+    public function testNeverReturnTypeCannotBeWidenedToVoid(): void
+    {
+        $this->exec('must be compatible', 'inheritance_error_return_never_widened.php');
+    }
+
+    public function testIntersectionReturnTypeCanNarrowToIntersectionOrConcreteSubtype(): void
+    {
+        $this->assertCompiles('return_type_covariance_intersection.php');
+    }
+
     public function testParameterTypeCannotBeCovariant()
     {
         $this->exec('must be compatible', 'inheritance_error_param_covariant_class.php');
diff --git a/src/Generator/TypeCheckGenerator.php b/src/Generator/TypeCheckGenerator.php
index 292967a1..66dbb2e2 100644
--- a/src/Generator/TypeCheckGenerator.php
+++ b/src/Generator/TypeCheckGenerator.php
@@ -116,7 +116,7 @@ trait TypeCheckGenerator
         return $class ? [['kind' => 'instanceof', 'class' => $class]] : [];
     }
 
-    private function typeCheckNodeToString(NodeAbstract $typeNode): string
+    protected function typeCheckNodeToString(NodeAbstract $typeNode): string
     {
         if ($typeNode instanceof Node\Identifier) {
             return $typeNode->name;
diff --git a/src/Preprocessor.php b/src/Preprocessor.php
index 9e0d5d11..877cc4f2 100644
--- a/src/Preprocessor.php
+++ b/src/Preprocessor.php
@@ -544,6 +544,9 @@ class Preprocessor extends CompilerBase
         }
         $functionDef->exported = !($this->classDef?->exported === false || $this->hasNoExportAttribute($v));
         $functionDef->returnClass = $class;
+        $functionDef->returnTypeStr = $v->returnType === null
+            ? ''
+            : $this->typeCheckNodeToString($v->returnType);
         // Record late-bound return type keywords so they can be re-resolved to
         // the consuming class when a trait method is flattened into a class.
         $functionDef->returnTypeKeyword = $returnTypeKeyword;
@@ -562,7 +565,6 @@ class Preprocessor extends CompilerBase
             $typeInfo = $this->buildTypeCheckFromNode($v->returnType);
             if (!empty($typeInfo['check'])) {
                 $functionDef->returnTypeCheck = $typeInfo['check'];
-                $functionDef->returnTypeStr = $typeInfo['typeStr'];
                 $functionDef->returnTypeNode = $v->returnType;
             }
         }
diff --git a/src/Translator.php b/src/Translator.php
index 402568ea..13ff107e 100644
--- a/src/Translator.php
+++ b/src/Translator.php
@@ -3626,7 +3626,12 @@ CODE;
             ));
         }
 
-        if (!$this->isReturnTypeOverrideCompatible($childFuncDef, $parentFuncDef)) {
+        if (!$this->isReturnTypeOverrideCompatible(
+            $childFuncDef,
+            $parentFuncDef,
+            $className,
+            $parentClass,
+        )) {
             $this->fatalMethodOverrideIncompatible($v, $className, $methodName, $parentClass);
         }
         if ($childFuncDef->returnsByRef !== $parentFuncDef->returnsByRef) {
@@ -3711,33 +3716,163 @@ CODE;
         ));
     }
 
-    private function isReturnTypeOverrideCompatible(FunctionDef $childFuncDef, FunctionDef $parentFuncDef): bool
-    {
+    private function isReturnTypeOverrideCompatible(
+        FunctionDef $childFuncDef,
+        FunctionDef $parentFuncDef,
+        string $childClass,
+        string $parentClass,
+    ): bool {
         if ($parentFuncDef->returnTypeUndeclared) {
             return true;
         }
         if ($childFuncDef->returnTypeUndeclared) {
             return false;
         }
-        if ($parentFuncDef->returnTypeCheck || $childFuncDef->returnTypeCheck) {
-            return $parentFuncDef->returnTypeStr === $childFuncDef->returnTypeStr;
+
+        $parentTypes = $this->getReturnAcceptedTypes($parentFuncDef, $parentClass);
+        $childTypes = $this->getReturnAcceptedTypes($childFuncDef, $childClass);
+
+        // Type checks are stored in disjunctive normal form: the outer list is
+        // a union, while an allOf entry is an intersection. Every child union
+        // branch must imply at least one complete parent branch.
+        foreach ($childTypes as $childType) {
+            if (!$this->isReturnTypeCoveredBy($childType, $parentTypes)) {
+                return false;
+            }
         }
-        if ($parentFuncDef->returnType === Type::VAR) {
-            return true;
+        return true;
+    }
+
+    private function getReturnAcceptedTypes(FunctionDef $functionDef, string $declaringClass): array
+    {
+        if (!empty($functionDef->returnTypeCheck)) {
+            return array_map(
+                fn (array $type): array => $this->normalizeReturnTypeEntry($type, $declaringClass),
+                $functionDef->returnTypeCheck,
+            );
         }
-        if ($childFuncDef->returnType !== $parentFuncDef->returnType) {
-            return false;
+
+        if ($functionDef->returnTypeKeyword === 'static') {
+            return [['kind' => 'isStatic', 'class' => $declaringClass]];
+        }
+        if ($functionDef->returnType === Type::OBJECT && $functionDef->returnClass !== '') {
+            return [['kind' => 'instanceof', 'class' => $functionDef->returnClass]];
+        }
+
+        $declaredType = strtolower($functionDef->returnTypeStr);
+        return match ($declaredType) {
+            'mixed' => [['kind' => 'isMixed']],
+            'never' => [['kind' => 'isNever']],
+            'void' => [['kind' => 'isVoid']],
+            'null' => [['kind' => 'isNull']],
+            'true' => [['kind' => 'isTrue']],
+            'false' => [['kind' => 'isFalse']],
+            'callable' => [['kind' => 'callable']],
+            'iterable' => [['kind' => 'iterable']],
+            'object' => [['kind' => 'isObject']],
+            default => match ($functionDef->returnType) {
+                Type::INT => [['kind' => 'isInt']],
+                Type::FLOAT => [['kind' => 'isFloat']],
+                Type::BOOL => [['kind' => 'isBool']],
+                Type::STR => [['kind' => 'isString']],
+                Type::ARRAY => [['kind' => 'isArray']],
+                Type::RESOURCE => [['kind' => 'isResource']],
+                Type::OBJECT => [['kind' => 'isObject']],
+                default => [['kind' => 'isMixed']],
+            },
+        };
+    }
+
+    private function normalizeReturnTypeEntry(array $type, string $declaringClass): array
+    {
+        if (($type['kind'] ?? null) === 'allOf') {
+            $type['types'] = array_map(
+                fn (array $member): array => $this->normalizeReturnTypeEntry($member, $declaringClass),
+                $type['types'],
+            );
+        } elseif (($type['kind'] ?? null) === 'instanceof' && ($type['class'] ?? null) === 'static') {
+            $type = ['kind' => 'isStatic', 'class' => $declaringClass];
+        }
+        return $type;
+    }
+
+    private function isReturnTypeCoveredBy(array $childType, array $parentTypes): bool
+    {
+        $childClause = ($childType['kind'] ?? null) === 'allOf'
+            ? $childType['types']
+            : [$childType];
+
+        foreach ($parentTypes as $parentType) {
+            $parentClause = ($parentType['kind'] ?? null) === 'allOf'
+                ? $parentType['types']
+                : [$parentType];
+            if ($this->isReturnTypeClauseSubtype($childClause, $parentClause)) {
+                return true;
+            }
         }
-        if ($parentFuncDef->returnType !== Type::OBJECT) {
+        return false;
+    }
+
+    private function isReturnTypeClauseSubtype(array $childClause, array $parentClause): bool
+    {
+        foreach ($parentClause as $parentType) {
+            $covered = false;
+            foreach ($childClause as $childType) {
+                if ($this->isReturnTypeEntryCompatible($childType, $parentType)) {
+                    $covered = true;
+                    break;
+                }
+            }
+            if (!$covered) {
+                return false;
+            }
+        }
+        return true;
+    }
+
+    private function isReturnTypeEntryCompatible(array $childType, array $parentType): bool
+    {
+        $childKind = $childType['kind'] ?? null;
+        $parentKind = $parentType['kind'] ?? null;
+
+        if ($childKind === 'isNever' || $parentKind === 'isMixed') {
+            return true;
+        }
+        if (($childKind === 'isTrue' || $childKind === 'isFalse') && $parentKind === 'isBool') {
             return true;
         }
-        if ($childFuncDef->returnClass === $parentFuncDef->returnClass) {
+        if ($childKind === 'isArray' && $parentKind === 'iterable') {
             return true;
         }
-        if (!$childFuncDef->returnClass || !$parentFuncDef->returnClass) {
+        if ($childKind === 'isStatic') {
+            if ($parentKind === 'isObject' || $parentKind === 'isStatic') {
+                return true;
+            }
+            if ($parentKind === 'instanceof') {
+                return $this->isInheritedFrom(
+                    $childType['class'] ?? '',
+                    $parentType['class'] ?? '',
+                );
+            }
+            return false;
+        }
+        if ($childKind === 'instanceof') {
+            if ($parentKind === 'isObject') {
+                return true;
+            }
+            $childClass = $childType['class'] ?? '';
+            if ($parentKind === 'iterable') {
+                return $childClass !== '' && $this->isInheritedFrom($childClass, 'Traversable');
+            }
+            if ($parentKind === 'instanceof') {
+                $parentClass = $parentType['class'] ?? '';
+                return $childClass !== ''
+                    && $parentClass !== ''
+                    && $this->isInheritedFrom($childClass, $parentClass);
+            }
             return false;
         }
-        return $this->isInheritedFrom($childFuncDef->returnClass, $parentFuncDef->returnClass);
+        return $childKind !== null && $childKind === $parentKind;
     }
 
     private function isParameterTypeOverrideCompatible(ArgInfo $childArg, ArgInfo $parentArg): bool
diff --git a/tests/compiler/class/interface-return-covariance.phpt b/tests/compiler/class/interface-return-covariance.phpt
new file mode 100644
index 00000000..792c3c76
--- /dev/null
+++ b/tests/compiler/class/interface-return-covariance.phpt
@@ -0,0 +1,47 @@
+--TEST--
+Interface return type covariance with nullable interface and anonymous class
+--FILE--
+<?php
+
+declare(strict_types=1);
+
+interface TestInterface1
+{
+}
+
+interface TestInterface2 extends TestInterface1
+{
+}
+
+interface TestInterface3
+{
+    public function test(): ?TestInterface1;
+}
+
+class TestClass implements TestInterface3
+{
+    // Covariant: ?TestInterface2 is a subtype of ?TestInterface1 because
+    // TestInterface2 extends TestInterface1.
+    public function test(): ?TestInterface2
+    {
+        return new class() implements TestInterface2 {
+            public function hello(): string {
+                return "anon";
+            }
+        };
+    }
+}
+
+function main()
+{
+    $test = new TestClass;
+    $result = $test->test();
+    var_dump($result instanceof TestInterface1);
+    var_dump($result instanceof TestInterface2);
+    var_dump($result === null);
+}
+?>
+--EXPECT--
+bool(true)
+bool(true)
+bool(false)
diff --git a/tests/compiler/type_decl/return-type-covariance.phpt b/tests/compiler/type_decl/return-type-covariance.phpt
new file mode 100644
index 00000000..68883ac3
--- /dev/null
+++ b/tests/compiler/type_decl/return-type-covariance.phpt
@@ -0,0 +1,120 @@
+--TEST--
+Return type covariance: union narrowing and object subtype
+--FILE--
+<?php
+
+interface UnionReturnContract
+{
+    public function make(): int|string;
+}
+
+class UnionReturnImpl implements UnionReturnContract
+{
+    // Covariant: narrowing a union return type (int|string -> int) is allowed.
+    public function make(): int
+    {
+        return 42;
+    }
+}
+
+class BaseType {}
+class ChildType extends BaseType {}
+
+interface ObjectReturnContract
+{
+    public function build(): BaseType;
+}
+
+class ObjectReturnImpl implements ObjectReturnContract
+{
+    // Covariant: returning a subtype (ChildType) for a BaseType return is allowed.
+    public function build(): ChildType
+    {
+        return new ChildType();
+    }
+}
+
+class StaticBase
+{
+    public function copy(): ?self
+    {
+        return $this;
+    }
+}
+
+class StaticChild extends StaticBase
+{
+    public function copy(): ?static
+    {
+        return $this;
+    }
+}
+
+interface IterableContract
+{
+    public function values(): iterable;
+}
+
+class IterableImpl implements IterableContract
+{
+    public function values(): array
+    {
+        return [1, 2];
+    }
+}
+
+interface BoolContract
+{
+    public function enabled(): bool;
+}
+
+class LiteralBoolImpl implements BoolContract
+{
+    public function enabled(): true
+    {
+        return true;
+    }
+}
+
+abstract class VoidContract
+{
+    abstract public function stop(): void;
+}
+
+abstract class NeverImpl extends VoidContract
+{
+    public function stop(): never
+    {
+        throw new RuntimeException('stop');
+    }
+}
+
+function main()
+{
+    $impl = new UnionReturnImpl();
+    var_dump($impl->make());
+
+    $obj = new ObjectReturnImpl();
+    $built = $obj->build();
+    var_dump($built instanceof BaseType);
+    var_dump($built instanceof ChildType);
+
+    $static = new StaticChild();
+    var_dump($static->copy() instanceof StaticChild);
+
+    var_dump((new IterableImpl())->values());
+    var_dump((new LiteralBoolImpl())->enabled());
+}
+?>
+--EXPECT--
+int(42)
+bool(true)
+bool(true)
+bool(true)
+array(2) {
+  [0]=>
+  int(1)
+  [1]=>
+  int(2)
+}
+bool(true)