diff --git a/compiler-utils/src/main/java/com/squareup/anvil/compiler/internal/reference/TypeReference.kt b/compiler-utils/src/main/java/com/squareup/anvil/compiler/internal/reference/TypeReference.kt
index de759bb12..f7a76511a 100644
--- a/compiler-utils/src/main/java/com/squareup/anvil/compiler/internal/reference/TypeReference.kt
+++ b/compiler-utils/src/main/java/com/squareup/anvil/compiler/internal/reference/TypeReference.kt
@@ -35,6 +35,7 @@ import org.jetbrains.kotlin.psi.KtTypeReference
 import org.jetbrains.kotlin.psi.KtUserType
 import org.jetbrains.kotlin.psi.psiUtil.containingClass
 import org.jetbrains.kotlin.psi.psiUtil.getChildOfType
+import org.jetbrains.kotlin.psi.psiUtil.hasSuspendModifier
 import org.jetbrains.kotlin.psi.psiUtil.parents
 import org.jetbrains.kotlin.resolve.descriptorUtil.fqNameOrNull
 import org.jetbrains.kotlin.types.DefinitelyNotNullType
@@ -304,6 +305,8 @@ public sealed class TypeReference {
                 ?: emptyList(),
               returnType = (returnTypeReference ?: fail())
                 .requireTypeName()
+            ).copy(
+              suspending = type.modifierList?.hasSuspendModifier() ?: false
             )
           is KtNullableType -> {
             (innerType ?: fail()).requireTypeName().copy(nullable = true)
@@ -644,6 +647,15 @@ private fun TypeName.lambdaFix(): TypeName {
   // must be converted or their signatures won't match.
   // see https://github.com/square/anvil/issues/400
   val lambdaTypeName = this as? LambdaTypeName ?: return this
+  if (lambdaTypeName.isSuspending) {
+    // We short-circuit for suspend lambdas because otherwise we would need to represent them as
+    // something like `Function1<Continuation<String?>, *>`. This works fine when generating Java
+    // code like in Dagger, but proves problematic when generating Kotlin code and ends up requiring
+    // continuous casting of the arg to make the compiler happy again. It's possible this could end
+    // up failing for a Psi vs Descriptor use-case like the original ticket that required this
+    // lambda fix method but I haven't been able to find a failing repro for that yet.
+    return this
+  }
 
   val allTypes = listOfNotNull(lambdaTypeName.receiver) +
     lambdaTypeName.parameters.map { it.type } +
diff --git a/compiler/src/test/java/com/squareup/anvil/compiler/dagger/AssistedFactoryGeneratorTest.kt b/compiler/src/test/java/com/squareup/anvil/compiler/dagger/AssistedFactoryGeneratorTest.kt
index 044da9ae1..8690c6ebf 100644
--- a/compiler/src/test/java/com/squareup/anvil/compiler/dagger/AssistedFactoryGeneratorTest.kt
+++ b/compiler/src/test/java/com/squareup/anvil/compiler/dagger/AssistedFactoryGeneratorTest.kt
@@ -326,6 +326,48 @@ public final class AssistedServiceFactory_Impl implements AssistedServiceFactory
     }
   }
 
+  @Test fun `the factory function may require a suspend lambda type`() {
+    compile(
+      """
+      package com.squareup.test
+      
+      import dagger.assisted.Assisted
+      import dagger.assisted.AssistedFactory
+      import dagger.assisted.AssistedInject
+      
+      data class AssistedService @AssistedInject constructor(
+        val int: Int,
+        @Assisted val stringFactory: suspend (Int) -> String
+      )
+      
+      @AssistedFactory
+      interface AssistedServiceFactory {
+        fun create(stringFactory: suspend (Int) -> String): AssistedService
+      }
+      """
+    ) {
+      val factoryImplClass = assistedServiceFactory.implClass()
+      val generatedFactoryInstance = assistedService.factoryClass().createInstance(Provider { 5 })
+      val factoryImplInstance = factoryImplClass.createInstance(generatedFactoryInstance)
+
+      val staticMethods = factoryImplClass.declaredMethods.filter { it.isStatic }
+      assertThat(staticMethods).hasSize(1)
+
+      val factoryProvider = staticMethods.single { it.name == "create" }
+        .invoke(null, generatedFactoryInstance) as Provider<*>
+      assertThat(factoryProvider.get()::class.java).isEqualTo(factoryImplClass)
+
+      val lambdaArg: suspend (Int) -> String = { num: Int -> num.toString() }
+
+      val assistedServiceInstance = factoryImplClass.declaredMethods
+        .filterNot { it.isStatic }
+        .last { it.name == "create" }
+        .invoke(factoryImplInstance, lambdaArg)
+
+      assertThat(assistedServiceInstance).isEqualTo(assistedService.createInstance(5, lambdaArg))
+    }
+  }
+
   @Test fun `the factory function may require a Function type`() {
     compile(
       """
diff --git a/compiler/src/test/java/com/squareup/anvil/compiler/dagger/AssistedInjectGeneratorTest.kt b/compiler/src/test/java/com/squareup/anvil/compiler/dagger/AssistedInjectGeneratorTest.kt
index f13bfd0f2..ad5f114d0 100644
--- a/compiler/src/test/java/com/squareup/anvil/compiler/dagger/AssistedInjectGeneratorTest.kt
+++ b/compiler/src/test/java/com/squareup/anvil/compiler/dagger/AssistedInjectGeneratorTest.kt
@@ -96,6 +96,38 @@ public final class AssistedService_Factory {
     }
   }
 
+  @Test fun `a factory class is generated with a suspend lambda assisted parameter`() {
+    compile(
+      """
+      package com.squareup.test
+      
+      import dagger.assisted.Assisted
+      import dagger.assisted.AssistedInject
+      
+      data class AssistedService @AssistedInject constructor(
+        @Assisted val action: suspend () -> String?
+      )
+      """,
+    ) {
+      val factoryClass = assistedService.factoryClass()
+
+      val constructor = factoryClass.declaredConstructors.single()
+      assertThat(constructor.parameterTypes.toList()).isEmpty()
+
+      val staticMethods = factoryClass.declaredMethods.filter { it.isStatic }
+      assertThat(staticMethods).hasSize(2)
+
+      val factoryInstance = staticMethods.single { it.name == "create" }
+        .invoke(null)
+      assertThat(factoryInstance::class.java).isEqualTo(factoryClass)
+
+      val action: suspend () -> String? = { "Hello " }
+      val newInstance = staticMethods.single { it.name == "newInstance" }
+        .invoke(null, action)
+      assertThat(factoryInstance.invokeGet(action)).isEqualTo(newInstance)
+    }
+  }
+
   @Test fun `a factory class is generated without any parameter`() {
     compile(
       """
@@ -642,7 +674,7 @@ public final class AssistedService_Factory {
 
   private fun compile(
     @Language("kotlin") vararg sources: String,
-    block: JvmCompilationResult.() -> Unit = { }
+    block: JvmCompilationResult.() -> Unit = { },
   ): JvmCompilationResult = compileAnvil(
     sources = sources,
     enableDaggerAnnotationProcessor = useDagger,