diff --git a/src/Compilers/CSharp/Portable/Binder/Semantics/Conversions/Conversions.cs b/src/Compilers/CSharp/Portable/Binder/Semantics/Conversions/Conversions.cs
index d1fd763c7b9fd..1dda2dd2c9090 100644
--- a/src/Compilers/CSharp/Portable/Binder/Semantics/Conversions/Conversions.cs
+++ b/src/Compilers/CSharp/Portable/Binder/Semantics/Conversions/Conversions.cs
@@ -382,7 +382,13 @@ public static bool ReportDelegateOrFunctionPointerMethodGroupDiagnostics(Binder
                             typeContainingConstructor: null, delegateTypeBeingInvoked: null,
                             isMethodGroupConversion: true, returnRefKind: invokeMethodOpt?.RefKind, delegateOrFunctionPointerType: targetType);
 
-                        hasErrors = overloadDiagnostics.HasAnyErrors();
+                        // Even if no diagnostics were reported, check if any candidate method has error types
+                        // in its return type or parameters. This can happen when ERR_BadRetType or similar errors
+                        // are suppressed for methods with omitted type arguments.
+                        hasErrors = overloadDiagnostics.HasAnyErrors()
+                            || result.Results.Any(static candidate => candidate.Member.ReturnType.ContainsErrorType()
+                            || candidate.Member.Parameters.Any(static p => p.Type.ContainsErrorType()));
+
                         diagnostics.AddRangeAndFree(overloadDiagnostics);
                     }
                 }
diff --git a/src/Compilers/CSharp/Portable/Binder/Semantics/OverloadResolution/OverloadResolutionResult.cs b/src/Compilers/CSharp/Portable/Binder/Semantics/OverloadResolution/OverloadResolutionResult.cs
index 7982f26bcba47..66791be64d1e8 100644
--- a/src/Compilers/CSharp/Portable/Binder/Semantics/OverloadResolution/OverloadResolutionResult.cs
+++ b/src/Compilers/CSharp/Portable/Binder/Semantics/OverloadResolution/OverloadResolutionResult.cs
@@ -726,7 +726,13 @@ private bool HadReturnMismatch(Location location, BindingDiagnosticBag diagnosti
             if (!mismatch.IsNull)
             {
                 var method = (MethodSymbol)(Symbol)mismatch.Member;
-                diagnostics.Add(ErrorCode.ERR_BadRetType, location, method, method.ReturnType);
+                // Only report ERR_BadRetType if the return type is well-defined.
+                // If the return type is an error type (from omitted type arguments like Method<>),
+                // there's already a more specific error reported elsewhere (e.g., ERR_OmittedTypeArgument).
+                if (!method.ReturnType.ContainsErrorType())
+                {
+                    diagnostics.Add(ErrorCode.ERR_BadRetType, location, method, method.ReturnType);
+                }
                 return true;
             }
 
diff --git a/src/Compilers/CSharp/Test/Semantic/Semantics/BindingTests.cs b/src/Compilers/CSharp/Test/Semantic/Semantics/BindingTests.cs
index be2dc6665b3b0..4999166309c14 100644
--- a/src/Compilers/CSharp/Test/Semantic/Semantics/BindingTests.cs
+++ b/src/Compilers/CSharp/Test/Semantic/Semantics/BindingTests.cs
@@ -3860,9 +3860,6 @@ public void Test()
                 // (33,51): error CS8389: Omitting the type argument is not allowed in the current context
                 //         System.Func<object> delegateConversion1 = "string literal".ExtensionMethod1<>;
                 Diagnostic(ErrorCode.ERR_OmittedTypeArgument, @"""string literal"".ExtensionMethod1<>").WithLocation(33, 51),
-                // (33,51): error CS0407: '? FooExtensions.ExtensionMethod1<?>(object)' has the wrong return type
-                //         System.Func<object> delegateConversion1 = "string literal".ExtensionMethod1<>;
-                Diagnostic(ErrorCode.ERR_BadRetType, @"""string literal"".ExtensionMethod1<>").WithArguments("FooExtensions.ExtensionMethod1<?>(object)", "?").WithLocation(33, 51),
                 // (34,51): error CS8389: Omitting the type argument is not allowed in the current context
                 //         System.Func<object> delegateConversion2 = "string literal".ExtensionMethod2<>;
                 Diagnostic(ErrorCode.ERR_OmittedTypeArgument, @"""string literal"".ExtensionMethod2<>").WithLocation(34, 51),
@@ -3871,6 +3868,32 @@ public void Test()
                 Diagnostic(ErrorCode.ERR_NoSuchMemberOrExtension, "ExtensionMethod2<>").WithArguments("string", "ExtensionMethod2").WithLocation(34, 68));
         }
 
+        [Fact, WorkItem("https://github.com/dotnet/roslyn/issues/16041")]
+        public void MissingTypeArgumentInGenericExtensionMethod_ParameterType()
+        {
+            var source =
+                """
+                public static class GooExtensions
+                {
+                    public static void ExtensionMethod1<T>(this object obj, T t) { }
+                }
+
+                public class Class1
+                {
+                    public void Test()
+                    {
+                        System.Action<object> delegateConversion1 = "literal".ExtensionMethod1<>;
+                    }
+                }
+                """;
+            var compilation = CreateCompilationWithMscorlib40AndSystemCore(source);
+
+            compilation.VerifyDiagnostics(
+                // (10,53): error CS8389: Omitting the type argument is not allowed in the current context
+                //         System.Action<object> delegateConversion1 = "literal".ExtensionMethod1<>;
+                Diagnostic(ErrorCode.ERR_OmittedTypeArgument, @"""literal"".ExtensionMethod1<>").WithLocation(10, 53));
+        }
+
         [WorkItem(22757, "https://github.com/dotnet/roslyn/issues/22757")]
         [Fact]
         public void MethodGroupConversionNoReceiver()