diff --git a/types/react/index.d.ts b/types/react/index.d.ts
index 3f992f6e8f..06bc3ae590 100644
--- a/types/react/index.d.ts
+++ b/types/react/index.d.ts
@@ -21,6 +21,7 @@
 //                 Saransh Kataria <https://github.com/saranshkataria>
 //                 Kanitkorn Sujautra <https://github.com/lukyth>
 //                 Sebastian Silbermann <https://github.com/eps1lon>
+//                 Chris Sauve <https://github.com/lemonmade>
 // Definitions: https://github.com/DefinitelyTyped/DefinitelyTyped
 // TypeScript Version: 2.8
 
@@ -804,7 +805,9 @@ declare namespace React {
     // based on the code in https://github.com/facebook/react/pull/13968
 
     // Unlike the class component setState, the updates are not allowed to be partial
-    type SetStateAction<S> = S | ((prevState: S) => S);
+    type SetStateAction<S> = S extends ((...args: any[]) => any) ?
+        (prevState: S) => S :
+        (S | ((prevState: S) => S));
     // this technically does accept a second argument, but it's already under a deprecation warning
     // and it's not even released so probably better to not define it.
     type Dispatch<A> = (value: A) => void;
diff --git a/types/react/test/hooks.tsx b/types/react/test/hooks.tsx
index 70ea9a0ce7..e7e6585207 100644
--- a/types/react/test/hooks.tsx
+++ b/types/react/test/hooks.tsx
@@ -201,6 +201,14 @@ function useEveryHook(ref: React.Ref<{ id: number }>|undefined): () => boolean {
     // make sure the generic argument does reject actual potentially undefined inputs
     // $ExpectError
     React.useState<number>(undefined)[0];
+    // When state is a function type, it must be returned from a function,
+    // not provided directly.
+    // $ExpectError
+    React.useState<(() => boolean)>(() => true)[1](() => false);
+    // Returning a function for state is fine
+    React.useState<(() => boolean)>(() => true)[1](() => () => false);
+    // As is returning non-function members of a union
+    React.useState<(() => boolean) | number>(() => true)[1](() => 42);
 
     // useReducer convenience overload