diff --git a/.changeset/tasty-chicken-itch.md b/.changeset/tasty-chicken-itch.md
new file mode 100644
index 0000000000..91c5aea351
--- /dev/null
+++ b/.changeset/tasty-chicken-itch.md
@@ -0,0 +1,5 @@
+---
+'xstate': patch
+---
+
+Fixed an issue with inline functions in the config object used as transition actions not having their argument types inferred.
diff --git a/packages/core/src/StateNode.ts b/packages/core/src/StateNode.ts
index 32047ca815..a31a3a5db4 100644
--- a/packages/core/src/StateNode.ts
+++ b/packages/core/src/StateNode.ts
@@ -66,7 +66,6 @@ import {
   InvokeSourceDefinition,
   MachineSchema,
   ActorRef,
-  StateMachine,
   InternalMachineOptions,
   ServiceMap,
   StateConfig,
@@ -306,7 +305,7 @@ class StateNode<
     private _context:
       | Readonly<TContext>
       | (() => Readonly<TContext>) = ('context' in config
-      ? (config as StateMachine<TContext, any, TEvent>).context
+      ? (config as any).context
       : undefined) as any, // TODO: this is unsafe, but we're removing it in v5 anyway
     _stateInfo?: {
       parent: StateNode<any, any, any, any, any, any>;
diff --git a/packages/core/src/types.ts b/packages/core/src/types.ts
index 6395246cae..4114a28187 100644
--- a/packages/core/src/types.ts
+++ b/packages/core/src/types.ts
@@ -449,14 +449,12 @@ export type TransitionConfigOrTarget<
 >;
 
 export type TransitionsConfigMap<TContext, TEvent extends EventObject> = {
-  [K in TEvent['type']]?: TransitionConfigOrTarget<
-    TContext,
-    TEvent extends { type: K } ? TEvent : never
-  >;
-} & {
-  ''?: TransitionConfigOrTarget<TContext, TEvent>;
-} & {
-  '*'?: TransitionConfigOrTarget<TContext, TEvent>;
+  [K in TEvent['type'] | '' | '*']?: K extends '' | '*'
+    ? TransitionConfigOrTarget<TContext, TEvent>
+    : TransitionConfigOrTarget<
+        TContext,
+        TEvent extends { type: K } ? TEvent : never
+      >;
 };
 
 type TransitionsConfigArray<TContext, TEvent extends EventObject> = Array<
diff --git a/packages/core/test/types.test.ts b/packages/core/test/types.test.ts
index 33557207f1..7489dd6a5e 100644
--- a/packages/core/test/types.test.ts
+++ b/packages/core/test/types.test.ts
@@ -514,6 +514,57 @@ describe('events', () => {
 
     acceptMachine(toggleMachine);
   });
+
+  it('should infer inline function parameters when narrowing transition actions based on the event type', () => {
+    createMachine({
+      schema: {
+        context: {} as {
+          count: number;
+        },
+        events: {} as
+          | { type: 'EVENT_WITH_FLAG'; flag: boolean }
+          | {
+              type: 'EVENT_WITHOUT_FLAG';
+            }
+      },
+      on: {
+        EVENT_WITH_FLAG: {
+          actions: (_context, event) => {
+            ((_accept: 'EVENT_WITH_FLAG') => {})(event.type);
+            ((_accept: boolean) => {})(event.flag);
+            // @ts-expect-error
+            ((_accept: 'is not any') => {})(event);
+          }
+        }
+      }
+    });
+  });
+
+  it('should infer inline function parameters when for a wildcard transition', () => {
+    createMachine({
+      schema: {
+        context: {} as {
+          count: number;
+        },
+        events: {} as
+          | { type: 'EVENT_WITH_FLAG'; flag: boolean }
+          | {
+              type: 'EVENT_WITHOUT_FLAG';
+            }
+      },
+      on: {
+        '*': {
+          actions: (_context, event) => {
+            ((_accept: 'EVENT_WITH_FLAG' | 'EVENT_WITHOUT_FLAG') => {})(
+              event.type
+            );
+            // @ts-expect-error
+            ((_accept: 'is not any') => {})(event);
+          }
+        }
+      }
+    });
+  });
 });
 
 describe('interpreter', () => {