diff --git a/pkl-core/src/main/java/org/pkl/core/ast/type/TypeNode.java b/pkl-core/src/main/java/org/pkl/core/ast/type/TypeNode.java
index 925dc3029..96a5138cd 100644
--- a/pkl-core/src/main/java/org/pkl/core/ast/type/TypeNode.java
+++ b/pkl-core/src/main/java/org/pkl/core/ast/type/TypeNode.java
@@ -777,6 +777,102 @@ protected boolean acceptTypeNode(boolean visitTypeArguments, TypeNodeConsumer co
     }
   }
 
+  public static final class ClassValueTypeNode extends ValidatingObjectSlotTypeNode {
+    @Child private TypeNode typeArgumentNode;
+
+    public ClassValueTypeNode(SourceSection sourceSection, TypeNode typeArgumentNode) {
+      super(sourceSection);
+      this.typeArgumentNode = typeArgumentNode;
+      validate();
+    }
+
+    @Override
+    protected Object executeLazily(VirtualFrame frame, Object value) {
+      var typeArgumentClass = getTypeArgumentClass();
+      if (value instanceof VmClass vmClass
+          && (typeArgumentClass == null || typeArgumentClass.isSuperclassOf(vmClass))) {
+        return value;
+      }
+
+      throw typeMismatch(value, BaseModule.getClassClass());
+    }
+
+    private @Nullable VmClass getTypeArgumentClass() {
+      var unaliasedTypeArgumentNode = getUnaliasedTypeArgumentNode();
+      return unaliasedTypeArgumentNode instanceof TypeVariableNode
+          ? null
+          : unaliasedTypeArgumentNode.getVmClass();
+    }
+
+    private TypeNode getUnaliasedTypeArgumentNode() {
+      var result = typeArgumentNode;
+      while (result instanceof TypeAliasTypeNode typeAliasTypeNode) {
+        result = typeAliasTypeNode.getAliasedTypeNode();
+      }
+      return result;
+    }
+
+    @Override
+    protected String getValidationErrorKey() {
+      return "invalidClassTypeArgument";
+    }
+
+    @Override
+    protected @Nullable Node getViolatingNode() {
+      var unaliasedTypeArgumentNode = getUnaliasedTypeArgumentNode();
+      if (unaliasedTypeArgumentNode instanceof TypeVariableNode) return null;
+
+      return unaliasedTypeArgumentNode.getVmClass() != null
+              && unaliasedTypeArgumentNode.getVmTypeAlias() == null
+              && !(unaliasedTypeArgumentNode instanceof FinalModuleTypeNode)
+              && !(unaliasedTypeArgumentNode instanceof NonFinalModuleTypeNode)
+              && !unaliasedTypeArgumentNode.isParametric()
+          ? null
+          : unaliasedTypeArgumentNode;
+    }
+
+    @Override
+    protected boolean isIncludedInTrace(Node node) {
+      return node instanceof ClassValueTypeNode;
+    }
+
+    @Override
+    public VmClass getVmClass() {
+      return BaseModule.getClassClass();
+    }
+
+    @Override
+    public VmList getTypeArgumentMirrors() {
+      return VmList.of(typeArgumentNode.getMirror());
+    }
+
+    @Override
+    public boolean doIsEquivalentTo(TypeNode other) {
+      if (!(other instanceof ClassValueTypeNode classValueTypeNode)) {
+        return false;
+      }
+      return typeArgumentNode.isEquivalentTo(classValueTypeNode.typeArgumentNode);
+    }
+
+    @Override
+    protected PType doExport() {
+      return new PType.Class(BaseModule.getClassClass().export(), typeArgumentNode.doExport());
+    }
+
+    @Override
+    protected boolean acceptTypeNode(boolean visitTypeArguments, TypeNodeConsumer consumer) {
+      if (visitTypeArguments) {
+        return consumer.accept(this) && typeArgumentNode.acceptTypeNode(true, consumer);
+      }
+      return consumer.accept(this);
+    }
+
+    @Override
+    protected boolean isParametric() {
+      return true;
+    }
+  }
+
   public static class NullableTypeNode extends WriteFrameSlotTypeNode {
     @Child private TypeNode elementTypeNode;
 
diff --git a/pkl-core/src/main/java/org/pkl/core/ast/type/UnresolvedTypeNode.java b/pkl-core/src/main/java/org/pkl/core/ast/type/UnresolvedTypeNode.java
index 22544d37b..10c1368e4 100644
--- a/pkl-core/src/main/java/org/pkl/core/ast/type/UnresolvedTypeNode.java
+++ b/pkl-core/src/main/java/org/pkl/core/ast/type/UnresolvedTypeNode.java
@@ -278,9 +278,8 @@ public TypeNode execute(VirtualFrame frame) {
           return FunctionNClassTypeNodeGen.create(sourceSection, resolvedTypeArgumentNodes);
         }
 
-        // erase `x: Class<Foo>` to `x: Class` for now (cf. function types)
         if (clazz.isClassClass()) {
-          return new FinalClassTypeNode(sourceSection, clazz);
+          return new ClassValueTypeNode(sourceSection, typeArgumentNodes[0].execute(frame));
         }
 
         if (clazz.isVarArgsClass()) {
diff --git a/pkl-core/src/main/resources/org/pkl/core/errorMessages.properties b/pkl-core/src/main/resources/org/pkl/core/errorMessages.properties
index 30bdff601..61cc52030 100644
--- a/pkl-core/src/main/resources/org/pkl/core/errorMessages.properties
+++ b/pkl-core/src/main/resources/org/pkl/core/errorMessages.properties
@@ -212,6 +212,9 @@ Expected a module as argument, but got an object that amends a module.
 wrongTypeArgumentCount=\
 Expected {0} type argument(s) but got {1}.
 
+invalidClassTypeArgument=\
+`Class` type arguments must be class types.
+
 duplicateDefinition=\
 Duplicate definition of member `{0}`.
 
diff --git a/pkl-core/src/test/kotlin/org/pkl/core/ClassTypeTest.kt b/pkl-core/src/test/kotlin/org/pkl/core/ClassTypeTest.kt
new file mode 100644
index 000000000..33e6515aa
--- /dev/null
+++ b/pkl-core/src/test/kotlin/org/pkl/core/ClassTypeTest.kt
@@ -0,0 +1,156 @@
+/*
+ * Copyright © 2026 Apple Inc. and the Pkl project authors. All rights reserved.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     https://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+package org.pkl.core
+
+import org.assertj.core.api.Assertions.assertThat
+import org.junit.jupiter.api.Test
+import org.junit.jupiter.api.assertThrows
+import org.pkl.core.runtime.BaseModule
+
+class ClassTypeTest {
+  @Test
+  fun `Class type checks preserve type argument`() {
+    Evaluator.preconfigured().use { evaluator ->
+      val output =
+        evaluator.evaluateOutputText(
+          ModuleSource.text(
+            """
+            open class A
+            open class B
+            class C extends A
+            typealias AAlias = A
+            typealias ClassOf<Type> = Class<Type>
+
+            output {
+              text =
+                "\(C is Class<A>)\n" +
+                "\(C is Class<B>)\n" +
+                "\(A is Class<A>)\n" +
+                "\(A is Class<B>)\n" +
+                "\(C is Class<AAlias>)\n" +
+                "\(C is ClassOf<A>)\n" +
+                "\(C is ClassOf<B>)\n" +
+                "\(List is Class<List>)"
+            }
+            """
+              .trimIndent()
+          )
+        )
+
+      assertThat(output).isEqualTo("true\nfalse\ntrue\nfalse\ntrue\ntrue\nfalse\ntrue")
+    }
+  }
+
+  @Test
+  fun `Class type annotation rejects a non-subclass`() {
+    Evaluator.preconfigured().use { evaluator ->
+      val exception =
+        assertThrows<PklException> {
+          evaluator.evaluate(
+            ModuleSource.text(
+              """
+              open class A
+              open class B
+              value: Class<A> = B
+              """
+                .trimIndent()
+            )
+          )
+        }
+
+      assertThat(exception).hasMessageContaining("Expected value of type `Class`")
+    }
+  }
+
+  @Test
+  fun `Class type argument is preserved in exported schema`() {
+    Evaluator.preconfigured().use { evaluator ->
+      val schema =
+        evaluator.evaluateSchema(
+          ModuleSource.text(
+            """
+            class A
+            value: Class<A> = A
+            """
+              .trimIndent()
+          )
+        )
+
+      val classType = schema.moduleClass.properties.getValue("value").type as PType.Class
+      assertThat(classType.pClass).isEqualTo(BaseModule.getClassClass().export())
+
+      val typeArgument = classType.typeArguments.single() as PType.Class
+      assertThat(typeArgument.pClass).isSameAs(schema.classes.getValue("A"))
+    }
+  }
+
+  @Test
+  fun `stdlib Class type argument can be a type variable`() {
+    Evaluator.preconfigured().use { evaluator ->
+      val output =
+        evaluator.evaluateOutputText(
+          ModuleSource.text(
+            """
+            output {
+              text = List(1, "Pigeon").filterIsInstance(String).first
+            }
+            """
+              .trimIndent()
+          )
+        )
+
+      assertThat(output).isEqualTo("Pigeon")
+    }
+  }
+
+  @Test
+  fun `Class type arguments must be class types`() {
+    listOf(
+        "Class<A | B>",
+        "Class<A?>",
+        "Class<A(isSubclassOf(A))>",
+        "Class<List<String>>",
+        "Class<ListOfString>",
+        "Class<ClassOf<List<String>>>",
+        "Class<\"A\">",
+        "Class<Int8>",
+        "Class<module>",
+        "Class<nothing>",
+        "Class<unknown>",
+      )
+      .forEach { type ->
+        Evaluator.preconfigured().use { evaluator ->
+          val exception =
+            assertThrows<PklException> {
+              evaluator.evaluate(
+                ModuleSource.text(
+                  """
+                  open class A
+                  open class B
+                  typealias ListOfString = List<String>
+                  typealias ClassOf<Type> = Class<Type>
+                  value: $type = A
+                  """
+                    .trimIndent()
+                )
+              )
+            }
+
+          assertThat(exception).hasMessageContaining("`Class` type arguments must be class types.")
+        }
+      }
+  }
+}