diff --git a/release-notes/CREDITS b/release-notes/CREDITS
index 1d2bbb252a..df82843bd2 100644
--- a/release-notes/CREDITS
+++ b/release-notes/CREDITS
@@ -247,6 +247,9 @@ Dmitry Spikhalskiy (Spikhalskiy@github)
   * Reported #731, suggested the way to fix it: XmlAdapter result marshaling error in
     case of ValueType=Object
    (2.5.3)
+  * Reported #1456: `TypeFactory` type resolution broken in 2.7 for generic types
+   when using `constructType` with context
+   (2.7.9 / 2.8.6)
 
 John Meyer (jpmeyer@github)
   * Reported, contributed fix for #745: EnumDeserializer.deserializerForCreator() fails
diff --git a/release-notes/VERSION b/release-notes/VERSION
index adcdecd46f..f0d8611459 100644
--- a/release-notes/VERSION
+++ b/release-notes/VERSION
@@ -13,6 +13,9 @@ Project: jackson-databind
 #1432: Off by 1 bug in PropertyValueBuffer
  (reported by Kevin D)
 #1439: NPE when using with filter id, serializing `java.util.Map` types
+#1456: `TypeFactory` type resolution broken in 2.7 for generic types
+   when using `constructType` with context
+ (reported by Dmitry S)
 
 2.7.8 (26-Sep-2016)
 
diff --git a/src/main/java/com/fasterxml/jackson/databind/type/TypeFactory.java b/src/main/java/com/fasterxml/jackson/databind/type/TypeFactory.java
index 1e85958633..0022dddaf4 100644
--- a/src/main/java/com/fasterxml/jackson/databind/type/TypeFactory.java
+++ b/src/main/java/com/fasterxml/jackson/databind/type/TypeFactory.java
@@ -621,9 +621,8 @@ public JavaType constructType(TypeReference<?> typeRef)
      */
     @Deprecated
     public JavaType constructType(Type type, Class<?> contextClass) {
-        TypeBindings bindings = (contextClass == null)
-                ? TypeBindings.emptyBindings() : constructType(contextClass).getBindings();
-        return _fromAny(null, type, bindings);
+        JavaType contextType = (contextClass == null) ? null : constructType(contextClass);
+        return constructType(type, contextType);
     }
 
     /**
@@ -631,8 +630,27 @@ public JavaType constructType(Type type, Class<?> contextClass) {
      */
     @Deprecated
     public JavaType constructType(Type type, JavaType contextType) {
-        TypeBindings bindings = (contextType == null)
-                ? TypeBindings.emptyBindings() : contextType.getBindings();
+        TypeBindings bindings;
+        if (contextType == null) {
+            bindings = TypeBindings.emptyBindings();
+        } else {
+            bindings = contextType.getBindings();
+            // 16-Nov-2016, tatu: Unfortunately as per [databind#1456] this can't
+            //   be made to work for some cases used to work (even if accidentally);
+            //   however, we can try a simple heuristic to increase chances of
+            //   compatibility from 2.6 code
+            if (type.getClass() != Class.class) {
+                // Ok: so, ideally we would test super-interfaces if necessary;
+                // but let's assume most if not all cases are for classes.
+                while (bindings.isEmpty()) {
+                    contextType = contextType.getSuperClass();
+                    if (contextType == null) {
+                        break;
+                    }
+                    bindings = contextType.getBindings();
+                }
+            }
+        }
         return _fromAny(null, type, bindings);
     }
 
diff --git a/src/test/java/com/fasterxml/jackson/failing/GenericParameterTypeFactory1456Test.java b/src/test/java/com/fasterxml/jackson/databind/type/DeprecatedConstructType1456Test.java
similarity index 79%
rename from src/test/java/com/fasterxml/jackson/failing/GenericParameterTypeFactory1456Test.java
rename to src/test/java/com/fasterxml/jackson/databind/type/DeprecatedConstructType1456Test.java
index 03efadb1e7..8d3e58caba 100644
--- a/src/test/java/com/fasterxml/jackson/failing/GenericParameterTypeFactory1456Test.java
+++ b/src/test/java/com/fasterxml/jackson/databind/type/DeprecatedConstructType1456Test.java
@@ -1,4 +1,4 @@
-package com.fasterxml.jackson.failing;
+package com.fasterxml.jackson.databind.type;
 
 import java.lang.reflect.Method;
 import java.lang.reflect.Type;
@@ -8,7 +8,9 @@
 import com.fasterxml.jackson.databind.introspect.AnnotatedMethod;
 import com.fasterxml.jackson.databind.introspect.AnnotatedParameter;
 
-public class GenericParameterTypeFactory1456Test extends BaseMapTest
+// Tests for [databind#1456]: resolution using methods deprecated
+// in 2.7, but used to work in 2.6
+public class DeprecatedConstructType1456Test extends BaseMapTest
 {
     public static class BaseController<Entity extends BaseEntity> {
         public void process(Entity entity) {}
@@ -21,8 +23,9 @@ public static class BaseEntity {}
     public static class ImplEntity extends BaseEntity {}
 
     private final ObjectMapper MAPPER = new ObjectMapper();
-    
-    public void testGenericParameterDirect() throws Exception
+
+    @SuppressWarnings("deprecation")
+    public void testGenericResolutionUsingDeprecated() throws Exception
     {
         Method proceed = BaseController.class.getMethod("process", BaseEntity.class);
         Type entityType = proceed.getGenericParameterTypes()[0];
@@ -31,6 +34,7 @@ public void testGenericParameterDirect() throws Exception
         assertEquals(ImplEntity.class, resolvedType.getRawClass());
     }
 
+    // and this is how new code should resolve types if at all possible
     public void testGenericParameterViaClass() throws Exception
     {
         BeanDescription desc = MAPPER.getDeserializationConfig().introspect(