diff --git a/source/replace.d.ts b/source/replace.d.ts
index df523a999..56c487677 100644
--- a/source/replace.d.ts
+++ b/source/replace.d.ts
@@ -62,6 +62,6 @@ export type Replace<
 	Options extends ReplaceOptions = {},
 > = Input extends `${infer Head}${Search}${infer Tail}`
 	? Options['all'] extends true
-		? Replace<`${Head}${Replacement}${Tail}`, Search, Replacement, Options>
+		? `${Head}${Replacement}${Replace<Tail, Search, Replacement, Options>}`
 		: `${Head}${Replacement}${Tail}`
 	: Input;
diff --git a/test-d/replace.ts b/test-d/replace.ts
index 371d02423..92ec34291 100644
--- a/test-d/replace.ts
+++ b/test-d/replace.ts
@@ -26,3 +26,4 @@ expectType<'hello ❓?'>(replace('hello ??', '?', '❓'));
 expectType<'10-42-00'>(replaceAll('10:42:00', ':', '-'));
 expectType<'userName'>(replaceAll('__userName__', '__', ''));
 expectType<'MyCoolTitle'>(replaceAll('My Cool Title', ' ', ''));
+expectType<'fobarfobar'>(replaceAll('foobarfoobar', 'ob', 'b'));