diff --git a/CHANGES b/CHANGES
index 4848e29e72..1a58b9dc98 100644
--- a/CHANGES
+++ b/CHANGES
@@ -78,6 +78,8 @@ Bugs fixed
 * #9678: linkcheck: file extension was shown twice in warnings
 * #9697: py domain: An index entry with parens was registered for ``py:method``
   directive with ``:property:`` option
+* #9775: py domain: Literal typehint was converted to a cross reference when
+  :confval:`autodoc_typehints='description'`
 * #9708: needs_extension failed to check double-digit version correctly
 * #9688: Fix :rst:dir:`code`` does not recognize ``:class:`` option
 * #9733: Fix for logging handler flushing warnings in the middle of the docs
diff --git a/sphinx/domains/python.py b/sphinx/domains/python.py
index 9bb9a1e723..fd6a788921 100644
--- a/sphinx/domains/python.py
+++ b/sphinx/domains/python.py
@@ -353,17 +353,21 @@ def make_xrefs(self, rolename: str, domain: str, target: str,
 
         split_contnode = bool(contnode and contnode.astext() == target)
 
+        in_literal = False
         results = []
         for sub_target in filter(None, sub_targets):
             if split_contnode:
                 contnode = nodes.Text(sub_target)
 
-            if delims_re.match(sub_target):
+            if in_literal or delims_re.match(sub_target):
                 results.append(contnode or innernode(sub_target, sub_target))
             else:
                 results.append(self.make_xref(rolename, domain, sub_target,
                                               innernode, contnode, env, inliner, location))
 
+            if sub_target in ('Literal', 'typing.Literal'):
+                in_literal = True
+
         return results
 
 
diff --git a/tests/test_domain_py.py b/tests/test_domain_py.py
index 5ba63d0e35..e34218dfa4 100644
--- a/tests/test_domain_py.py
+++ b/tests/test_domain_py.py
@@ -1110,6 +1110,42 @@ def test_info_field_list_piped_type(app):
                 **{"py:module": "example", "py:class": "Class"})
 
 
+def test_info_field_list_Literal(app):
+    text = (".. py:module:: example\n"
+            ".. py:class:: Class\n"
+            "\n"
+            "   :param age: blah blah\n"
+            "   :type age: Literal['foo', 'bar', 'baz']\n")
+    doctree = restructuredtext.parse(app, text)
+
+    assert_node(doctree,
+                (nodes.target,
+                 addnodes.index,
+                 addnodes.index,
+                 [desc, ([desc_signature, ([desc_annotation, ("class", desc_sig_space)],
+                                           [desc_addname, "example."],
+                                           [desc_name, "Class"])],
+                         [desc_content, nodes.field_list, nodes.field, (nodes.field_name,
+                                                                        nodes.field_body)])]))
+    assert_node(doctree[3][1][0][0][1],
+                ([nodes.paragraph, ([addnodes.literal_strong, "age"],
+                                    " (",
+                                    [pending_xref, addnodes.literal_emphasis, "Literal"],
+                                    [addnodes.literal_emphasis, "["],
+                                    [addnodes.literal_emphasis, "'foo'"],
+                                    [addnodes.literal_emphasis, ", "],
+                                    [addnodes.literal_emphasis, "'bar'"],
+                                    [addnodes.literal_emphasis, ", "],
+                                    [addnodes.literal_emphasis, "'baz'"],
+                                    [addnodes.literal_emphasis, "]"],
+                                    ")",
+                                    " -- ",
+                                    "blah blah")],))
+    assert_node(doctree[3][1][0][0][1][0][2], pending_xref,
+                refdomain="py", reftype="class", reftarget="Literal",
+                **{"py:module": "example", "py:class": "Class"})
+
+
 def test_info_field_list_var(app):
     text = (".. py:class:: Class\n"
             "\n"