diff --git a/compiler/src/dotty/tools/dotc/config/Feature.scala b/compiler/src/dotty/tools/dotc/config/Feature.scala
index 8fda99be6896..3b96eb83731d 100644
--- a/compiler/src/dotty/tools/dotc/config/Feature.scala
+++ b/compiler/src/dotty/tools/dotc/config/Feature.scala
@@ -133,7 +133,7 @@ object Feature:
   /** Is captureChecking enabled for this compilation unit? */
   def ccEnabled(using Context) =
     enabledBySetting(captureChecking)
-    || ctx.compilationUnit.needsCaptureChecking
+    || ctx.originalCompilationUnit.needsCaptureChecking
 
   /** Is pureFunctions enabled for any of the currently compiled compilation units? */
   def pureFunsEnabledSomewhere(using Context) =
diff --git a/compiler/src/dotty/tools/dotc/core/Contexts.scala b/compiler/src/dotty/tools/dotc/core/Contexts.scala
index a867f90b237a..85edadd40c80 100644
--- a/compiler/src/dotty/tools/dotc/core/Contexts.scala
+++ b/compiler/src/dotty/tools/dotc/core/Contexts.scala
@@ -42,6 +42,7 @@ import plugins.*
 import java.util.concurrent.atomic.AtomicInteger
 import java.nio.file.InvalidPathException
 import dotty.tools.dotc.coverage.Coverage
+import scala.annotation.tailrec
 
 object Contexts {
 
@@ -776,6 +777,14 @@ object Contexts {
       c
   end FreshContext
 
+  extension (ctx: Context)
+    /** Get the original compilation unit, ignoring any highlighting wrappers. */
+    @tailrec
+    def originalCompilationUnit: CompilationUnit =
+      val cu = ctx.compilationUnit
+      if cu.source.name == SyntaxHighlighting.VirtualSourceName then ctx.outer.originalCompilationUnit
+      else cu
+
   extension (c: Context)
     def addNotNullInfo(info: NotNullInfo) =
       if c.explicitNulls then c.withNotNullInfos(c.notNullInfos.extendWith(info)) else c
@@ -787,18 +796,16 @@ object Contexts {
       if !c.explicitNulls || (c.notNullInfos eq infos) then c else c.fresh.setNotNullInfos(infos)
 
   // TODO: Fix issue when converting ModeChanges and FreshModeChanges to extension givens
-  extension (c: Context) {
+  extension (c: Context)
     final def withModeBits(mode: Mode): Context =
       if (mode != c.mode) c.fresh.setMode(mode) else c
 
     final def addMode(mode: Mode): Context = withModeBits(c.mode | mode)
     final def retractMode(mode: Mode): Context = withModeBits(c.mode &~ mode)
-  }
 
-  extension (c: FreshContext) {
+  extension (c: FreshContext)
     final def addMode(mode: Mode): c.type = c.setMode(c.mode | mode)
     final def retractMode(mode: Mode): c.type = c.setMode(c.mode &~ mode)
-  }
 
   /** Run `op` with a pool-allocated context that has an ExporeTyperState. */
   inline def explore[T](inline op: Context ?=> T)(using Context): T =
diff --git a/compiler/src/dotty/tools/dotc/printing/SyntaxHighlighting.scala b/compiler/src/dotty/tools/dotc/printing/SyntaxHighlighting.scala
index ea58cff357c1..41ab7412d748 100644
--- a/compiler/src/dotty/tools/dotc/printing/SyntaxHighlighting.scala
+++ b/compiler/src/dotty/tools/dotc/printing/SyntaxHighlighting.scala
@@ -16,6 +16,9 @@ import java.util.Arrays
 /** This object provides functions for syntax highlighting in the REPL */
 object SyntaxHighlighting {
 
+  /** The name of the virtual source file used for highlighting */
+  val VirtualSourceName = "<highlighting>"
+
   /** if true, log erroneous positions being highlighted */
   private inline val debug = true
 
@@ -33,7 +36,7 @@ object SyntaxHighlighting {
     def freshCtx = ctx.fresh.setReporter(Reporter.NoReporter)
     if (in.isEmpty || ctx.settings.color.value == "never") in
     else {
-      val source = SourceFile.virtual("<highlighting>", in)
+      val source = SourceFile.virtual(VirtualSourceName, in)
 
       given Context = freshCtx
         .setCompilationUnit(CompilationUnit(source, mustExist = false)(using freshCtx))
diff --git a/tests/neg-custom-args/captures/i23389-1.scala b/tests/neg-custom-args/captures/i23389-1.scala
new file mode 100644
index 000000000000..568c9da52aa7
--- /dev/null
+++ b/tests/neg-custom-args/captures/i23389-1.scala
@@ -0,0 +1,8 @@
+import language.experimental.captureChecking
+import caps.*
+
+trait Collection[+T] extends Mutable:
+  update def add(elem: T): Unit // error
+  update def remove(elem: T): Unit // error
+  def get(index: Int): Option[T]
+
diff --git a/tests/neg-custom-args/captures/i23389-2.scala b/tests/neg-custom-args/captures/i23389-2.scala
new file mode 100644
index 000000000000..a7612891d3a9
--- /dev/null
+++ b/tests/neg-custom-args/captures/i23389-2.scala
@@ -0,0 +1,8 @@
+import language.experimental.captureChecking
+import caps.*
+
+trait Collection[T] extends Mutable // <- note the forgotten :
+  update def add(elem: T): Unit // error // error
+  update def remove(elem: T): Unit // error // error
+  def get(index: Int): Option[T] // error // error
+