diff --git a/CHANGELOG.rst b/CHANGELOG.rst
index 4b32e060..9482571f 100644
--- a/CHANGELOG.rst
+++ b/CHANGELOG.rst
@@ -20,6 +20,8 @@ Fixed
 - Confusing error message when adding signature parameters that conflict with
   existing arguments.
 - Deprecation warnings not printing the correct file and line of code.
+- ``sub_configs=True`` not working for callable types that return a class (`#419
+  <https://github.com/omni-us/jsonargparse/issues/419>`__).
 
 
 v4.27.0 (2023-11-02)
diff --git a/jsonargparse/_signatures.py b/jsonargparse/_signatures.py
index 455e2ae5..cc1aa464 100644
--- a/jsonargparse/_signatures.py
+++ b/jsonargparse/_signatures.py
@@ -365,10 +365,13 @@ def _add_signature_parameter(
                     sub_add_kwargs["skip"] = subclass_skip
                 else:
                     register_pydantic_type(annotation)
+                enable_path = sub_configs and (
+                    is_subclass_typehint or ActionTypeHint.is_return_subclass_typehint(annotation)
+                )
                 args = ActionTypeHint.prepare_add_argument(
                     args=args,
                     kwargs=kwargs,
-                    enable_path=is_subclass_typehint and sub_configs,
+                    enable_path=enable_path,
                     container=group,
                     logger=self.logger,
                     sub_add_kwargs=sub_add_kwargs,
diff --git a/jsonargparse/_typehints.py b/jsonargparse/_typehints.py
index 3042de38..4cdb2859 100644
--- a/jsonargparse/_typehints.py
+++ b/jsonargparse/_typehints.py
@@ -278,6 +278,15 @@ def is_subclass_typehint(typehint, all_subtypes=True, also_lists=False):
             and not is_subclass(typehint, (Path, Enum))
         )
 
+    @staticmethod
+    def is_return_subclass_typehint(typehint):
+        typehint_origin = get_typehint_origin(typehint)
+        if typehint_origin in callable_origin_types:
+            return_type = get_callable_return_type(typehint)
+            if ActionTypeHint.is_subclass_typehint(return_type):
+                return True
+        return False
+
     @staticmethod
     def is_mapping_typehint(typehint):
         typehint_origin = get_typehint_origin(typehint) or typehint
diff --git a/jsonargparse_tests/test_typehints.py b/jsonargparse_tests/test_typehints.py
index 00a52064..fd714a0f 100644
--- a/jsonargparse_tests/test_typehints.py
+++ b/jsonargparse_tests/test_typehints.py
@@ -6,6 +6,7 @@
 import uuid
 from calendar import Calendar
 from enum import Enum
+from pathlib import Path
 from typing import (
     Any,
     Callable,
@@ -784,6 +785,27 @@ def test_callable_args_return_type_union_of_classes(parser, subtests):
             assert f"{__name__}.{name}" in help_str
 
 
+class CallableSubconfig:
+    def __init__(self, o: Callable[[int], Optimizer]):
+        self.o = o
+
+
+def test_callable_args_return_type_class_subconfig(parser, tmp_cwd):
+    config = {
+        "class_path": "Adam",
+        "init_args": {"momentum": 0.8},
+    }
+    Path("optimizer.yaml").write_text(yaml.safe_dump(config))
+
+    parser.add_class_arguments(CallableSubconfig, "m", sub_configs=True)
+    cfg = parser.parse_args(["--m.o=optimizer.yaml"])
+    assert cfg.m.o.class_path == f"{__name__}.Adam"
+    init = parser.instantiate_classes(cfg)
+    optimizer = init.m.o(1)
+    assert isinstance(optimizer, Adam)
+    assert optimizer.momentum == 0.8
+
+
 # lazy_instance tests