diff --git a/packages/frontend-plugin-api/src/blueprints/ApiBlueprint.test.ts b/packages/frontend-plugin-api/src/blueprints/ApiBlueprint.test.ts
index 862f802810..6eafcf2556 100644
--- a/packages/frontend-plugin-api/src/blueprints/ApiBlueprint.test.ts
+++ b/packages/frontend-plugin-api/src/blueprints/ApiBlueprint.test.ts
@@ -16,21 +16,19 @@
 
 import { createExtensionInput } from '../wiring';
 import { ApiBlueprint } from './ApiBlueprint';
-import { createApiFactory, createApiRef } from '@backstage/core-plugin-api';
+import { createApiRef } from '@backstage/core-plugin-api';
 
 describe('ApiBlueprint', () => {
   it('should create an extension with sensible defaults', () => {
     const api = createApiRef<{ foo: string }>({ id: 'test' });
-    const factory = createApiFactory({
-      api,
-      deps: {},
-      factory: () => ({ foo: 'bar' }),
-    });
 
     const extension = ApiBlueprint.make({
-      params: {
-        factory,
-      },
+      params: define =>
+        define({
+          api,
+          deps: {},
+          factory: () => ({ foo: 'bar' }),
+        }),
       name: 'test',
     });
 
@@ -58,6 +56,97 @@ describe('ApiBlueprint', () => {
     `);
   });
 
+  it('should properly type the API factory', () => {
+    const fooApi = createApiRef<{ foo: string }>({ id: 'foo' });
+    const barApi = createApiRef<{ bar: string }>({ id: 'bar' });
+
+    expect('test').not.toBe('failing without assertions');
+
+    ApiBlueprint.make({
+      params: define =>
+        define({ api: fooApi, deps: {}, factory: () => ({ foo: 'foo' }) }),
+    });
+
+    ApiBlueprint.make({
+      params: define =>
+        define({
+          api: fooApi,
+          deps: {},
+          // @ts-expect-error missing property
+          factory: () => ({}),
+        }),
+    });
+
+    ApiBlueprint.make({
+      params: define =>
+        define({
+          api: fooApi,
+          deps: {},
+          // @ts-expect-error wrong property
+          factory: () => ({
+            bar: 'bar',
+          }),
+        }),
+    });
+
+    ApiBlueprint.make({
+      params: define =>
+        define({
+          api: fooApi,
+          deps: {},
+          factory: () => ({
+            // @ts-expect-error wrong type
+            foo: 1,
+          }),
+        }),
+    });
+
+    ApiBlueprint.make({
+      params: define =>
+        define({
+          api: fooApi,
+          deps: { bar: barApi },
+          factory: ({ bar }) => ({ foo: bar.bar }),
+        }),
+    });
+
+    ApiBlueprint.make({
+      params: define =>
+        define({
+          api: fooApi,
+          deps: { bar: barApi },
+          factory: ({ bar }) => ({
+            // @ts-expect-error not an available property
+            foo: bar.foo,
+          }),
+        }),
+    });
+
+    ApiBlueprint.make({
+      params: define =>
+        define({
+          api: fooApi,
+          deps: { bar: barApi },
+          factory: ({ bar }) => ({
+            // @ts-expect-error not an available property
+            foo: bar.foo,
+          }),
+        }),
+    });
+
+    ApiBlueprint.make({
+      params: define =>
+        define({
+          api: fooApi,
+          deps: {},
+          factory: ({ bar }) => ({
+            // @ts-expect-error unknown dep
+            foo: bar.bar,
+          }),
+        }),
+    });
+  });
+
   it('should create an extension with custom factory', () => {
     const api = createApiRef<{ foo: string }>({ id: 'test' });
     const factory = jest.fn(() => ({ foo: 'bar' }));
@@ -73,13 +162,7 @@ describe('ApiBlueprint', () => {
       },
       name: api.id,
       factory(originalFactory, { config: _config, inputs: _inputs }) {
-        return originalFactory({
-          factory: createApiFactory({
-            api,
-            deps: {},
-            factory,
-          }),
-        });
+        return originalFactory(define => define({ api, deps: {}, factory }));
       },
     });
 
diff --git a/packages/frontend-plugin-api/src/blueprints/ApiBlueprint.ts b/packages/frontend-plugin-api/src/blueprints/ApiBlueprint.ts
index 1f28a3cf54..a066a362d9 100644
--- a/packages/frontend-plugin-api/src/blueprints/ApiBlueprint.ts
+++ b/packages/frontend-plugin-api/src/blueprints/ApiBlueprint.ts
@@ -14,8 +14,9 @@
  * limitations under the License.
  */
 
+import { AnyApiFactory, ApiFactory } from '../apis/system';
 import { createExtensionBlueprint, createExtensionDataRef } from '../wiring';
-import { AnyApiFactory } from '@backstage/core-plugin-api';
+import { createExtensionBlueprintParams } from '../wiring/createExtensionBlueprint';
 
 const factoryDataRef = createExtensionDataRef<AnyApiFactory>().with({
   id: 'core.api.factory',
@@ -33,7 +34,14 @@ export const ApiBlueprint = createExtensionBlueprint({
   dataRefs: {
     factory: factoryDataRef,
   },
-  *factory(params: { factory: AnyApiFactory }) {
-    yield factoryDataRef(params.factory);
+  defineParams: <
+    TApi,
+    TImpl extends TApi,
+    TDeps extends { [name in string]: unknown },
+  >(
+    params: ApiFactory<TApi, TImpl, TDeps>,
+  ) => createExtensionBlueprintParams(params as AnyApiFactory),
+  *factory(params) {
+    yield factoryDataRef(params);
   },
 });