diff --git a/activerecord/CHANGELOG.md b/activerecord/CHANGELOG.md
index 79faa9326d..89ba579e80 100644
--- a/activerecord/CHANGELOG.md
+++ b/activerecord/CHANGELOG.md
@@ -1,3 +1,16 @@
+*   Respect the column default values for `inheritance_column` when
+    instantiating records through the base class.
+
+    Fixes #17121.
+
+    Example:
+
+        # The schema of BaseModel has `t.string :type, default: 'SubType'`
+        subtype = BaseModel.new
+        assert_equals SubType, subtype.class
+
+    *Kuldeep Aggarwal*
+
 *   Fix `rake db:structure:dump` on Postgres when multiple schemas are used.
 
     Fixes #22346.
diff --git a/activerecord/lib/active_record/inheritance.rb b/activerecord/lib/active_record/inheritance.rb
index 8b719e0bcb..4ae9920efb 100644
--- a/activerecord/lib/active_record/inheritance.rb
+++ b/activerecord/lib/active_record/inheritance.rb
@@ -51,8 +51,8 @@ module ActiveRecord
         end
 
         attrs = args.first
-        if subclass_from_attributes?(attrs)
-          subclass = subclass_from_attributes(attrs)
+        if attribute_names.include?(inheritance_column)
+          subclass = subclass_from_attributes(attrs) || subclass_from_defaults
         end
 
         if subclass && subclass != self
@@ -197,16 +197,20 @@ module ActiveRecord
       # is not self or a valid subclass, raises ActiveRecord::SubclassNotFound
       # If this is a StrongParameters hash, and access to inheritance_column is not permitted,
       # this will ignore the inheritance column and return nil
-      def subclass_from_attributes?(attrs)
-        attribute_names.include?(inheritance_column) && (attrs.is_a?(Hash) || attrs.respond_to?(:permitted?))
-      end
-
       def subclass_from_attributes(attrs)
         attrs = attrs.to_h if attrs.respond_to?(:permitted?)
-        subclass_name = attrs.with_indifferent_access[inheritance_column]
+        if attrs.is_a?(Hash)
+          subclass_name = attrs.with_indifferent_access[inheritance_column]
 
-        if subclass_name.present?
-          find_sti_class(subclass_name)
+          if subclass_name.present?
+            find_sti_class(subclass_name)
+          end
+        end
+      end
+
+      def subclass_from_defaults
+        if default = columns_hash[inheritance_column].default
+          find_sti_class(default)
         end
       end
     end
diff --git a/activerecord/test/cases/inheritance_test.rb b/activerecord/test/cases/inheritance_test.rb
index 52e3734dd0..2ad8b30eae 100644
--- a/activerecord/test/cases/inheritance_test.rb
+++ b/activerecord/test/cases/inheritance_test.rb
@@ -478,4 +478,25 @@ class InheritanceComputeTypeTest < ActiveRecord::TestCase
     product = Shop::Product.new(:type => phone)
     assert product.save
   end
+
+  def test_inheritance_new_with_subclass_as_default
+    original_type = Company.columns_hash["type"].default
+    ActiveRecord::Base.connection.change_column_default :companies, :type, 'Firm'
+    Company.reset_column_information
+
+    firm = Company.new # without arguments
+    assert_equal 'Firm', firm.type
+    assert_instance_of Firm, firm
+
+    firm = Company.new(firm_name: 'Shri Hans Plastic') # with arguments
+    assert_equal 'Firm', firm.type
+    assert_instance_of Firm, firm
+
+    firm = Company.new(type: 'Client') # overwrite the default type
+    assert_equal 'Client', firm.type
+    assert_instance_of Client, firm
+  ensure
+    ActiveRecord::Base.connection.change_column_default :companies, :type, original_type
+    Company.reset_column_information
+  end
 end