diff --git a/ir/normalize.go b/ir/normalize.go
index 2b62e894..8edddac2 100644
--- a/ir/normalize.go
+++ b/ir/normalize.go
@@ -451,6 +451,86 @@ func normalizeProcedure(procedure *Procedure) {
 	// Same rationale as functions — see normalizeFunction. (Issue #354)
 }
 
+// splitTableColumns splits a TABLE column list by top-level commas,
+// respecting nested parentheses (e.g., numeric(10, 2)).
+func splitTableColumns(inner string) []string {
+	var parts []string
+	depth := 0
+	inQuotes := false
+	start := 0
+	for i := 0; i < len(inner); i++ {
+		ch := inner[i]
+		if inQuotes {
+			if ch == '"' {
+				if i+1 < len(inner) && inner[i+1] == '"' {
+					i++ // skip escaped ""
+				} else {
+					inQuotes = false
+				}
+			}
+			continue
+		}
+		switch ch {
+		case '"':
+			inQuotes = true
+		case '(':
+			depth++
+		case ')':
+			depth--
+		case ',':
+			if depth == 0 {
+				parts = append(parts, inner[start:i])
+				start = i + 1
+			}
+		}
+	}
+	parts = append(parts, inner[start:])
+	return parts
+}
+
+// splitColumnNameAndType splits a TABLE column definition like `"full name" public.mytype`
+// into the column name and the type, respecting double-quoted identifiers.
+func splitColumnNameAndType(colDef string) (name, typePart string) {
+	colDef = strings.TrimSpace(colDef)
+	if colDef == "" {
+		return "", ""
+	}
+
+	var nameEnd int
+	if colDef[0] == '"' {
+		// Quoted identifier: find the closing double-quote
+		// PostgreSQL escapes embedded quotes as ""
+		i := 1
+		for i < len(colDef) {
+			if colDef[i] == '"' {
+				if i+1 < len(colDef) && colDef[i+1] == '"' {
+					i += 2 // skip escaped ""
+					continue
+				}
+				nameEnd = i + 1
+				break
+			}
+			i++
+		}
+		if nameEnd == 0 {
+			// Unterminated quote — treat whole thing as name
+			return colDef, ""
+		}
+	} else {
+		// Unquoted identifier: ends at first whitespace
+		nameEnd = strings.IndexFunc(colDef, func(r rune) bool {
+			return r == ' ' || r == '\t'
+		})
+		if nameEnd == -1 {
+			return colDef, ""
+		}
+	}
+
+	name = colDef[:nameEnd]
+	rest := strings.TrimSpace(colDef[nameEnd:])
+	return name, rest
+}
+
 // normalizeFunctionReturnType normalizes function return types, especially TABLE types
 func normalizeFunctionReturnType(returnType string) string {
 	if returnType == "" {
@@ -462,8 +542,8 @@ func normalizeFunctionReturnType(returnType string) string {
 		// Extract the contents inside TABLE(...)
 		inner := returnType[6 : len(returnType)-1] // Remove "TABLE(" and ")"
 
-		// Split by comma to process each column definition
-		parts := strings.Split(inner, ",")
+		// Split by top-level commas (respecting nested parentheses like numeric(10,2))
+		parts := splitTableColumns(inner)
 		var normalizedParts []string
 
 		for _, part := range parts {
@@ -472,13 +552,11 @@ func normalizeFunctionReturnType(returnType string) string {
 				continue
 			}
 
-			// Normalize individual column definitions (name type)
-			fields := strings.Fields(part)
-			if len(fields) >= 2 {
-				// Normalize the type part
-				typePart := strings.Join(fields[1:], " ")
+			// Split column definition into name and type, respecting quoted identifiers
+			name, typePart := splitColumnNameAndType(part)
+			if typePart != "" {
 				normalizedType := normalizePostgreSQLType(typePart)
-				normalizedParts = append(normalizedParts, fields[0]+" "+normalizedType)
+				normalizedParts = append(normalizedParts, name+" "+normalizedType)
 			} else {
 				// Just a type, normalize it
 				normalizedParts = append(normalizedParts, normalizePostgreSQLType(part))
@@ -513,8 +591,26 @@ func stripSchemaFromReturnType(returnType, schema string) string {
 	}
 
 	// Handle TABLE(...) return types - strip schema from individual column types
-	if strings.HasPrefix(returnType, "TABLE(") {
-		return returnType // TABLE types are already handled by normalizeFunctionReturnType
+	if strings.HasPrefix(returnType, "TABLE(") && strings.HasSuffix(returnType, ")") {
+		inner := returnType[6 : len(returnType)-1] // Remove "TABLE(" and ")"
+		// Split by top-level commas (respecting nested parentheses like numeric(10,2))
+		parts := splitTableColumns(inner)
+		var newParts []string
+		for _, part := range parts {
+			part = strings.TrimSpace(part)
+			if part == "" {
+				continue
+			}
+			// Split column definition into name and type, respecting quoted identifiers
+			name, typePart := splitColumnNameAndType(part)
+			if typePart != "" {
+				strippedType := stripSchemaPrefix(typePart, prefix)
+				newParts = append(newParts, name+" "+strippedType)
+			} else {
+				newParts = append(newParts, part)
+			}
+		}
+		return "TABLE(" + strings.Join(newParts, ", ") + ")"
 	}
 
 	// Direct type name
diff --git a/ir/normalize_test.go b/ir/normalize_test.go
index cfaf96be..5eb31386 100644
--- a/ir/normalize_test.go
+++ b/ir/normalize_test.go
@@ -161,6 +161,166 @@ func TestNormalizeViewStripsSchemaPrefixFromDefinition(t *testing.T) {
 	}
 }
 
+func TestSplitColumnNameAndType(t *testing.T) {
+	tests := []struct {
+		name         string
+		colDef       string
+		expectedName string
+		expectedType string
+	}{
+		{"simple", "id integer", "id", "integer"},
+		{"schema qualified type", "col public.mytype", "col", "public.mytype"},
+		{"quoted identifier", `"full name" text`, `"full name"`, "text"},
+		{"quoted with schema type", `"my col" public.mytype`, `"my col"`, "public.mytype"},
+		{"quoted with escaped quotes", `"it""s" integer`, `"it""s"`, "integer"},
+		{"name only", "id", "id", ""},
+		{"empty", "", "", ""},
+		{"multi-word type", "col character varying", "col", "character varying"},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			name, typePart := splitColumnNameAndType(tt.colDef)
+			if name != tt.expectedName || typePart != tt.expectedType {
+				t.Errorf("splitColumnNameAndType(%q) = (%q, %q), want (%q, %q)",
+					tt.colDef, name, typePart, tt.expectedName, tt.expectedType)
+			}
+		})
+	}
+}
+
+func TestSplitTableColumns(t *testing.T) {
+	tests := []struct {
+		name     string
+		inner    string
+		expected []string
+	}{
+		{
+			name:     "simple columns",
+			inner:    "id integer, name varchar",
+			expected: []string{"id integer", " name varchar"},
+		},
+		{
+			name:     "numeric with precision and scale",
+			inner:    "id integer, amount numeric(10, 2), name varchar",
+			expected: []string{"id integer", " amount numeric(10, 2)", " name varchar"},
+		},
+		{
+			name:     "nested parentheses",
+			inner:    "id integer, val numeric(10, 2), label character varying(100)",
+			expected: []string{"id integer", " val numeric(10, 2)", " label character varying(100)"},
+		},
+		{
+			name:     "quoted identifier with comma",
+			inner:    `"a,b" integer, name varchar`,
+			expected: []string{`"a,b" integer`, " name varchar"},
+		},
+		{
+			name:     "quoted identifier with parenthesis",
+			inner:    `"a(b)" integer, val numeric(10, 2)`,
+			expected: []string{`"a(b)" integer`, " val numeric(10, 2)"},
+		},
+		{
+			name:     "single column",
+			inner:    "id integer",
+			expected: []string{"id integer"},
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			result := splitTableColumns(tt.inner)
+			if len(result) != len(tt.expected) {
+				t.Fatalf("splitTableColumns(%q) returned %d parts, want %d: %v", tt.inner, len(result), len(tt.expected), result)
+			}
+			for i, part := range result {
+				if part != tt.expected[i] {
+					t.Errorf("splitTableColumns(%q)[%d] = %q, want %q", tt.inner, i, part, tt.expected[i])
+				}
+			}
+		})
+	}
+}
+
+func TestStripSchemaFromReturnType(t *testing.T) {
+	tests := []struct {
+		name       string
+		returnType string
+		schema     string
+		expected   string
+	}{
+		{
+			name:       "empty",
+			returnType: "",
+			schema:     "public",
+			expected:   "",
+		},
+		{
+			name:       "simple type no prefix",
+			returnType: "integer",
+			schema:     "public",
+			expected:   "integer",
+		},
+		{
+			name:       "simple type with prefix",
+			returnType: "public.mytype",
+			schema:     "public",
+			expected:   "mytype",
+		},
+		{
+			name:       "SETOF with prefix",
+			returnType: "SETOF public.actor",
+			schema:     "public",
+			expected:   "SETOF actor",
+		},
+		{
+			name:       "TABLE with custom type prefix",
+			returnType: "TABLE(id uuid, name varchar, created_at public.datetimeoffset)",
+			schema:     "public",
+			expected:   "TABLE(id uuid, name varchar, created_at datetimeoffset)",
+		},
+		{
+			name:       "TABLE with multiple custom type prefixes",
+			returnType: "TABLE(id uuid, created_at public.datetimeoffset, updated_at public.datetimeoffset)",
+			schema:     "public",
+			expected:   "TABLE(id uuid, created_at datetimeoffset, updated_at datetimeoffset)",
+		},
+		{
+			name:       "TABLE with no prefix to strip",
+			returnType: "TABLE(id uuid, name varchar)",
+			schema:     "public",
+			expected:   "TABLE(id uuid, name varchar)",
+		},
+		{
+			name:       "TABLE with numeric precision (commas in parens)",
+			returnType: "TABLE(id integer, amount numeric(10, 2), name public.mytype)",
+			schema:     "public",
+			expected:   "TABLE(id integer, amount numeric(10, 2), name mytype)",
+		},
+		{
+			name:       "array type with prefix",
+			returnType: "public.mytype[]",
+			schema:     "public",
+			expected:   "mytype[]",
+		},
+		{
+			name:       "TABLE with quoted column name",
+			returnType: `TABLE("full name" public.mytype, id uuid)`,
+			schema:     "public",
+			expected:   `TABLE("full name" mytype, id uuid)`,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			result := stripSchemaFromReturnType(tt.returnType, tt.schema)
+			if result != tt.expected {
+				t.Errorf("stripSchemaFromReturnType(%q, %q) = %q, want %q", tt.returnType, tt.schema, result, tt.expected)
+			}
+		})
+	}
+}
+
 func TestNormalizeCheckClause(t *testing.T) {
 	tests := []struct {
 		name     string
diff --git a/testdata/diff/create_function/issue_360_returns_table_custom_type/diff.sql b/testdata/diff/create_function/issue_360_returns_table_custom_type/diff.sql
new file mode 100644
index 00000000..e69de29b
diff --git a/testdata/diff/create_function/issue_360_returns_table_custom_type/new.sql b/testdata/diff/create_function/issue_360_returns_table_custom_type/new.sql
new file mode 100644
index 00000000..e75034f8
--- /dev/null
+++ b/testdata/diff/create_function/issue_360_returns_table_custom_type/new.sql
@@ -0,0 +1,30 @@
+CREATE TYPE datetimeoffset AS (local_time timestamp without time zone, offset_minutes smallint);
+
+CREATE TABLE account_groups (
+    id uuid NOT NULL,
+    company_id uuid NOT NULL,
+    name varchar NOT NULL,
+    created_at datetimeoffset NOT NULL,
+    updated_at datetimeoffset NOT NULL
+);
+
+CREATE OR REPLACE FUNCTION get_account_group_by_id(
+    p_group_id uuid
+)
+RETURNS TABLE(id uuid, company_id uuid, name varchar, created_at datetimeoffset, updated_at datetimeoffset)
+LANGUAGE plpgsql
+VOLATILE
+SECURITY DEFINER
+AS $$
+BEGIN
+    RETURN QUERY
+    SELECT
+        ag.id,
+        ag.company_id,
+        ag.name,
+        ag.created_at,
+        ag.updated_at
+    FROM account_groups ag
+    WHERE ag.id = p_group_id;
+END;
+$$;
diff --git a/testdata/diff/create_function/issue_360_returns_table_custom_type/old.sql b/testdata/diff/create_function/issue_360_returns_table_custom_type/old.sql
new file mode 100644
index 00000000..e75034f8
--- /dev/null
+++ b/testdata/diff/create_function/issue_360_returns_table_custom_type/old.sql
@@ -0,0 +1,30 @@
+CREATE TYPE datetimeoffset AS (local_time timestamp without time zone, offset_minutes smallint);
+
+CREATE TABLE account_groups (
+    id uuid NOT NULL,
+    company_id uuid NOT NULL,
+    name varchar NOT NULL,
+    created_at datetimeoffset NOT NULL,
+    updated_at datetimeoffset NOT NULL
+);
+
+CREATE OR REPLACE FUNCTION get_account_group_by_id(
+    p_group_id uuid
+)
+RETURNS TABLE(id uuid, company_id uuid, name varchar, created_at datetimeoffset, updated_at datetimeoffset)
+LANGUAGE plpgsql
+VOLATILE
+SECURITY DEFINER
+AS $$
+BEGIN
+    RETURN QUERY
+    SELECT
+        ag.id,
+        ag.company_id,
+        ag.name,
+        ag.created_at,
+        ag.updated_at
+    FROM account_groups ag
+    WHERE ag.id = p_group_id;
+END;
+$$;
diff --git a/testdata/diff/create_function/issue_360_returns_table_custom_type/plan.json b/testdata/diff/create_function/issue_360_returns_table_custom_type/plan.json
new file mode 100644
index 00000000..0ae1da87
--- /dev/null
+++ b/testdata/diff/create_function/issue_360_returns_table_custom_type/plan.json
@@ -0,0 +1,9 @@
+{
+  "version": "1.0.0",
+  "pgschema_version": "1.7.4",
+  "created_at": "1970-01-01T00:00:00Z",
+  "source_fingerprint": {
+    "hash": "bc4fc478f2d7ae4cc204de3447d992dface8f485a9227504fed99b21817cb888"
+  },
+  "groups": null
+}
diff --git a/testdata/diff/create_function/issue_360_returns_table_custom_type/plan.sql b/testdata/diff/create_function/issue_360_returns_table_custom_type/plan.sql
new file mode 100644
index 00000000..e69de29b
diff --git a/testdata/diff/create_function/issue_360_returns_table_custom_type/plan.txt b/testdata/diff/create_function/issue_360_returns_table_custom_type/plan.txt
new file mode 100644
index 00000000..241994af
--- /dev/null
+++ b/testdata/diff/create_function/issue_360_returns_table_custom_type/plan.txt
@@ -0,0 +1 @@
+No changes detected.