diff --git a/cli/napi/threadsafe_functions.rs b/cli/napi/threadsafe_functions.rs
index d692b5bb27..119ee81da6 100644
--- a/cli/napi/threadsafe_functions.rs
+++ b/cli/napi/threadsafe_functions.rs
@@ -2,19 +2,33 @@
 
 use deno_core::futures::channel::mpsc;
 use deno_runtime::deno_napi::*;
+use once_cell::sync::Lazy;
 use std::mem::forget;
+use std::sync::atomic::AtomicUsize;
 use std::sync::mpsc::channel;
+use std::sync::Arc;
+
+static TS_FN_ID_COUNTER: Lazy<AtomicUsize> = Lazy::new(|| AtomicUsize::new(0));
 
 pub struct TsFn {
+  pub id: usize,
   pub env: *mut Env,
   pub maybe_func: Option<v8::Global<v8::Function>>,
   pub maybe_call_js_cb: Option<napi_threadsafe_function_call_js>,
   pub context: *mut c_void,
   pub thread_counter: usize,
+  pub ref_counter: Arc<AtomicUsize>,
   sender: mpsc::UnboundedSender<PendingNapiAsyncWork>,
   tsfn_sender: mpsc::UnboundedSender<ThreadSafeFunctionStatus>,
 }
 
+impl Drop for TsFn {
+  fn drop(&mut self) {
+    let env = unsafe { self.env.as_mut().unwrap() };
+    env.remove_threadsafe_function_ref_counter(self.id)
+  }
+}
+
 impl TsFn {
   pub fn acquire(&mut self) -> Result {
     self.thread_counter += 1;
@@ -35,6 +49,29 @@ impl TsFn {
     Ok(())
   }
 
+  pub fn ref_(&mut self) -> Result {
+    self
+      .ref_counter
+      .fetch_add(1, std::sync::atomic::Ordering::SeqCst);
+    Ok(())
+  }
+
+  pub fn unref(&mut self) -> Result {
+    let _ = self.ref_counter.fetch_update(
+      std::sync::atomic::Ordering::SeqCst,
+      std::sync::atomic::Ordering::SeqCst,
+      |x| {
+        if x == 0 {
+          None
+        } else {
+          Some(x - 1)
+        }
+      },
+    );
+
+    Ok(())
+  }
+
   pub fn call(&self, data: *mut c_void, is_blocking: bool) {
     let js_func = self.maybe_func.clone();
     let (tx, rx) = channel();
@@ -107,15 +144,21 @@ fn napi_create_threadsafe_function(
     })
     .transpose()?;
 
+  let id = TS_FN_ID_COUNTER.fetch_add(1, std::sync::atomic::Ordering::SeqCst);
+
   let tsfn = TsFn {
+    id,
     maybe_func,
     maybe_call_js_cb,
     context,
     thread_counter: initial_thread_count,
     sender: env_ref.async_work_sender.clone(),
     tsfn_sender: env_ref.threadsafe_function_sender.clone(),
+    ref_counter: Arc::new(AtomicUsize::new(1)),
     env,
   };
+  env_ref
+    .add_threadsafe_function_ref_counter(tsfn.id, tsfn.ref_counter.clone());
 
   env_ref
     .threadsafe_function_sender
@@ -142,7 +185,8 @@ fn napi_unref_threadsafe_function(
   _env: &mut Env,
   tsfn: napi_threadsafe_function,
 ) -> Result {
-  let _tsfn: &TsFn = &*(tsfn as *const TsFn);
+  let tsfn: &mut TsFn = &mut *(tsfn as *mut TsFn);
+  tsfn.unref()?;
 
   Ok(())
 }
@@ -170,8 +214,12 @@ fn napi_call_threadsafe_function(
 }
 
 #[napi_sym::napi_sym]
-fn napi_ref_threadsafe_function() -> Result {
-  // TODO
+fn napi_ref_threadsafe_function(
+  _env: &mut Env,
+  func: napi_threadsafe_function,
+) -> Result {
+  let tsfn: &mut TsFn = &mut *(func as *mut TsFn);
+  tsfn.ref_()?;
   Ok(())
 }
 
diff --git a/ext/napi/lib.rs b/ext/napi/lib.rs
index 882f7c19d7..57f73a0ca2 100644
--- a/ext/napi/lib.rs
+++ b/ext/napi/lib.rs
@@ -19,6 +19,8 @@ use std::ffi::CString;
 use std::path::Path;
 use std::path::PathBuf;
 use std::rc::Rc;
+use std::sync::atomic::AtomicUsize;
+use std::sync::Arc;
 use std::task::Poll;
 use std::thread_local;
 
@@ -322,7 +324,7 @@ pub struct napi_node_version {
 }
 
 pub type PendingNapiAsyncWork = Box<dyn FnOnce()>;
-
+pub type ThreadsafeFunctionRefCounters = Vec<(usize, Arc<AtomicUsize>)>;
 pub struct NapiState {
   // Async tasks.
   pub pending_async_work: Vec<PendingNapiAsyncWork>,
@@ -336,6 +338,7 @@ pub struct NapiState {
     mpsc::UnboundedSender<ThreadSafeFunctionStatus>,
   pub env_cleanup_hooks:
     Rc<RefCell<Vec<(extern "C" fn(*const c_void), *const c_void)>>>,
+  pub tsfn_ref_counters: Rc<RefCell<ThreadsafeFunctionRefCounters>>,
 }
 
 impl Drop for NapiState {
@@ -391,6 +394,7 @@ pub struct Env {
     mpsc::UnboundedSender<ThreadSafeFunctionStatus>,
   pub cleanup_hooks:
     Rc<RefCell<Vec<(extern "C" fn(*const c_void), *const c_void)>>>,
+  pub tsfn_ref_counters: Rc<RefCell<ThreadsafeFunctionRefCounters>>,
 }
 
 unsafe impl Send for Env {}
@@ -405,6 +409,7 @@ impl Env {
     cleanup_hooks: Rc<
       RefCell<Vec<(extern "C" fn(*const c_void), *const c_void)>>,
     >,
+    tsfn_ref_counters: Rc<RefCell<ThreadsafeFunctionRefCounters>>,
   ) -> Self {
     let sc = sender.clone();
     ASYNC_WORK_SENDER.with(|s| {
@@ -423,6 +428,7 @@ impl Env {
       async_work_sender: sender,
       threadsafe_function_sender,
       cleanup_hooks,
+      tsfn_ref_counters,
     }
   }
 
@@ -458,6 +464,22 @@ impl Env {
     // using `napi_open_handle_scope`.
     unsafe { v8::CallbackScope::new(context) }
   }
+
+  pub fn add_threadsafe_function_ref_counter(
+    &mut self,
+    id: usize,
+    counter: Arc<AtomicUsize>,
+  ) {
+    let mut counters = self.tsfn_ref_counters.borrow_mut();
+    assert!(!counters.iter().any(|(i, _)| *i == id));
+    counters.push((id, counter));
+  }
+
+  pub fn remove_threadsafe_function_ref_counter(&mut self, id: usize) {
+    let mut counters = self.tsfn_ref_counters.borrow_mut();
+    let index = counters.iter().position(|(i, _)| *i == id).unwrap();
+    counters.remove(index);
+  }
 }
 
 pub fn init<P: NapiPermissions + 'static>(unstable: bool) -> Extension {
@@ -479,22 +501,16 @@ pub fn init<P: NapiPermissions + 'static>(unstable: bool) -> Extension {
           napi_state.pending_async_work.push(async_work_fut);
         }
 
-        while let Poll::Ready(Some(tsfn_status)) =
-          napi_state.threadsafe_function_receiver.poll_next_unpin(cx)
-        {
-          match tsfn_status {
-            ThreadSafeFunctionStatus::Alive => {
-              napi_state.active_threadsafe_functions += 1
-            }
-            ThreadSafeFunctionStatus::Dead => {
-              napi_state.active_threadsafe_functions -= 1
-            }
-          };
-        }
-
         if napi_state.active_threadsafe_functions > 0 {
           maybe_scheduling = true;
         }
+
+        for (_id, counter) in napi_state.tsfn_ref_counters.borrow().iter() {
+          if counter.load(std::sync::atomic::Ordering::SeqCst) > 0 {
+            maybe_scheduling = true;
+            break;
+          }
+        }
       }
 
       loop {
@@ -527,6 +543,7 @@ pub fn init<P: NapiPermissions + 'static>(unstable: bool) -> Extension {
         threadsafe_function_receiver,
         active_threadsafe_functions: 0,
         env_cleanup_hooks: Rc::new(RefCell::new(vec![])),
+        tsfn_ref_counters: Rc::new(RefCell::new(vec![])),
       });
       state.put(Unstable(unstable));
       Ok(())
@@ -563,7 +580,13 @@ where
   let permissions = op_state.borrow_mut::<NP>();
   permissions.check(Some(&PathBuf::from(&path)))?;
 
-  let (async_work_sender, tsfn_sender, isolate_ptr, cleanup_hooks) = {
+  let (
+    async_work_sender,
+    tsfn_sender,
+    isolate_ptr,
+    cleanup_hooks,
+    tsfn_ref_counters,
+  ) = {
     let napi_state = op_state.borrow::<NapiState>();
     let isolate_ptr = op_state.borrow::<*mut v8::OwnedIsolate>();
     (
@@ -571,6 +594,7 @@ where
       napi_state.threadsafe_function_sender.clone(),
       *isolate_ptr,
       napi_state.env_cleanup_hooks.clone(),
+      napi_state.tsfn_ref_counters.clone(),
     )
   };
 
@@ -593,6 +617,7 @@ where
     async_work_sender,
     tsfn_sender,
     cleanup_hooks,
+    tsfn_ref_counters,
   );
   env.shared = Box::into_raw(Box::new(env_shared));
   let env_ptr = Box::into_raw(Box::new(env)) as _;
diff --git a/test_napi/src/lib.rs b/test_napi/src/lib.rs
index 3a28e4471a..025fbf5d2b 100644
--- a/test_napi/src/lib.rs
+++ b/test_napi/src/lib.rs
@@ -17,6 +17,7 @@ pub mod primitives;
 pub mod promise;
 pub mod properties;
 pub mod strings;
+pub mod tsfn;
 pub mod typedarray;
 
 #[macro_export]
@@ -126,6 +127,7 @@ unsafe extern "C" fn napi_register_module_v1(
   object_wrap::init(env, exports);
   callback::init(env, exports);
   r#async::init(env, exports);
+  tsfn::init(env, exports);
   init_cleanup_hook(env, exports);
 
   exports
diff --git a/test_napi/src/tsfn.rs b/test_napi/src/tsfn.rs
new file mode 100644
index 0000000000..314975f39b
--- /dev/null
+++ b/test_napi/src/tsfn.rs
@@ -0,0 +1,108 @@
+// Copyright 2018-2023 the Deno authors. All rights reserved. MIT license.
+
+// This test performs initilization similar to napi-rs.
+// https://github.com/napi-rs/napi-rs/commit/a5a04a4e545f268769cc78e2bd6c45af4336aac3
+
+use napi_sys as sys;
+use std::ffi::c_char;
+use std::ffi::c_void;
+use std::ptr;
+
+macro_rules! check_status_or_panic {
+  ($code:expr, $msg:expr) => {{
+    let c = $code;
+    match c {
+      sys::Status::napi_ok => {}
+      _ => panic!($msg),
+    }
+  }};
+}
+
+fn create_custom_gc(env: sys::napi_env) {
+  let mut custom_gc_fn = ptr::null_mut();
+  check_status_or_panic!(
+    unsafe {
+      sys::napi_create_function(
+        env,
+        "custom_gc".as_ptr() as *const c_char,
+        9,
+        Some(empty),
+        ptr::null_mut(),
+        &mut custom_gc_fn,
+      )
+    },
+    "Create Custom GC Function in napi_register_module_v1 failed"
+  );
+  let mut async_resource_name = ptr::null_mut();
+  check_status_or_panic!(
+    unsafe {
+      sys::napi_create_string_utf8(
+        env,
+        "CustomGC".as_ptr() as *const c_char,
+        8,
+        &mut async_resource_name,
+      )
+    },
+    "Create async resource string in napi_register_module_v1 napi_register_module_v1"
+  );
+  let mut custom_gc_tsfn = ptr::null_mut();
+  check_status_or_panic!(
+    unsafe {
+      sys::napi_create_threadsafe_function(
+        env,
+        custom_gc_fn,
+        ptr::null_mut(),
+        async_resource_name,
+        0,
+        1,
+        ptr::null_mut(),
+        Some(custom_gc_finalize),
+        ptr::null_mut(),
+        Some(custom_gc),
+        &mut custom_gc_tsfn,
+      )
+    },
+    "Create Custom GC ThreadsafeFunction in napi_register_module_v1 failed"
+  );
+  check_status_or_panic!(
+    unsafe { sys::napi_unref_threadsafe_function(env, custom_gc_tsfn) },
+    "Unref Custom GC ThreadsafeFunction in napi_register_module_v1 failed"
+  );
+}
+
+unsafe extern "C" fn empty(
+  _env: sys::napi_env,
+  _info: sys::napi_callback_info,
+) -> sys::napi_value {
+  ptr::null_mut()
+}
+
+unsafe extern "C" fn custom_gc_finalize(
+  _env: sys::napi_env,
+  _finalize_data: *mut c_void,
+  _finalize_hint: *mut c_void,
+) {
+}
+
+extern "C" fn custom_gc(
+  env: sys::napi_env,
+  _js_callback: sys::napi_value,
+  _context: *mut c_void,
+  data: *mut c_void,
+) {
+  let mut ref_count = 0;
+  check_status_or_panic!(
+    unsafe {
+      sys::napi_reference_unref(env, data as sys::napi_ref, &mut ref_count)
+    },
+    "Failed to unref Buffer reference in Custom GC"
+  );
+  check_status_or_panic!(
+    unsafe { sys::napi_delete_reference(env, data as sys::napi_ref) },
+    "Failed to delete Buffer reference in Custom GC"
+  );
+}
+
+pub fn init(env: sys::napi_env, _exports: sys::napi_value) {
+  create_custom_gc(env);
+}