We develop a nonlinear theory for infrahyperfunctions (also referred to as quasianalytic (ultra) distributions by L. Hormander). In the hyperfunction case, our work can be summarized as follows. We construct a differential algebra that contains the space of hyperfunctions as a linear differential subspace and in which the multiplication of real analytic functions coincides with their ordinary product. Moreover, by proving an analogue of Schwartz's impossibility result for hyperfunctions, we show that this embedding is optimal. Our results fully solve an earlier question raised by M. Oberguggenberger.