diff --git a/src/VisualStudio/Core/Test.Next/Services/ServiceHubServicesTests.cs b/src/VisualStudio/Core/Test.Next/Services/ServiceHubServicesTests.cs
index 32c1f79810c4a..987204412186e 100644
--- a/src/VisualStudio/Core/Test.Next/Services/ServiceHubServicesTests.cs
+++ b/src/VisualStudio/Core/Test.Next/Services/ServiceHubServicesTests.cs
@@ -307,6 +307,54 @@ await solution.State.GetChecksumAsync(CancellationToken.None),
                 await remoteWorkspace.CurrentSolution.State.GetChecksumAsync(CancellationToken.None));
         }
 
+        [Fact]
+        [WorkItem(52578, "https://github.com/dotnet/roslyn/issues/52578")]
+        public async Task TestIncrementalUpdateHandlesReferenceReversal()
+        {
+            using var workspace = CreateWorkspace();
+
+            using var client = await InProcRemoteHostClient.GetTestClientAsync(workspace).ConfigureAwait(false);
+            var remoteWorkspace = client.GetRemoteWorkspace();
+
+            var solution = workspace.CurrentSolution;
+            solution = AddProject(solution, LanguageNames.CSharp, documents: Array.Empty<string>(), additionalDocuments: Array.Empty<string>(), p2pReferences: Array.Empty<ProjectId>());
+            var projectId1 = solution.ProjectIds.Single();
+            solution = AddProject(solution, LanguageNames.CSharp, documents: Array.Empty<string>(), additionalDocuments: Array.Empty<string>(), p2pReferences: Array.Empty<ProjectId>());
+            var projectId2 = solution.ProjectIds.Where(id => id != projectId1).Single();
+
+            var project1ToProject2 = new ProjectReference(projectId2);
+            var project2ToProject1 = new ProjectReference(projectId1);
+
+            // Start with projectId1 -> projectId2
+            solution = solution.AddProjectReference(projectId1, project1ToProject2);
+
+            // verify initial setup
+            await UpdatePrimaryWorkspace(client, solution);
+            await VerifyAssetStorageAsync(client, solution, includeProjectCones: false);
+
+            Assert.Equal(
+                await solution.State.GetChecksumAsync(CancellationToken.None),
+                await remoteWorkspace.CurrentSolution.State.GetChecksumAsync(CancellationToken.None));
+
+            // reverse project references and incrementally update
+            solution = solution.RemoveProjectReference(projectId1, project1ToProject2);
+            solution = solution.AddProjectReference(projectId2, project2ToProject1);
+            await UpdatePrimaryWorkspace(client, solution);
+
+            Assert.Equal(
+                await solution.State.GetChecksumAsync(CancellationToken.None),
+                await remoteWorkspace.CurrentSolution.State.GetChecksumAsync(CancellationToken.None));
+
+            // reverse project references again and incrementally update
+            solution = solution.RemoveProjectReference(projectId2, project2ToProject1);
+            solution = solution.AddProjectReference(projectId1, project1ToProject2);
+            await UpdatePrimaryWorkspace(client, solution);
+
+            Assert.Equal(
+                await solution.State.GetChecksumAsync(CancellationToken.None),
+                await remoteWorkspace.CurrentSolution.State.GetChecksumAsync(CancellationToken.None));
+        }
+
         [Fact]
         public void TestRemoteWorkspaceCircularReferences()
         {
diff --git a/src/Workspaces/Remote/ServiceHub/Host/RemoteWorkspace.SolutionCreator.cs b/src/Workspaces/Remote/ServiceHub/Host/RemoteWorkspace.SolutionCreator.cs
index 37d81cffed904..e650ef41b4af7 100644
--- a/src/Workspaces/Remote/ServiceHub/Host/RemoteWorkspace.SolutionCreator.cs
+++ b/src/Workspaces/Remote/ServiceHub/Host/RemoteWorkspace.SolutionCreator.cs
@@ -150,7 +150,8 @@ private async Task<Solution> UpdateProjectsAsync(Solution solution, HashSet<Chec
                     }
                 }
 
-                // changed project
+                // remove all project references from projects that changed. this ensures exceptions will not occur for
+                // cyclic references during an incremental update.
                 foreach (var (projectId, newProjectChecksums) in newMap)
                 {
                     if (!oldMap.TryGetValue(projectId, out var oldProjectChecksums))
@@ -158,9 +159,10 @@ private async Task<Solution> UpdateProjectsAsync(Solution solution, HashSet<Chec
                         continue;
                     }
 
-                    Contract.ThrowIfTrue(oldProjectChecksums.Checksum == newProjectChecksums.Checksum);
-
-                    solution = await UpdateProjectAsync(solution.GetProject(projectId)!, oldProjectChecksums, newProjectChecksums).ConfigureAwait(false);
+                    if (oldProjectChecksums.ProjectReferences.Checksum != newProjectChecksums.ProjectReferences.Checksum)
+                    {
+                        solution = solution.WithProjectReferences(projectId, SpecializedCollections.EmptyEnumerable<ProjectReference>());
+                    }
                 }
 
                 // removed project
@@ -173,6 +175,19 @@ private async Task<Solution> UpdateProjectsAsync(Solution solution, HashSet<Chec
                     }
                 }
 
+                // changed project
+                foreach (var (projectId, newProjectChecksums) in newMap)
+                {
+                    if (!oldMap.TryGetValue(projectId, out var oldProjectChecksums))
+                    {
+                        continue;
+                    }
+
+                    Contract.ThrowIfTrue(oldProjectChecksums.Checksum == newProjectChecksums.Checksum);
+
+                    solution = await UpdateProjectAsync(solution.GetProject(projectId)!, oldProjectChecksums, newProjectChecksums).ConfigureAwait(false);
+                }
+
                 return solution;
             }