diff --git a/change/change-811de810-7c2d-4e6c-96b7-c671b4d7ffcb.json b/change/change-811de810-7c2d-4e6c-96b7-c671b4d7ffcb.json
new file mode 100644
index 000000000..d923c849f
--- /dev/null
+++ b/change/change-811de810-7c2d-4e6c-96b7-c671b4d7ffcb.json
@@ -0,0 +1,25 @@
+{
+  "changes": [
+    {
+      "type": "minor",
+      "comment": "Fix bug where we have unnecessary dependency edges added to the graph when a package does not have the relevant target in scripts",
+      "packageName": "@lage-run/cli",
+      "email": "1581488+christiango@users.noreply.github.com",
+      "dependentChangeType": "patch"
+    },
+    {
+      "type": "minor",
+      "comment": "Fix bug where we have unnecessary dependency edges added to the graph when a package does not have the relevant target in scripts",
+      "packageName": "@lage-run/config",
+      "email": "1581488+christiango@users.noreply.github.com",
+      "dependentChangeType": "patch"
+    },
+    {
+      "type": "minor",
+      "comment": "Fix bug where we have unnecessary dependency edges added to the graph when a package does not have the relevant target in scripts",
+      "packageName": "@lage-run/target-graph",
+      "email": "1581488+christiango@users.noreply.github.com",
+      "dependentChangeType": "patch"
+    }
+  ]
+}
\ No newline at end of file
diff --git a/change/change-af1026b1-217e-47f5-9bf6-56d614cb46c9.json b/change/change-af1026b1-217e-47f5-9bf6-56d614cb46c9.json
deleted file mode 100644
index 53de9432f..000000000
--- a/change/change-af1026b1-217e-47f5-9bf6-56d614cb46c9.json
+++ /dev/null
@@ -1,32 +0,0 @@
-{
-  "changes": [
-    {
-      "type": "patch",
-      "comment": "Update backfill-cache to 5.11.3",
-      "packageName": "@lage-run/cache",
-      "email": "elcraig@microsoft.com",
-      "dependentChangeType": "patch"
-    },
-    {
-      "type": "patch",
-      "comment": "Update config generated by init",
-      "packageName": "@lage-run/cli",
-      "email": "elcraig@microsoft.com",
-      "dependentChangeType": "patch"
-    },
-    {
-      "type": "patch",
-      "comment": "Reuse utilities from backfill-hasher",
-      "packageName": "@lage-run/hasher",
-      "email": "elcraig@microsoft.com",
-      "dependentChangeType": "patch"
-    },
-    {
-      "type": "none",
-      "comment": "Update readme",
-      "packageName": "lage",
-      "email": "elcraig@microsoft.com",
-      "dependentChangeType": "none"
-    }
-  ]
-}
\ No newline at end of file
diff --git a/packages/cli/src/__tests__/createTargetGraph.test.ts b/packages/cli/src/__tests__/createTargetGraph.test.ts
index 6527d87f6..79bddbc70 100644
--- a/packages/cli/src/__tests__/createTargetGraph.test.ts
+++ b/packages/cli/src/__tests__/createTargetGraph.test.ts
@@ -129,6 +129,7 @@ async function createPackageTasks(tasks: string[], packageInfos: PackageInfos, p
     dependencies: options.dependencies,
     dependents: options.dependents && !options.to, // --to is a short hand for --scope + --no-dependents
     enableTargetConfigMerging: true,
+    enablePhantomTargetOptimization: false,
     ignore: options.ignore.concat(config.ignore),
     pipeline: config.pipeline,
     repoWideChanges: config.repoWideChanges,
diff --git a/packages/cli/src/commands/info/action.ts b/packages/cli/src/commands/info/action.ts
index ee1f26bdb..be93ba465 100644
--- a/packages/cli/src/commands/info/action.ts
+++ b/packages/cli/src/commands/info/action.ts
@@ -123,6 +123,7 @@ export async function infoAction(options: InfoActionOptions, command: Command):
     packageInfos,
     priorities: config.priorities,
     enableTargetConfigMerging: config.enableTargetConfigMerging,
+    enablePhantomTargetOptimization: config.enablePhantomTargetOptimization,
   });
 
   const scope = getFilteredPackages({
diff --git a/packages/cli/src/commands/run/createTargetGraph.ts b/packages/cli/src/commands/run/createTargetGraph.ts
index ebfbcef67..49b76e007 100644
--- a/packages/cli/src/commands/run/createTargetGraph.ts
+++ b/packages/cli/src/commands/run/createTargetGraph.ts
@@ -21,6 +21,7 @@ interface CreateTargetGraphOptions {
   packageInfos: PackageInfos;
   priorities: Priority[];
   enableTargetConfigMerging: boolean;
+  enablePhantomTargetOptimization: boolean;
 }
 
 function getChangedFiles(since: string, cwd: string) {
@@ -45,6 +46,7 @@ export async function createTargetGraph(options: CreateTargetGraphOptions): Prom
     dependencies,
     dependents,
     enableTargetConfigMerging,
+    enablePhantomTargetOptimization,
     since,
     scope,
     repoWideChanges,
@@ -56,7 +58,7 @@ export async function createTargetGraph(options: CreateTargetGraphOptions): Prom
     priorities,
   } = options;
 
-  const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, enableTargetConfigMerging);
+  const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, enableTargetConfigMerging, enablePhantomTargetOptimization);
 
   const packages = getFilteredPackages({
     root,
diff --git a/packages/cli/src/commands/run/runAction.ts b/packages/cli/src/commands/run/runAction.ts
index 822034e9d..d465d42c2 100644
--- a/packages/cli/src/commands/run/runAction.ts
+++ b/packages/cli/src/commands/run/runAction.ts
@@ -65,6 +65,7 @@ export async function runAction(options: RunOptions, command: Command): Promise<
     packageInfos,
     priorities: config.priorities,
     enableTargetConfigMerging: config.enableTargetConfigMerging,
+    enablePhantomTargetOptimization: config.enablePhantomTargetOptimization,
   });
 
   validateTargetGraph(targetGraph, allowNoTargetRuns);
diff --git a/packages/cli/src/commands/run/watchAction.ts b/packages/cli/src/commands/run/watchAction.ts
index 900a27229..98f37e19a 100644
--- a/packages/cli/src/commands/run/watchAction.ts
+++ b/packages/cli/src/commands/run/watchAction.ts
@@ -63,6 +63,7 @@ export async function watchAction(options: RunOptions, command: Command): Promis
     packageInfos,
     priorities: config.priorities,
     enableTargetConfigMerging: config.enableTargetConfigMerging,
+    enablePhantomTargetOptimization: config.enablePhantomTargetOptimization,
   });
 
   // Make sure we do not attempt writeRemoteCache in watch mode
diff --git a/packages/cli/src/commands/server/lageService.ts b/packages/cli/src/commands/server/lageService.ts
index 9b2e47091..a06363c1d 100644
--- a/packages/cli/src/commands/server/lageService.ts
+++ b/packages/cli/src/commands/server/lageService.ts
@@ -78,6 +78,7 @@ async function createInitializedPromise({ cwd, logger, serverControls, nodeArg,
     packageInfos,
     priorities: config.priorities,
     enableTargetConfigMerging: config.enableTargetConfigMerging,
+    enablePhantomTargetOptimization: config.enablePhantomTargetOptimization,
   });
 
   const targetHasher = new TargetHasher({
diff --git a/packages/config/src/getConfig.ts b/packages/config/src/getConfig.ts
index c7e112502..ef175ed66 100644
--- a/packages/config/src/getConfig.ts
+++ b/packages/config/src/getConfig.ts
@@ -31,6 +31,7 @@ export async function getConfig(cwd: string): Promise<ConfigOptions> {
     concurrency: config?.concurrency ?? availableParallelism,
     allowNoTargetRuns: config?.allowNoTargetRuns ?? false,
     enableTargetConfigMerging: config?.enableTargetConfigMerging ?? false,
+    enablePhantomTargetOptimization: config?.enablePhantomTargetOptimization ?? false,
     reporters: config?.reporters ?? {},
   };
 }
diff --git a/packages/config/src/types/ConfigOptions.ts b/packages/config/src/types/ConfigOptions.ts
index 38dd85021..ba9268127 100644
--- a/packages/config/src/types/ConfigOptions.ts
+++ b/packages/config/src/types/ConfigOptions.ts
@@ -84,6 +84,13 @@ export interface ConfigOptions {
    */
   enableTargetConfigMerging: boolean;
 
+  /**
+   * Enables phantom target optimization. When enabled, targets created for packages that don't actually define
+   * the corresponding npm script are excluded from transitive (`^^`) dependency expansion.
+   * This prevents unwanted cross-package dependency chains when phantom targets are later removed.
+   */
+  enablePhantomTargetOptimization: boolean;
+
   /**
    * Custom reporters that can be referenced by name in the --reporter CLI flag.
    * The key is the reporter name, and the value is the path to the reporter module.
diff --git a/packages/e2e-tests/src/transitiveTaskDeps.test.ts b/packages/e2e-tests/src/transitiveTaskDeps.test.ts
index a8859aeb2..8185955f4 100644
--- a/packages/e2e-tests/src/transitiveTaskDeps.test.ts
+++ b/packages/e2e-tests/src/transitiveTaskDeps.test.ts
@@ -207,4 +207,51 @@ describe("transitive task deps test", () => {
 
     await repo.cleanup();
   });
+
+  it("reproduce bug where transitive dependencies were being added that were not necessary", async () => {
+    // Simulates a bug from an internal repo that implemented isolated declarations for some packages
+    const repo = new Monorepo("transitiveDeps-isolated-declarations-info");
+
+    await repo.init();
+
+    // This repo has some packages that have isolated declarations configured and some that do not.
+    // For the packages that do not have isolatedDeclarations enabled, we have a dummy emitDeclarations task defined for them whose sole purpose is to make sure we block on those package's typecheck step for d.ts emission
+    // For packages that do have isolatedDeclarations enabled, we emit the d.ts during transpile so we omit the emitDeclarations task.
+    await repo.setLageConfig(`module.exports = {
+      pipeline: {
+        transpile: [],
+        emitDeclarations: ["typecheck"],
+        typecheck: ["^^emitDeclarations", "transpile", "^^transpile"]
+      },
+    }`);
+
+    await repo.addPackage("dep", [], {
+      transpile: "echo dep:transpile",
+      typecheck: "echo dep:typecheck",
+    });
+
+    await repo.addPackage("app", ["dep"], {
+      transpile: "echo app:transpile",
+      typecheck: "echo app:typecheck",
+      emitDeclarations: "echo app:emitDeclarations",
+    });
+
+    await repo.install();
+
+    const results = await repo.run("writeInfo", ["typecheck", "--scope", "app"]);
+
+    const output = results.stdout + results.stderr;
+    const jsonOutput = parseNdJson(output);
+    const packageTasks = jsonOutput[0].data.packageTasks;
+
+    const appTypecheckTask = packageTasks.find(({ id }: { id: string }) => id === "app#typecheck");
+    expect(appTypecheckTask).toBeTruthy();
+
+    expect(appTypecheckTask.dependencies).toContain("app#transpile");
+
+    // This was the bug, we'd end up with app depending on the typecheck step of the dependency which does not have an emitDeclarations step
+    expect(appTypecheckTask.dependencies).not.toContain("dep#typecheck");
+
+    await repo.cleanup();
+  });
 });
diff --git a/packages/target-graph/src/WorkspaceTargetGraphBuilder.ts b/packages/target-graph/src/WorkspaceTargetGraphBuilder.ts
index 7c00c9c9a..620dfd06d 100644
--- a/packages/target-graph/src/WorkspaceTargetGraphBuilder.ts
+++ b/packages/target-graph/src/WorkspaceTargetGraphBuilder.ts
@@ -54,7 +54,8 @@ export class WorkspaceTargetGraphBuilder {
   constructor(
     root: string,
     private packageInfos: PackageInfos,
-    private enableTargetConfigMerging: boolean
+    private enableTargetConfigMerging: boolean,
+    private enablePhantomTargetOptimization: boolean
   ) {
     this.dependencyMap = createDependencyMap(packageInfos, { withDevDependencies: true, withPeerDependencies: false });
     this.graphBuilder = new TargetGraphBuilder();
@@ -95,8 +96,10 @@ export class WorkspaceTargetGraphBuilder {
       this.processStagedConfig(target, config, changedFiles);
     } else {
       const packages = Object.keys(this.packageInfos);
+
       for (const packageName of packages) {
         const task = id;
+
         const targetConfig = this.determineFinalTargetConfig(getTargetId(packageName, task), config);
         const target = this.targetFactory.createPackageTarget(packageName!, task, targetConfig);
         this.graphBuilder.addTarget(target);
@@ -207,7 +210,12 @@ export class WorkspaceTargetGraphBuilder {
     priorities?: { package?: string; task: string; priority: number }[]
   ): Promise<TargetGraph> {
     // Expands the dependency specs from the target definitions
-    const fullDependencies = expandDepSpecs(this.graphBuilder.targets, this.dependencyMap);
+    const fullDependencies = expandDepSpecs(
+      this.graphBuilder.targets,
+      this.dependencyMap,
+      this.packageInfos,
+      this.enablePhantomTargetOptimization
+    );
 
     for (const [from, to] of fullDependencies) {
       this.graphBuilder.addDependency(from, to);
diff --git a/packages/target-graph/src/__tests__/WorkspaceTargetGraphBuilder.test.ts b/packages/target-graph/src/__tests__/WorkspaceTargetGraphBuilder.test.ts
index 78dc9ecba..38cb72219 100644
--- a/packages/target-graph/src/__tests__/WorkspaceTargetGraphBuilder.test.ts
+++ b/packages/target-graph/src/__tests__/WorkspaceTargetGraphBuilder.test.ts
@@ -38,7 +38,7 @@ describe("workspace target graph builder", () => {
       b: [],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
     await builder.addTargetConfig("build", {
       dependsOn: ["^build"],
     });
@@ -80,7 +80,7 @@ describe("workspace target graph builder", () => {
       b: [],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
     await builder.addTargetConfig("test");
     await builder.addTargetConfig("lint");
 
@@ -119,7 +119,7 @@ describe("workspace target graph builder", () => {
       c: ["b"],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
 
     await builder.addTargetConfig("build", {
       dependsOn: ["^build"],
@@ -161,7 +161,7 @@ describe("workspace target graph builder", () => {
       c: ["b"],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
 
     await builder.addTargetConfig("build", {
       dependsOn: ["^build"],
@@ -195,7 +195,7 @@ describe("workspace target graph builder", () => {
       c: [],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
 
     await builder.addTargetConfig("bundle", {
       dependsOn: ["^^transpile"],
@@ -240,7 +240,7 @@ describe("workspace target graph builder", () => {
       common: [],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
 
     await builder.addTargetConfig("build", {
       dependsOn: ["common#copy", "^build"],
@@ -296,7 +296,7 @@ describe("workspace target graph builder", () => {
       b: [],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
     await builder.addTargetConfig("build", {
       dependsOn: ["^build", "#global:task"],
     });
@@ -345,7 +345,7 @@ describe("workspace target graph builder", () => {
       b: [],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
     await builder.addTargetConfig("build", {
       dependsOn: ["^build", "#global:task"],
     });
@@ -374,7 +374,7 @@ describe("workspace target graph builder", () => {
       b: [],
     });
 
-    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false);
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
     await builder.addTargetConfig("build", {
       dependsOn: ["^build"],
     });
@@ -402,4 +402,77 @@ describe("workspace target graph builder", () => {
       ]
     `);
   });
+
+  it("should not create phantom transitive deps for packages missing a script", async () => {
+    const root = "/repos/a";
+
+    // "app" has emitDeclarations in scripts, "dep" does not
+    const packageInfos = createPackageInfoWithScripts({
+      app: { deps: ["dep"], scripts: ["transpile", "typecheck", "emitDeclarations"] },
+      dep: { deps: [], scripts: ["transpile", "typecheck"] },
+    });
+
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
+    await builder.addTargetConfig("transpile");
+    await builder.addTargetConfig("emitDeclarations", {
+      dependsOn: ["typecheck"],
+    });
+    await builder.addTargetConfig("typecheck", {
+      dependsOn: ["^^emitDeclarations", "transpile", "^^transpile"],
+    });
+
+    const targetGraph = await builder.build(["typecheck"], ["app"]);
+    const graph = getGraphFromTargets(targetGraph);
+
+    // app#typecheck should depend on app#transpile (same-package dep)
+    expect(graph).toContainEqual(["app#transpile", "app#typecheck"]);
+
+    // app#typecheck should depend on dep#transpile (via ^^transpile, dep has the script)
+    expect(graph).toContainEqual(["dep#transpile", "app#typecheck"]);
+
+    // app#typecheck should NOT depend on dep#typecheck — dep doesn't have emitDeclarations,
+    // so the phantom dep#emitDeclarations should not create a transitive link
+    expect(graph).not.toContainEqual(["dep#typecheck", "app#typecheck"]);
+  });
+
+  it("should preserve ^^ deps for non-npmScript typed targets even without scripts entry", async () => {
+    const root = "/repos/a";
+
+    // "dep" doesn't have "customTask" in scripts, but it's configured as a worker type
+    const packageInfos = createPackageInfoWithScripts({
+      app: { deps: ["dep"], scripts: ["build"] },
+      dep: { deps: [], scripts: ["build"] },
+    });
+
+    const builder = new WorkspaceTargetGraphBuilder(root, packageInfos, false, false);
+    await builder.addTargetConfig("customTask", {
+      type: "worker",
+    });
+    await builder.addTargetConfig("build", {
+      dependsOn: ["^^customTask"],
+    });
+
+    const targetGraph = await builder.build(["build"], ["app"]);
+    const graph = getGraphFromTargets(targetGraph);
+
+    // app#build should depend on dep#customTask even though dep doesn't have it in scripts,
+    // because the target has an explicit non-npmScript type ("worker")
+    expect(graph).toContainEqual(["dep#customTask", "app#build"]);
+  });
 });
+
+function createPackageInfoWithScripts(packages: { [id: string]: { deps: string[]; scripts: string[] } }) {
+  const packageInfos: PackageInfos = {};
+  Object.keys(packages).forEach((id) => {
+    const { deps, scripts } = packages[id];
+    packageInfos[id] = {
+      packageJsonPath: `/path/to/${id}/package.json`,
+      name: id,
+      version: "1.0.0",
+      dependencies: deps.reduce((acc, dep) => ({ ...acc, [dep]: "*" }), {}),
+      devDependencies: {},
+      scripts: scripts.reduce((acc, script) => ({ ...acc, [script]: `echo ${script}` }), {}),
+    };
+  });
+  return packageInfos;
+}
diff --git a/packages/target-graph/src/expandDepSpecs.ts b/packages/target-graph/src/expandDepSpecs.ts
index 2992832c5..35af19c2c 100644
--- a/packages/target-graph/src/expandDepSpecs.ts
+++ b/packages/target-graph/src/expandDepSpecs.ts
@@ -1,11 +1,47 @@
 import type { Target } from "./types/Target.js";
 import type { DependencyMap } from "workspace-tools/lib/graph/createDependencyMap.js";
+import type { PackageInfos } from "workspace-tools";
 import { getPackageAndTask, getStartTargetId, getTargetId } from "./targetId.js";
 
+/**
+ * Checks whether a target represents a "phantom" target — one created for a package that
+ * doesn't actually define the script for an npmScript target. Phantom targets should be excluded from `^` and `^^`
+ * (topological/transitive) dependency expansion to avoid unwanted cross-package dependency chains.
+ *
+ * When phantom targets are later removed by `removeNodes` (because `shouldRun` returns false),
+ * their same-package dependencies get reconnected to their cross-package dependents, creating
+ * unnecessary work.
+ *
+ * Only npmScript target types can be considered phantom targets
+ *
+ * Returns true if the target should be EXCLUDED from dependency expansion.
+ */
+function isPhantomTarget(targetId: string, task: string, targets: Map<string, Target>, packageInfos: PackageInfos): boolean {
+  const target = targets.get(targetId);
+  if (!target?.packageName) return false;
+
+  // Only npmScript targets can be phantom — other types (worker, noop, etc.)
+  // are real targets regardless of whether the package defines the script.
+  if (target.type !== "npmScript") {
+    return false;
+  }
+
+  const pkgScripts = packageInfos[target.packageName]?.scripts;
+  // If the package has a scripts section but doesn't include this task, it's a phantom target.
+  // If the package has no scripts section at all (e.g., in unit tests), we include the target
+  // for backward compatibility.
+  return !!pkgScripts && !pkgScripts[task];
+}
+
 /**
  * Expands the dependency graph by adding all transitive dependencies of the given targets.
  */
-export function expandDepSpecs(targets: Map<string, Target>, dependencyMap: DependencyMap): [string, string][] {
+export function expandDepSpecs(
+  targets: Map<string, Target>,
+  dependencyMap: DependencyMap,
+  packageInfos: PackageInfos,
+  enablePhantomTargetOptimization: boolean
+): [string, string][] {
   const dependencies: [string, string][] = [];
 
   /**
@@ -77,6 +113,8 @@ export function expandDepSpecs(targets: Map<string, Target>, dependencyMap: Depe
         const targetDependencies = [...(getTransitiveGraphDependencies(packageName, dependencyMap) ?? [])];
         const dependencyTargetIds = findDependenciesByTask(depTask, targetDependencies);
         for (const from of dependencyTargetIds) {
+          // Skip phantom targets: packages that don't define this task as a real npm script.
+          if (enablePhantomTargetOptimization && isPhantomTarget(from, depTask, targets, packageInfos)) continue;
           addDependency(from, to);
         }
       } else if (dependencyTargetId.startsWith("^") && packageName) {
@@ -85,6 +123,8 @@ export function expandDepSpecs(targets: Map<string, Target>, dependencyMap: Depe
         const targetDependencies = [...(dependencyMap.dependencies.get(packageName) ?? [])];
         const dependencyTargetIds = findDependenciesByTask(depTask, targetDependencies);
         for (const from of dependencyTargetIds) {
+          // Skip phantom targets: packages that don't define this task as a real npm script.
+          if (enablePhantomTargetOptimization && isPhantomTarget(from, depTask, targets, packageInfos)) continue;
           addDependency(from, to);
         }
       } else if (packageName) {