diff --git a/src/compiler/tsbuild.ts b/src/compiler/tsbuild.ts
index 4602c0793b..f2a43e5e79 100644
--- a/src/compiler/tsbuild.ts
+++ b/src/compiler/tsbuild.ts
@@ -1462,7 +1462,8 @@ namespace ts {
                 const refStatus = getUpToDateStatus(state, parseConfigFile(state, resolvedRef, resolvedRefPath), resolvedRefPath);
 
                 // Its a circular reference ignore the status of this project
-                if (refStatus.type === UpToDateStatusType.ComputingUpstream) {
+                if (refStatus.type === UpToDateStatusType.ComputingUpstream ||
+                    refStatus.type === UpToDateStatusType.ContainerOnly) { // Container only ignore this project
                     continue;
                 }
 
diff --git a/src/testRunner/tsconfig.json b/src/testRunner/tsconfig.json
index 07499a998b..b2e7e3e78b 100644
--- a/src/testRunner/tsconfig.json
+++ b/src/testRunner/tsconfig.json
@@ -90,6 +90,7 @@
         "unittests/services/textChanges.ts",
         "unittests/services/transpile.ts",
         "unittests/tsbuild/amdModulesWithOut.ts",
+        "unittests/tsbuild/containerOnlyReferenced.ts",
         "unittests/tsbuild/emptyFiles.ts",
         "unittests/tsbuild/graphOrdering.ts",
         "unittests/tsbuild/inferredTypeFromTransitiveModule.ts",
diff --git a/src/testRunner/unittests/tsbuild/containerOnlyReferenced.ts b/src/testRunner/unittests/tsbuild/containerOnlyReferenced.ts
new file mode 100644
index 0000000000..425dbf2e20
--- /dev/null
+++ b/src/testRunner/unittests/tsbuild/containerOnlyReferenced.ts
@@ -0,0 +1,48 @@
+namespace ts {
+    describe("unittests:: tsbuild:: when containerOnly project is referenced", () => {
+        let projFs: vfs.FileSystem;
+        before(() => {
+            projFs = loadProjectFromDisk("tests/projects/containerOnlyReferenced");
+        });
+
+        after(() => {
+            projFs = undefined!; // Release the contents
+        });
+
+        function outputs(folder: string) {
+            return [
+                `${folder}/index.js`,
+                `${folder}/index.d.ts`,
+                `${folder}/tsconfig.tsbuildinfo`
+            ];
+        }
+
+        it("verify that subsequent builds after initial build doesnt build anything", () => {
+            const fs = projFs.shadow();
+            const host = new fakes.SolutionBuilderHost(fs);
+            createSolutionBuilder(host, ["/src"], { verbose: true }).build();
+            host.assertDiagnosticMessages(
+                getExpectedDiagnosticForProjectsInBuild("src/src/folder/tsconfig.json", "src/src/folder2/tsconfig.json", "src/src/tsconfig.json", "src/tests/tsconfig.json", "src/tsconfig.json"),
+                [Diagnostics.Project_0_is_out_of_date_because_output_file_1_does_not_exist, "src/src/folder/tsconfig.json", "src/src/folder/index.js"],
+                [Diagnostics.Building_project_0, "/src/src/folder/tsconfig.json"],
+                [Diagnostics.Project_0_is_out_of_date_because_output_file_1_does_not_exist, "src/src/folder2/tsconfig.json", "src/src/folder2/index.js"],
+                [Diagnostics.Building_project_0, "/src/src/folder2/tsconfig.json"],
+                [Diagnostics.Project_0_is_out_of_date_because_output_file_1_does_not_exist, "src/tests/tsconfig.json", "src/tests/index.js"],
+                [Diagnostics.Building_project_0, "/src/tests/tsconfig.json"],
+            );
+            verifyOutputsPresent(fs, [
+                ...outputs("/src/src/folder"),
+                ...outputs("/src/src/folder2"),
+                ...outputs("/src/tests"),
+            ]);
+            host.clearDiagnostics();
+            createSolutionBuilder(host, ["/src"], { verbose: true }).build();
+            host.assertDiagnosticMessages(
+                getExpectedDiagnosticForProjectsInBuild("src/src/folder/tsconfig.json", "src/src/folder2/tsconfig.json", "src/src/tsconfig.json", "src/tests/tsconfig.json", "src/tsconfig.json"),
+                [Diagnostics.Project_0_is_up_to_date_because_newest_input_1_is_older_than_oldest_output_2, "src/src/folder/tsconfig.json", "src/src/folder/index.ts", "src/src/folder/index.js"],
+                [Diagnostics.Project_0_is_up_to_date_because_newest_input_1_is_older_than_oldest_output_2, "src/src/folder2/tsconfig.json", "src/src/folder2/index.ts", "src/src/folder2/index.js"],
+                [Diagnostics.Project_0_is_up_to_date_because_newest_input_1_is_older_than_oldest_output_2, "src/tests/tsconfig.json", "src/tests/index.ts", "src/tests/index.js"],
+            );
+        });
+    });
+}
diff --git a/src/testRunner/unittests/tsbuild/referencesWithRootDirInParent.ts b/src/testRunner/unittests/tsbuild/referencesWithRootDirInParent.ts
index 186a43b3c3..f6a2dca6c2 100644
--- a/src/testRunner/unittests/tsbuild/referencesWithRootDirInParent.ts
+++ b/src/testRunner/unittests/tsbuild/referencesWithRootDirInParent.ts
@@ -10,7 +10,6 @@ namespace ts {
         });
 
         it("verify that it builds correctly", () => {
-            const projFs = loadProjectFromDisk("tests/projects/projectReferenceWithRootDirInParent");
             const allExpectedOutputs = [
                 "/src/dist/other/other.js", "/src/dist/other/other.d.ts",
                 "/src/dist/main/a.js", "/src/dist/main/a.d.ts",
diff --git a/tests/projects/containerOnlyReferenced/src/folder/index.ts b/tests/projects/containerOnlyReferenced/src/folder/index.ts
new file mode 100644
index 0000000000..a65e423515
--- /dev/null
+++ b/tests/projects/containerOnlyReferenced/src/folder/index.ts
@@ -0,0 +1 @@
+export const x = 10;
\ No newline at end of file
diff --git a/tests/projects/containerOnlyReferenced/src/folder/tsconfig.json b/tests/projects/containerOnlyReferenced/src/folder/tsconfig.json
new file mode 100644
index 0000000000..d54f4070fe
--- /dev/null
+++ b/tests/projects/containerOnlyReferenced/src/folder/tsconfig.json
@@ -0,0 +1,6 @@
+{
+    "files": ["index.ts"],
+    "compilerOptions": {
+        "composite": true
+    }
+}
\ No newline at end of file
diff --git a/tests/projects/containerOnlyReferenced/src/folder2/index.ts b/tests/projects/containerOnlyReferenced/src/folder2/index.ts
new file mode 100644
index 0000000000..a65e423515
--- /dev/null
+++ b/tests/projects/containerOnlyReferenced/src/folder2/index.ts
@@ -0,0 +1 @@
+export const x = 10;
\ No newline at end of file
diff --git a/tests/projects/containerOnlyReferenced/src/folder2/tsconfig.json b/tests/projects/containerOnlyReferenced/src/folder2/tsconfig.json
new file mode 100644
index 0000000000..d54f4070fe
--- /dev/null
+++ b/tests/projects/containerOnlyReferenced/src/folder2/tsconfig.json
@@ -0,0 +1,6 @@
+{
+    "files": ["index.ts"],
+    "compilerOptions": {
+        "composite": true
+    }
+}
\ No newline at end of file
diff --git a/tests/projects/containerOnlyReferenced/src/tsconfig.json b/tests/projects/containerOnlyReferenced/src/tsconfig.json
new file mode 100644
index 0000000000..4d67b0f8be
--- /dev/null
+++ b/tests/projects/containerOnlyReferenced/src/tsconfig.json
@@ -0,0 +1,10 @@
+{
+    "files": [],
+    "compilerOptions": {
+        "composite": true
+    },
+    "references": [ 
+        { "path": "./folder" },
+        { "path": "./folder2"}
+    ]
+  }
\ No newline at end of file
diff --git a/tests/projects/containerOnlyReferenced/tests/index.ts b/tests/projects/containerOnlyReferenced/tests/index.ts
new file mode 100644
index 0000000000..a65e423515
--- /dev/null
+++ b/tests/projects/containerOnlyReferenced/tests/index.ts
@@ -0,0 +1 @@
+export const x = 10;
\ No newline at end of file
diff --git a/tests/projects/containerOnlyReferenced/tests/tsconfig.json b/tests/projects/containerOnlyReferenced/tests/tsconfig.json
new file mode 100644
index 0000000000..987385d974
--- /dev/null
+++ b/tests/projects/containerOnlyReferenced/tests/tsconfig.json
@@ -0,0 +1,9 @@
+{
+    "files": ["index.ts"],
+    "compilerOptions": {
+        "composite": true
+    },
+    "references": [
+        { "path": "../src" }
+    ]
+}
\ No newline at end of file
diff --git a/tests/projects/containerOnlyReferenced/tsconfig.json b/tests/projects/containerOnlyReferenced/tsconfig.json
new file mode 100644
index 0000000000..28ea2a4385
--- /dev/null
+++ b/tests/projects/containerOnlyReferenced/tsconfig.json
@@ -0,0 +1,10 @@
+{
+  "files": [],
+  "compilerOptions": {
+    "composite": true
+  },
+  "references": [ 
+      { "path": "./src" },
+      { "path": "./tests"}
+  ]
+}
\ No newline at end of file