diff --git a/CHANGELOG_PENDING.md b/CHANGELOG_PENDING.md
index c79a31188..6f6861c0d 100644
--- a/CHANGELOG_PENDING.md
+++ b/CHANGELOG_PENDING.md
@@ -33,5 +33,8 @@
 - [engine] - Compute dependents correctly during targeted deletes.
   [#8360](https://github.com/pulumi/pulumi/pull/8360)
 
+- [cli/engine] - Update command respects `--target-dependents`
+  [#8395](https://github.com/pulumi/pulumi/pull/8395)
+
 - [docs] - Fix broken lists in dotnet docs
   [docs#6558](https://github.com/pulumi/docs/issues/6558)
diff --git a/pkg/engine/lifeycletest/target_test.go b/pkg/engine/lifeycletest/target_test.go
index c9ba4b1cc..6604337d4 100644
--- a/pkg/engine/lifeycletest/target_test.go
+++ b/pkg/engine/lifeycletest/target_test.go
@@ -145,17 +145,20 @@ func TestUpdateTarget(t *testing.T) {
 		// limit to up to 3 resources to destroy.  This keeps the test running time under
 		// control as it only generates a few hundred combinations instead of several thousand.
 		if len(subset) <= 3 {
-			updateSpecificTargets(t, subset)
+			updateSpecificTargets(t, subset, false /*targetDependents*/)
 		}
 	}
 
-	updateSpecificTargets(t, []string{"A"})
+	updateSpecificTargets(t, []string{"A"}, false /*targetDependents*/)
 
 	// Also update a target that doesn't exist to make sure we don't crash or otherwise go off the rails.
 	updateInvalidTarget(t)
+
+	// We want to check that targetDependents is respected
+	updateSpecificTargets(t, []string{"C"}, true /*targetDependents*/)
 }
 
-func updateSpecificTargets(t *testing.T, targets []string) {
+func updateSpecificTargets(t *testing.T, targets []string, targetDependents bool) {
 	//             A
 	//    _________|_________
 	//    B        C        D
@@ -193,6 +196,7 @@ func updateSpecificTargets(t *testing.T, targets []string) {
 	}
 
 	p.Options.Host = deploytest.NewPluginHost(nil, nil, program, loaders...)
+	p.Options.TargetDependents = targetDependents
 
 	updateTargets := []resource.URN{}
 	for _, target := range targets {
@@ -228,6 +232,28 @@ func updateSpecificTargets(t *testing.T, targets []string) {
 				assert.Contains(t, updated, target)
 			}
 
+			if !targetDependents {
+				// We should only perform updates on the entries we have targeted.
+				for _, target := range p.Options.UpdateTargets {
+					assert.Contains(t, targets, target.Name().String())
+				}
+			} else {
+				// We expect to find at least one other resource updates.
+
+				// NOTE: The test is limited to only passing a subset valid behavior. By specifying
+				// a URN with no dependents, no other urns will be updated and the test will fail
+				// (incorrectly).
+				found := false
+				updateList := []string{}
+				for target := range updated {
+					updateList = append(updateList, target.Name().String())
+					if !contains(targets, target.Name().String()) {
+						found = true
+					}
+				}
+				assert.True(t, found, "Updates: %v", updateList)
+			}
+
 			for _, target := range p.Options.UpdateTargets {
 				assert.NotContains(t, sames, target)
 			}
@@ -238,6 +264,15 @@ func updateSpecificTargets(t *testing.T, targets []string) {
 	p.Run(t, old)
 }
 
+func contains(list []string, entry string) bool {
+	for _, e := range list {
+		if e == entry {
+			return true
+		}
+	}
+	return false
+}
+
 func updateInvalidTarget(t *testing.T) {
 	p := &TestPlan{}
 
diff --git a/pkg/resource/deploy/step_generator.go b/pkg/resource/deploy/step_generator.go
index ee8f3865c..4b6a95eee 100644
--- a/pkg/resource/deploy/step_generator.go
+++ b/pkg/resource/deploy/step_generator.go
@@ -72,8 +72,33 @@ func (sg *stepGenerator) isTargetedUpdate() bool {
 	return sg.updateTargetsOpt != nil || sg.replaceTargetsOpt != nil
 }
 
-func (sg *stepGenerator) isTargetedForUpdate(urn resource.URN) bool {
-	return sg.updateTargetsOpt == nil || sg.updateTargetsOpt[urn]
+// isTargetedForUpdate returns if `res` is targeted for update. The function accommodates
+// `--target-dependents`. `targetDependentsForUpdate` should probably be called if this function
+// returns true.
+func (sg *stepGenerator) isTargetedForUpdate(res *resource.State) bool {
+	if sg.updateTargetsOpt == nil || sg.updateTargetsOpt[res.URN] {
+		return true
+	} else if !sg.opts.TargetDependents {
+		return false
+	}
+	if res.Provider != "" {
+		res, err := providers.ParseReference(res.Provider)
+		contract.AssertNoError(err)
+		if sg.updateTargetsOpt[res.URN()] {
+			return true
+		}
+	}
+	if res.Parent != "" {
+		if sg.updateTargetsOpt[res.Parent] {
+			return true
+		}
+	}
+	for _, dep := range res.Dependencies {
+		if dep != "" && sg.updateTargetsOpt[dep] {
+			return true
+		}
+	}
+	return false
 }
 
 func (sg *stepGenerator) isTargetedReplace(urn resource.URN) bool {
@@ -158,7 +183,7 @@ func (sg *stepGenerator) GenerateSteps(event RegisterResourceEvent) ([]Step, res
 		return steps, nil
 	}
 
-	// We got a set of steps to perfom during a targeted update. If any of the steps are not same steps and depend on
+	// We got a set of steps to perform during a targeted update. If any of the steps are not same steps and depend on
 	// creates we skipped because they were not in the --target list, issue an error that that the create was necessary
 	// and that the user must target the resource to create.
 	for _, step := range steps {
@@ -421,6 +446,11 @@ func (sg *stepGenerator) generateSteps(event RegisterResourceEvent) ([]Step, res
 		}, nil
 	}
 
+	isTargeted := sg.isTargetedForUpdate(new)
+	if isTargeted && sg.updateTargetsOpt != nil {
+		sg.updateTargetsOpt[urn] = true
+	}
+
 	// Case 3: hasOld
 	//  In this case, the resource we are operating upon now exists in the old snapshot.
 	//  It must be an update or a replace. Which operation we do depends on the the specific change made to the
@@ -439,8 +469,8 @@ func (sg *stepGenerator) generateSteps(event RegisterResourceEvent) ([]Step, res
 		contract.Assert(old != nil)
 
 		// If the user requested only specific resources to update, and this resource was not in
-		// that set, then do nothin but create a SameStep for it.
-		if !sg.isTargetedForUpdate(urn) {
+		// that set, then do nothing but create a SameStep for it.
+		if !isTargeted {
 			logging.V(7).Infof(
 				"Planner decided not to update '%v' due to not being in target group (same) (inputs=%v)", urn, new.Inputs)
 		} else {
@@ -490,9 +520,7 @@ func (sg *stepGenerator) generateSteps(event RegisterResourceEvent) ([]Step, res
 	// We will also not record this non-created resource into the checkpoint as it doesn't actually
 	// exist.
 
-	if !sg.isTargetedForUpdate(urn) &&
-		!providers.IsProviderType(goal.Type) {
-
+	if !isTargeted && !providers.IsProviderType(goal.Type) {
 		sg.sames[urn] = true
 		sg.skippedCreates[urn] = true
 		return []Step{NewSkippedCreateStep(sg.deployment, event, new)}, nil