diff --git a/.chronus/changes/copilot-fix-model-circular-references-2026-4-14-20-45-42.md b/.chronus/changes/copilot-fix-model-circular-references-2026-4-14-20-45-42.md
new file mode 100644
index 00000000000..dd682cc84ba
--- /dev/null
+++ b/.chronus/changes/copilot-fix-model-circular-references-2026-4-14-20-45-42.md
@@ -0,0 +1,7 @@
+---
+changeKind: fix
+packages:
+  - "@typespec/compiler"
+---
+
+Fixed the compiler to correctly detect circular model spread chains while preserving support for recursive model-expression aliases.
diff --git a/packages/compiler/src/core/checker.ts b/packages/compiler/src/core/checker.ts
index cd23221098d..ada3f7ede75 100644
--- a/packages/compiler/src/core/checker.ts
+++ b/packages/compiler/src/core/checker.ts
@@ -529,6 +529,7 @@ export function createChecker(program: Program, resolver: NameResolver): Checker
    * Key is the SymId of a node. It can be retrieved with getNodeSymId(node)
    */
   const pendingResolutions = new PendingResolutions();
+  const spreadResolutionAncestors = new Map<Sym, Set<Sym>>();
   const postCheckValidators: ValidatorFn[] = [];
 
   const typespecNamespaceBinding = resolver.symbols.global.exports!.get("TypeSpec");
@@ -6532,6 +6533,34 @@ export function createChecker(program: Program, resolver: NameResolver): Checker
       }
       return undefined;
     }
+
+    // Ancestors are models that already depend on this model via spread.
+    const modelAncestors = spreadResolutionAncestors.get(modelSymId);
+    if (targetSym && modelAncestors?.has(targetSym)) {
+      if (ctx.mapper === undefined) {
+        reportCheckerDiagnostic(
+          createDiagnostic({
+            code: "spread-model",
+            messageId: "selfSpread",
+            target: target,
+          }),
+        );
+      }
+      return undefined;
+    }
+
+    if (targetSym) {
+      let targetAncestors = spreadResolutionAncestors.get(targetSym);
+      if (!targetAncestors) {
+        targetAncestors = new Set<Sym>();
+        spreadResolutionAncestors.set(targetSym, targetAncestors);
+      }
+      targetAncestors.add(modelSymId);
+      for (const ancestor of modelAncestors ?? []) {
+        targetAncestors.add(ancestor);
+      }
+    }
+
     const type = getTypeForNode(target, ctx);
     return type;
   }
@@ -7360,7 +7389,9 @@ export function createChecker(program: Program, resolver: NameResolver): Checker
           return inProgressType;
         }
       }
-
+      if (node.value.kind === SyntaxKind.ModelExpression) {
+        return getTypeForNode(node.value, ctx);
+      }
       if (ctx.mapper === undefined) {
         reportCheckerDiagnostic(
           createDiagnostic({
diff --git a/packages/compiler/test/checker/alias.test.ts b/packages/compiler/test/checker/alias.test.ts
index ae5b75f604e..6b27b7ed792 100644
--- a/packages/compiler/test/checker/alias.test.ts
+++ b/packages/compiler/test/checker/alias.test.ts
@@ -149,6 +149,18 @@ describe("compiler: aliases", () => {
     strictEqual(expr.namespace, Foo);
   });
 
+  it("doesn't emit diagnostics for recursive aliases through model expressions", async () => {
+    const diagnostics = await Tester.diagnose(`
+      alias A = {
+        a: B;
+      };
+      alias B = {
+        a: A;
+      };
+    `);
+    expectDiagnosticEmpty(diagnostics);
+  });
+
   it("emit diagnostics if assign itself", async () => {
     const diagnostics = await Tester.diagnose(`
       alias A = A;
diff --git a/packages/compiler/test/checker/spread.test.ts b/packages/compiler/test/checker/spread.test.ts
index 126b147a885..018cc22f2fd 100644
--- a/packages/compiler/test/checker/spread.test.ts
+++ b/packages/compiler/test/checker/spread.test.ts
@@ -113,7 +113,7 @@ describe("circular reference", () => {
   });
 
   // https://github.com/microsoft/typespec/issues/7956
-  it.skip("emit diagnostic if models spread each other", async () => {
+  it("emit diagnostic if models spread each other", async () => {
     const diagnostics = await Tester.diagnose(`
       model Foo { ...Bar }
       model Bar { ...Foo }