diff --git a/src/fastmcp/utilities/openapi.py b/src/fastmcp/utilities/openapi.py
index 4c08e6281..aa5e89bf0 100644
--- a/src/fastmcp/utilities/openapi.py
+++ b/src/fastmcp/utilities/openapi.py
@@ -894,13 +894,18 @@ def _replace_ref_with_defs(
         dict[str, Any]
     """
     schema = info.copy()
-    if properties := schema.get("properties"):
-        for prop_name, prop_schema in properties.items():
-            properties[prop_name] = _replace_ref_with_defs(prop_schema)
-    elif ref_path := schema.get("$ref"):
+    if ref_path := schema.get("$ref"):
         if ref_path.startswith("#/components/schemas/"):
             schema_name = ref_path.split("/")[-1]
             schema["$ref"] = f"#/$defs/{schema_name}"
+    elif properties := schema.get("properties"):
+        if "$ref" in properties:
+            schema["properties"] = _replace_ref_with_defs(properties)
+        else:
+            schema["properties"] = {
+                prop_name: _replace_ref_with_defs(prop_schema)
+                for prop_name, prop_schema in properties.items()
+            }
     elif item_schema := schema.get("items"):
         schema["items"] = _replace_ref_with_defs(item_schema)
     for section in ["anyOf", "allOf", "oneOf"]:
diff --git a/tests/utilities/openapi/test_openapi.py b/tests/utilities/openapi/test_openapi.py
index 5d8f81b30..e83bf55d7 100644
--- a/tests/utilities/openapi/test_openapi.py
+++ b/tests/utilities/openapi/test_openapi.py
@@ -8,6 +8,7 @@ from pydantic import BaseModel, Field
 
 from fastmcp.utilities.openapi import (
     _combine_schemas,
+    _replace_ref_with_defs,
     parse_openapi_to_http_routes,
 )
 
@@ -1102,3 +1103,67 @@ def test_consistent_output_across_versions(
         "properties"
     ]
     assert set(schema_30.keys()) == set(schema_31.keys())
+
+
+def test_replace_ref_with_defs():
+    ref_type = {
+        "$ref": "#/components/schemas/RefFoo",
+    }
+    object_type = {
+        "type": "object",
+        "properties": {"$ref": "#/components/schemas/ObjectFoo"},
+    }
+    array_type = {"type": "array", "items": {"$ref": "#/components/schemas/ArrayFoo"}}
+    any_of_type = {
+        "anyOf": [
+            {"$ref": "#/components/schemas/AnyOfFoo"},
+            {"$ref": "#/components/schemas/AnyOfBar"},
+        ]
+    }
+    all_of_type = {
+        "allOf": [
+            {"$ref": "#/components/schemas/AllOfFoo"},
+            {"$ref": "#/components/schemas/AllOfBar"},
+        ]
+    }
+    one_of_type = {
+        "oneOf": [
+            {"$ref": "#/components/schemas/OneOfFoo"},
+            {"$ref": "#/components/schemas/OneOfBar"},
+        ]
+    }
+    nested_type = {
+        "type": "object",
+        "properties": {
+            "pets": {
+                "oneOf": [
+                    {"$ref": "#/components/schemas/Cat"},
+                    {"$ref": "#/components/schemas/Dog"},
+                ]
+            },
+        },
+    }
+    assert _replace_ref_with_defs(object_type) == {
+        "type": "object",
+        "properties": {"$ref": "#/$defs/ObjectFoo"},
+    }
+    assert _replace_ref_with_defs(ref_type) == {"$ref": "#/$defs/RefFoo"}
+    assert _replace_ref_with_defs(array_type) == {
+        "type": "array",
+        "items": {"$ref": "#/$defs/ArrayFoo"},
+    }
+    assert _replace_ref_with_defs(any_of_type) == {
+        "anyOf": [{"$ref": "#/$defs/AnyOfFoo"}, {"$ref": "#/$defs/AnyOfBar"}]
+    }
+    assert _replace_ref_with_defs(all_of_type) == {
+        "allOf": [{"$ref": "#/$defs/AllOfFoo"}, {"$ref": "#/$defs/AllOfBar"}]
+    }
+    assert _replace_ref_with_defs(one_of_type) == {
+        "oneOf": [{"$ref": "#/$defs/OneOfFoo"}, {"$ref": "#/$defs/OneOfBar"}]
+    }
+    assert _replace_ref_with_defs(nested_type) == {
+        "type": "object",
+        "properties": {
+            "pets": {"oneOf": [{"$ref": "#/$defs/Cat"}, {"$ref": "#/$defs/Dog"}]}
+        },
+    }