diff --git a/src/fastmcp/utilities/json_schema.py b/src/fastmcp/utilities/json_schema.py
index ca5fe37c9..29bb36aa3 100644
--- a/src/fastmcp/utilities/json_schema.py
+++ b/src/fastmcp/utilities/json_schema.py
@@ -67,13 +67,24 @@ def _prune_unused_defs(schema: dict) -> dict:
         walk(value, current_def=def_name)
 
     # Figure out what defs were referenced directly or recursively
-    def def_is_referenced(def_name):
+    def def_is_referenced(def_name, parent_def_names: set[str] | None = None):
         if def_name in root_defs:
             return True
         references = referenced_by.get(def_name)
         if references:
-            for reference in references:
-                if def_is_referenced(reference):
+            if parent_def_names is None:
+                parent_def_names = set()
+
+            # Handle recursion by excluding references already present in parent references
+            parent_def_names = parent_def_names | {def_name}
+            valid_references = [
+                reference
+                for reference in references
+                if reference not in parent_def_names
+            ]
+
+            for reference in valid_references:
+                if def_is_referenced(reference, parent_def_names):
                     return True
         return False
 
diff --git a/tests/utilities/test_json_schema.py b/tests/utilities/test_json_schema.py
index 55c970224..420567dc5 100644
--- a/tests/utilities/test_json_schema.py
+++ b/tests/utilities/test_json_schema.py
@@ -107,6 +107,79 @@ class TestPruneUnusedDefs:
         result = _prune_unused_defs(schema)
         assert "$defs" not in result
 
+    def test_nested_references_with_recursion_kept(self):
+        """Test that definitions with recursion referenced via nesting are kept."""
+        schema = {
+            "properties": {
+                "foo": {"$ref": "#/$defs/foo_def"},
+            },
+            "$defs": {
+                "foo_def": {
+                    "type": "object",
+                    "properties": {"nested": {"$ref": "#/$defs/foo_def"}},
+                },
+                "unused_def": {"type": "integer"},
+            },
+        }
+        result = _prune_unused_defs(schema)
+        assert "foo_def" in result["$defs"]
+        assert "unused_def" not in result["$defs"]
+
+    def test_nested_references_with_recursion_removed(self):
+        """Test that definitions with recursion referenced via nesting in unused defs are removed."""
+        schema = {
+            "properties": {},
+            "$defs": {
+                "foo_def": {
+                    "type": "object",
+                    "properties": {"nested": {"$ref": "#/$defs/foo_def"}},
+                },
+            },
+        }
+        result = _prune_unused_defs(schema)
+        assert "$defs" not in result
+
+    def test_multiple_nested_references_with_recursion_kept(self):
+        """Test that definitions with multiple levels of recursion referenced via nesting are kept."""
+        schema = {
+            "properties": {
+                "foo": {"$ref": "#/$defs/foo_def"},
+            },
+            "$defs": {
+                "foo_def": {
+                    "type": "object",
+                    "properties": {"nested": {"$ref": "#/$defs/nested_def"}},
+                },
+                "nested_def": {
+                    "type": "object",
+                    "properties": {"nested": {"$ref": "#/$defs/foo_def"}},
+                },
+                "unused_def": {"type": "integer"},
+            },
+        }
+        result = _prune_unused_defs(schema)
+        assert "foo_def" in result["$defs"]
+        assert "nested_def" in result["$defs"]
+        assert "unused_def" not in result["$defs"]
+
+    def test_multiple_nested_references_with_recursion_removed(self):
+        """Test that definitions with multiple levels of recursion referenced via nesting in unused defs are removed."""
+        schema = {
+            "properties": {},
+            "$defs": {
+                "foo_def": {
+                    "type": "object",
+                    "properties": {"nested": {"$ref": "#/$defs/nested_def"}},
+                },
+                "nested_def": {
+                    "type": "object",
+                    "properties": {"nested": {"$ref": "#/$defs/foo_def"}},
+                },
+            },
+        }
+        result = _prune_unused_defs(schema)
+        assert "$defs" not in result
+
     def test_array_references_kept(self):
         """Test that definitions referenced in array items are kept."""
         schema = {