diff --git a/common/changes/@microsoft/rush/jmaher-prevent-decoupled-workspace-deps_2024-07-30-15-46.json b/common/changes/@microsoft/rush/jmaher-prevent-decoupled-workspace-deps_2024-07-30-15-46.json
new file mode 100644
index 00000000000..605eef1e917
--- /dev/null
+++ b/common/changes/@microsoft/rush/jmaher-prevent-decoupled-workspace-deps_2024-07-30-15-46.json
@@ -0,0 +1,11 @@
+{
+  "changes": [
+    {
+      "comment": "Emit an error if a `workspace:` specifier is used in a dependency that is listed in `decoupledLocalDependencies`.",
+      "type": "none",
+      "packageName": "@microsoft/rush"
+    }
+  ],
+  "packageName": "@microsoft/rush",
+  "email": "jamesmaher-dd@users.noreply.github.com"
+}
\ No newline at end of file
diff --git a/libraries/rush-lib/src/logic/installManager/WorkspaceInstallManager.ts b/libraries/rush-lib/src/logic/installManager/WorkspaceInstallManager.ts
index 5098f48e4d1..00db90249ed 100644
--- a/libraries/rush-lib/src/logic/installManager/WorkspaceInstallManager.ts
+++ b/libraries/rush-lib/src/logic/installManager/WorkspaceInstallManager.ts
@@ -279,7 +279,20 @@ export class WorkspaceInstallManager extends BaseInstallManager {
             shrinkwrapIsUpToDate = false;
             continue;
           }
-        } else if (dependencySpecifier.specifierType === DependencySpecifierType.Workspace) {
+        } else if (
+          dependencySpecifier.specifierType === DependencySpecifierType.Workspace &&
+          rushProject.decoupledLocalDependencies.has(name)
+        ) {
+          // If the dependency is a local project that is decoupled, then we need to ensure that it is not specified
+          // as a workspace project. If it is, then we need to update the package.json to remove the workspace notation.
+          this._terminal.writeWarningLine(
+            `"${rushProject.packageName}" depends on package ${name}@${version}, but also lists it in ` +
+              `its "decoupledLocalDependencies" array. Either update the host project's package.json to use ` +
+              `a version from an external feed instead of "workspace:" notation, or remove the dependency from the ` +
+              `host project's "decoupledLocalDependencies" array in rush.json.`
+          );
+          throw new AlreadyReportedError();
+        } else if (!rushProject.decoupledLocalDependencies.has(name)) {
           // Already specified as a local project. Allow the package manager to validate this
           continue;
         }