diff --git a/packages/core/src/effect/layer-node.ts b/packages/core/src/effect/layer-node.ts
index b58692a1553..9dbc3d51607 100644
--- a/packages/core/src/effect/layer-node.ts
+++ b/packages/core/src/effect/layer-node.ts
@@ -230,7 +230,7 @@ export function hoist<A, E, T extends Tag, const Items extends Replacements = re
         if (existing && existing !== node) {
           throw new Error(`Tag ${tag} has conflicting implementations for ${node.name}`)
         }
-        hoisted.set(node.name, node)
+        hoisted.set(node.name, rewriteReplacementDependencies(node, replacementMap))
         return group([])
       }
       if (node.kind === "unbound") {
diff --git a/packages/core/src/location-services.ts b/packages/core/src/location-services.ts
index 7a4678a32c3..7da67673c31 100644
--- a/packages/core/src/location-services.ts
+++ b/packages/core/src/location-services.ts
@@ -89,6 +89,10 @@ export function buildLocationServiceMap(
     LayerMap.make(
       (ref: Location.Ref) => {
         const allReplacements = replacements.concat([[Location.node, Location.boundNode(ref)]])
+        // Apply replacements during hoist, not afterward: replacements can
+        // introduce new tagged dependencies (Location.boundNode depends on
+        // Project), and the hoist walk is the only pass that can still slice
+        // those back out.
         const location = LayerNode.hoist(locationServices, Node.tags.values.global, allReplacements)
 
         return LayerNode.compile(location.node).pipe(