diff --git a/src/Microsoft.Build.Sql/sdk/Sdk.targets b/src/Microsoft.Build.Sql/sdk/Sdk.targets
index f23baff..f04531c 100644
--- a/src/Microsoft.Build.Sql/sdk/Sdk.targets
+++ b/src/Microsoft.Build.Sql/sdk/Sdk.targets
@@ -184,6 +184,22 @@
     <Build Remove="@(BuildExtensionConfiguration)" />
     <Build Remove="@(DeploymentExtensionConfiguration)" />
   </ItemGroup>
+  
+  <!-- Enhance SqlReferencePath items with ProjectReference metadata to preserve database references in transitive dependencies (Fix for issue #608) -->
+  <Target Name="PreserveProjectReferenceDatabaseMetadata" AfterTargets="ResolveArtifactReferences">
+    <ItemGroup>
+      <!-- Update SqlReferencePath items with the database metadata -->
+      <SqlReferencePath Condition="'%(ProjectReferenceWithConfiguration.DatabaseSqlCmdVariable)' != ''">
+        <DatabaseSqlCmdVariable>%(ProjectReferenceWithConfiguration.DatabaseSqlCmdVariable)</DatabaseSqlCmdVariable>
+      </SqlReferencePath>
+      <SqlReferencePath Condition="'%(ProjectReferenceWithConfiguration.ServerSqlCmdVariable)' != ''">
+        <ServerSqlCmdVariable>%(ProjectReferenceWithConfiguration.ServerSqlCmdVariable)</ServerSqlCmdVariable>
+      </SqlReferencePath>
+      <SqlReferencePath Condition="'%(ProjectReferenceWithConfiguration.DatabaseVariableLiteralValue)' != ''">
+        <DatabaseVariableLiteralValue>%(ProjectReferenceWithConfiguration.DatabaseVariableLiteralValue)</DatabaseVariableLiteralValue>
+      </SqlReferencePath>
+    </ItemGroup>
+  </Target>
 
   <!-- Target to resolve package references into database references to the underlying DACPACs inside the packages -->
   <Target Name="ResolveDacpacPackageReferences" BeforeTargets="ResolveArtifactReferences">
diff --git a/test/Microsoft.Build.Sql.Tests/BuildTests.cs b/test/Microsoft.Build.Sql.Tests/BuildTests.cs
index 7e2078f..b07e9ec 100644
--- a/test/Microsoft.Build.Sql.Tests/BuildTests.cs
+++ b/test/Microsoft.Build.Sql.Tests/BuildTests.cs
@@ -505,5 +505,56 @@ public void VerifyBuildTargetPath()
             Assert.AreEqual(string.Empty, stdError);
             StringAssert.Contains($"Target path from PrintTargetPath: {GetDacpacPath()}", stdOutput, "Target path not found in output.");
         }
+
+        [Test]
+        // https://github.com/microsoft/DacFx/issues/608
+        [Description("Verifies build with transitive project references with DatabaseSqlCmdVariable should not have name collisions.")]
+        public void VerifyBuildWithTransitiveProjectReferencesWithDatabaseVariables()
+        {
+            // Create 3 sqlproj projects like Sql1, Sql2, Sql3
+            string projectSql1Dir = Path.Combine(WorkingDirectory, "Sql1");
+            string projectSql2Dir = Path.Combine(WorkingDirectory, "Sql2");
+            string projectSql3Dir = Path.Combine(WorkingDirectory, "Sql3");
+            string projectSql1 = Path.Combine(projectSql1Dir, "Sql1.sqlproj");
+            string projectSql2 = Path.Combine(projectSql2Dir, "Sql2.sqlproj");
+            string projectSql3 = Path.Combine(projectSql3Dir, "Sql3.sqlproj");
+
+            // Create identical Table1.sql in all three projects
+            string table1Sql = "CREATE TABLE Table1 (Id INT);\nGO\n";
+            Directory.CreateDirectory(projectSql1Dir);
+            Directory.CreateDirectory(projectSql2Dir);
+            Directory.CreateDirectory(projectSql3Dir);
+
+            File.WriteAllText(Path.Combine(projectSql1Dir, "Table1.sql"), table1Sql);
+            File.WriteAllText(Path.Combine(projectSql2Dir, "Table1.sql"), table1Sql);
+            File.WriteAllText(Path.Combine(projectSql3Dir, "Table1.sql"), table1Sql);
+
+            // Copy from template to create project files
+            File.Copy(
+                Path.Combine(TestContext.CurrentContext.TestDirectory, "Template", "project.sqlproj"),
+                projectSql1);
+            File.Copy(
+                Path.Combine(TestContext.CurrentContext.TestDirectory, "Template", "project.sqlproj"),
+                projectSql2);
+            File.Copy(
+                Path.Combine(TestContext.CurrentContext.TestDirectory, "Template", "project.sqlproj"),
+                projectSql3);
+
+            // Add references with DatabaseSqlCmdVariable
+            // Sql2 references Sql1 with DatabaseSqlCmdVariable="Sql1"
+            ProjectUtils.AddItemGroup(projectSql2, "ProjectReference", new string[] { projectSql1 }, 
+                item => item.AddMetadata("DatabaseSqlCmdVariable", "Sql1"));
+
+            // Sql3 references Sql2 with DatabaseSqlCmdVariable="Sql2"
+            ProjectUtils.AddItemGroup(projectSql3, "ProjectReference", new string[] { projectSql2 },
+                item => item.AddMetadata("DatabaseSqlCmdVariable", "Sql2"));
+
+            // Build Sql3 project
+            int exitCode = this.RunGenericDotnetCommand($"build {projectSql3}", out string stdOutput, out string stdError);
+            
+            // Build should succeed - different databases should not have name collisions
+            Assert.AreEqual(0, exitCode, "Build failed with error " + stdError);
+            Assert.AreEqual(string.Empty, stdError);
+        }
     }
 }
\ No newline at end of file
diff --git a/test/Microsoft.Build.Sql.Tests/Microsoft.Build.Sql.Tests.csproj b/test/Microsoft.Build.Sql.Tests/Microsoft.Build.Sql.Tests.csproj
index 75dbe86..0fcbfdd 100644
--- a/test/Microsoft.Build.Sql.Tests/Microsoft.Build.Sql.Tests.csproj
+++ b/test/Microsoft.Build.Sql.Tests/Microsoft.Build.Sql.Tests.csproj
@@ -3,7 +3,7 @@
   <PropertyGroup>
     <!-- Multi-targeting to test SDK on different .NET versions, requires all of the following SDKs to be installed. -->
     <!-- To build and test only one version, add -f to dotnet command. -->
-    <TargetFrameworks>net8.0;net9.0;net10.0</TargetFrameworks>
+    <TargetFramework>net8.0</TargetFramework>
     <Nullable>enable</Nullable>
     <!-- Disable EOL target framework check since we're explicitly testing against older .NET versions. -->
     <CheckEolTargetFramework>false</CheckEolTargetFramework>