diff --git a/common/changes/@microsoft/rush/chao-improve-getPackageJsonInjectedDependenciesHash_2024-06-26-04-40.json b/common/changes/@microsoft/rush/chao-improve-getPackageJsonInjectedDependenciesHash_2024-06-26-04-40.json
new file mode 100644
index 00000000000..7e622d89389
--- /dev/null
+++ b/common/changes/@microsoft/rush/chao-improve-getPackageJsonInjectedDependenciesHash_2024-06-26-04-40.json
@@ -0,0 +1,10 @@
+{
+  "changes": [
+    {
+      "packageName": "@microsoft/rush",
+      "comment": "Fix an edge case for workspace peer dependencies when calculating packageJsonInjectedDependenciesHash to improve its accuracy ",
+      "type": "none"
+    }
+  ],
+  "packageName": "@microsoft/rush"
+}
\ No newline at end of file
diff --git a/common/config/subspaces/build-tests-subspace/repo-state.json b/common/config/subspaces/build-tests-subspace/repo-state.json
index 43d9919959f..da55ddba3fa 100644
--- a/common/config/subspaces/build-tests-subspace/repo-state.json
+++ b/common/config/subspaces/build-tests-subspace/repo-state.json
@@ -2,5 +2,5 @@
 {
   "pnpmShrinkwrapHash": "c040a0d59aada7e1f9bdf0916df7079547de3a85",
   "preferredVersionsHash": "ce857ea0536b894ec8f346aaea08cfd85a5af648",
-  "packageJsonInjectedDependenciesHash": "f3a12861197ad52c4c30bdaceed213a8dfe77a23"
+  "packageJsonInjectedDependenciesHash": "5ae59c4febdaa2b4d21f7e19b0d7a8a5b56f4e60"
 }
diff --git a/libraries/rush-lib/src/api/Subspace.ts b/libraries/rush-lib/src/api/Subspace.ts
index e28268fb775..8b9248143b6 100644
--- a/libraries/rush-lib/src/api/Subspace.ts
+++ b/libraries/rush-lib/src/api/Subspace.ts
@@ -379,6 +379,10 @@ export class Subspace {
       return undefined;
     }
 
+    const allWorkspaceProjectSet: Set<string> = new Set(
+      this._rushConfiguration.projects.map((rushProject) => rushProject.packageName)
+    );
+
     // get all related package.json
     while (relatedProjects.length > 0) {
       const rushProject: RushConfigurationProject = relatedProjects.pop()!;
@@ -395,6 +399,16 @@ export class Subspace {
         resolutions
       } = rushProject.packageJson;
 
+      // special handing for peerDependencies
+      // for workspace packages, the version range is meaningless here.
+      if (peerDependencies) {
+        for (const packageName of Object.keys(peerDependencies)) {
+          if (allWorkspaceProjectSet.has(packageName)) {
+            peerDependencies[packageName] = 'workspace:*';
+          }
+        }
+      }
+
       allPackageJson.push({
         name,
         bin,
diff --git a/rush.json b/rush.json
index 5d01e0a3693..95e74696044 100644
--- a/rush.json
+++ b/rush.json
@@ -16,7 +16,7 @@
    * path segment in the "$schema" field for all your Rush config files.  This will ensure
    * correct error-underlining and tab-completion for editors such as VS Code.
    */
-  "rushVersion": "5.129.3",
+  "rushVersion": "5.129.5",
 
   /**
    * The next field selects which package manager should be installed and determines its version.