diff --git a/pydantic_ai_slim/pydantic_ai/_json_schema.py b/pydantic_ai_slim/pydantic_ai/_json_schema.py
index cde9eeb215..cbaa180208 100644
--- a/pydantic_ai_slim/pydantic_ai/_json_schema.py
+++ b/pydantic_ai_slim/pydantic_ai/_json_schema.py
@@ -54,14 +54,14 @@ def walk(self) -> JsonSchema:
         if not self.prefer_inlined_defs and self.defs:
             handled['$defs'] = {k: self._handle(v) for k, v in self.defs.items()}
 
-        elif self.recursive_refs:  # pragma: no cover
+        elif self.recursive_refs:
             # If we are preferring inlined defs and there are recursive refs, we _have_ to use a $defs+$ref structure
             # We try to use whatever the original root key was, but if it is already in use,
             # we modify it to avoid collisions.
             defs = {key: self.defs[key] for key in self.recursive_refs}
             root_ref = self.schema.get('$ref')
             root_key = None if root_ref is None else re.sub(r'^#/\$defs/', '', root_ref)
-            if root_key is None:
+            if root_key is None:  # pragma: no cover
                 root_key = self.schema.get('title', 'root')
                 while root_key in defs:
                     # Modify the root key until it is not already in use
@@ -77,6 +77,8 @@ def _handle(self, schema: JsonSchema) -> JsonSchema:
         if self.prefer_inlined_defs:
             while ref := schema.get('$ref'):
                 key = re.sub(r'^#/\$defs/', '', ref)
+                if key in self.recursive_refs:
+                    break
                 if key in self.refs_stack:
                     self.recursive_refs.add(key)
                     break  # recursive ref can't be unpacked
diff --git a/pydantic_ai_slim/pydantic_ai/output.py b/pydantic_ai_slim/pydantic_ai/output.py
index 2a4c821dc4..beb0b84adb 100644
--- a/pydantic_ai_slim/pydantic_ai/output.py
+++ b/pydantic_ai_slim/pydantic_ai/output.py
@@ -9,7 +9,7 @@
 from pydantic_core import core_schema
 from typing_extensions import TypeAliasType, TypeVar, deprecated
 
-from . import _utils
+from . import _utils, exceptions
 from ._json_schema import InlineDefsJsonSchemaTransformer
 from .messages import ToolCallPart
 from .tools import DeferredToolRequests, ObjectJsonSchema, RunContext, ToolDefinition
@@ -316,6 +316,10 @@ def StructuredDict(
     # See https://github.com/pydantic/pydantic/issues/12145
     if '$defs' in json_schema:
         json_schema = InlineDefsJsonSchemaTransformer(json_schema).walk()
+        if '$defs' in json_schema:
+            raise exceptions.UserError(
+                '`StructuredDict` does not currently support recursive `$ref`s and `$defs`. See https://github.com/pydantic/pydantic/issues/12145 for more information.'
+            )
 
     if name:
         json_schema['title'] = name
diff --git a/pydantic_evals/pydantic_evals/generation.py b/pydantic_evals/pydantic_evals/generation.py
index c1e68a6ea8..fd3b034573 100644
--- a/pydantic_evals/pydantic_evals/generation.py
+++ b/pydantic_evals/pydantic_evals/generation.py
@@ -59,7 +59,8 @@ async def generate_dataset(
     """
     output_schema = dataset_type.model_json_schema_with_evaluators(custom_evaluator_types)
 
-    # TODO(DavidM): Update this once we add better response_format and/or ResultTool support to Pydantic AI
+    # TODO: Use `output_type=StructuredDict(output_schema)` (and `from_dict` below) once https://github.com/pydantic/pydantic/issues/12145
+    # is fixed and `StructuredDict` no longer needs to use `InlineDefsJsonSchemaTransformer`.
     agent = Agent(
         model,
         system_prompt=(
diff --git a/tests/test_agent.py b/tests/test_agent.py
index c382725c9d..fcffd2b846 100644
--- a/tests/test_agent.py
+++ b/tests/test_agent.py
@@ -1466,6 +1466,41 @@ def call_tool(_: list[ModelMessage], info: AgentInfo) -> ModelResponse:
     assert result.output == snapshot({'make': 'Toyota', 'model': 'Camry', 'tires': [{'brand': 'Michelin', 'size': 17}]})
 
 
+def test_structured_dict_recursive_refs():
+    class Node(BaseModel):
+        nodes: list['Node'] | dict[str, 'Node']
+
+    schema = Node.model_json_schema()
+    assert schema == snapshot(
+        {
+            '$defs': {
+                'Node': {
+                    'properties': {
+                        'nodes': {
+                            'anyOf': [
+                                {'items': {'$ref': '#/$defs/Node'}, 'type': 'array'},
+                                {'additionalProperties': {'$ref': '#/$defs/Node'}, 'type': 'object'},
+                            ],
+                            'title': 'Nodes',
+                        }
+                    },
+                    'required': ['nodes'],
+                    'title': 'Node',
+                    'type': 'object',
+                }
+            },
+            '$ref': '#/$defs/Node',
+        }
+    )
+    with pytest.raises(
+        UserError,
+        match=re.escape(
+            '`StructuredDict` does not currently support recursive `$ref`s and `$defs`. See https://github.com/pydantic/pydantic/issues/12145 for more information.'
+        ),
+    ):
+        StructuredDict(schema)
+
+
 def test_default_structured_output_mode():
     def hello(_: list[ModelMessage], _info: AgentInfo) -> ModelResponse:
         return ModelResponse(parts=[TextPart(content='hello')])  # pragma: no cover