diff --git a/cirq-core/cirq/transformers/merge_k_qubit_gates.py b/cirq-core/cirq/transformers/merge_k_qubit_gates.py
index e62885bb121..a8707d18757 100644
--- a/cirq-core/cirq/transformers/merge_k_qubit_gates.py
+++ b/cirq-core/cirq/transformers/merge_k_qubit_gates.py
@@ -34,8 +34,6 @@ def _rewrite_merged_k_qubit_unitaries(
     deep = context.deep if context else False
 
     def map_func(op: 'cirq.Operation', _) -> 'cirq.OP_TREE':
-        if not (protocols.num_qubits(op) <= k and protocols.has_unitary(op)):
-            return op
         op_untagged = op.untagged
         if (
             deep
@@ -51,6 +49,8 @@ def map_func(op: 'cirq.Operation', _) -> 'cirq.OP_TREE':
                     merged_circuit_op_tag=merged_circuit_op_tag,
                 ).freeze()
             ).with_tags(*op.tags)
+        if not (protocols.num_qubits(op) <= k and protocols.has_unitary(op)):
+            return op
         if rewriter:
             return rewriter(
                 cast(circuits.CircuitOperation, op_untagged)
diff --git a/cirq-core/cirq/transformers/merge_k_qubit_gates_test.py b/cirq-core/cirq/transformers/merge_k_qubit_gates_test.py
index 47b0e9efdd4..6dc1434dc52 100644
--- a/cirq-core/cirq/transformers/merge_k_qubit_gates_test.py
+++ b/cirq-core/cirq/transformers/merge_k_qubit_gates_test.py
@@ -253,3 +253,27 @@ def _wrap_in_matrix_gate(ops: cirq.OP_TREE):
     )
     c_new_matrix = cirq.merge_k_qubit_unitaries(c_orig, k=2, context=context)
     cirq.testing.assert_same_circuits(c_new_matrix, c_expected_matrix)
+
+
+def test_merge_k_qubit_unitaries_deep_recurses_on_large_circuit_op():
+    q = cirq.LineQubit.range(2)
+    c_orig = cirq.Circuit(
+        cirq.CircuitOperation(cirq.FrozenCircuit(cirq.X(q[0]), cirq.H(q[0]), cirq.CNOT(*q)))
+    )
+    c_expected = cirq.Circuit(
+        cirq.CircuitOperation(
+            cirq.FrozenCircuit(
+                cirq.CircuitOperation(cirq.FrozenCircuit(cirq.X(q[0]), cirq.H(q[0]))).with_tags(
+                    "merged"
+                ),
+                cirq.CNOT(*q),
+            )
+        )
+    )
+    c_new = cirq.merge_k_qubit_unitaries(
+        c_orig,
+        context=cirq.TransformerContext(deep=True),
+        k=1,
+        rewriter=lambda op: op.with_tags("merged"),
+    )
+    cirq.testing.assert_same_circuits(c_new, c_expected)