diff --git a/src/libraries/Microsoft.Extensions.FileProviders.Physical/src/PhysicalFilesWatcher.cs b/src/libraries/Microsoft.Extensions.FileProviders.Physical/src/PhysicalFilesWatcher.cs
index f74d2f3f37760f..ad723228b44278 100644
--- a/src/libraries/Microsoft.Extensions.FileProviders.Physical/src/PhysicalFilesWatcher.cs
+++ b/src/libraries/Microsoft.Extensions.FileProviders.Physical/src/PhysicalFilesWatcher.cs
@@ -4,6 +4,7 @@
 using System;
 using System.Collections.Concurrent;
 using System.Collections.Generic;
+using System.ComponentModel;
 using System.Diagnostics;
 using System.IO;
 using System.Runtime.Versioning;
@@ -49,6 +50,13 @@ public class PhysicalFilesWatcher : IDisposable
         private readonly object _rootCreationWatcherLock = new();
         private bool _rootWasUnavailable;
 
+        // The last Error reported by the FileSystemWatcher that could indicate a persistent failure,
+        // remembered until a change is successfully delivered (see OnFileSystemEntryChange). Guarded by
+        // _errorLock. Used to detect the same error occurring again with no progress in between, like a
+        // file system that can't be watched (for example, a network share or a WSL path accessed from Windows).
+        private Exception? _lastError;
+        private readonly object _errorLock = new();
+
         private Timer? _timer;
         private bool _timerInitialized;
         private object _timerLock = new();
@@ -373,6 +381,39 @@ private void OnChanged(object sender, FileSystemEventArgs e)
         [SupportedOSPlatform("maccatalyst")]
         private void OnError(object sender, ErrorEventArgs e)
         {
+            Exception? error = e.GetException();
+
+            // An InternalBufferOverflowException means the watcher is still functioning but dropped
+            // events, so consumers must rescan; a DirectoryNotFoundException means the watched directory
+            // was deleted or moved, which is a real change the root-creation watcher recovers from. Both
+            // must always be reported, and both count as progress that clears any remembered error.
+            if (error is InternalBufferOverflowException or DirectoryNotFoundException)
+            {
+                ClearLastError();
+            }
+            else if (error is not null)
+            {
+                lock (_errorLock)
+                {
+                    if (_lastError is not null && IsSameError(_lastError, error))
+                    {
+                        // The same error recurred with no change delivered in between, so the file
+                        // system can't be watched. Don't cancel tokens: doing so would likely re-create tokens
+                        // and re-enable the watcher, looping until the stack overflows. The watcher is
+                        // still re-enabled on the next request, so if the condition later clears it can
+                        // resume watching.
+                        return;
+                    }
+
+                    _lastError = error;
+                }
+            }
+            else
+            {
+                // The Error carried no exception (only reachable through a custom FileSystemWatcher).
+                // Report it like any other error, but leave the remembered-error state untouched.
+            }
+
             // Notify all cache entries on error.
             CancelAll(_filePathTokenLookup, FilePathRequiresSubdirectories);
             CancelAll(_wildcardTokenLookup, WildcardRequiresSubdirectories);
@@ -396,6 +437,34 @@ void CancelAll(ConcurrentDictionary<string, ChangeTokenInfo> tokens, Func<string
             }
         }
 
+        // Two errors are considered the same when they have the same type and OS error code. That's a
+        // strong signal of a persistent condition (for example the same failure for an unwatchable
+        // volume), while genuinely distinct failures keep being reported. Win32Exception carries the
+        // code in NativeErrorCode (its HResult is a constant); other exceptions, such as the IOExceptions
+        // built from errno on Unix, carry it in HResult.
+        private static bool IsSameError(Exception a, Exception b)
+        {
+            if (a.GetType() != b.GetType())
+            {
+                return false;
+            }
+
+            if (a is Win32Exception win32A && b is Win32Exception win32B)
+            {
+                return win32A.NativeErrorCode == win32B.NativeErrorCode;
+            }
+
+            return a.HResult == b.HResult;
+        }
+
+        private void ClearLastError()
+        {
+            lock (_errorLock)
+            {
+                _lastError = null;
+            }
+        }
+
         [UnsupportedOSPlatform("browser")]
         [UnsupportedOSPlatform("wasi")]
         [UnsupportedOSPlatform("ios")]
@@ -421,6 +490,13 @@ private void OnFileSystemEntryChange(string fullPath)
                     return;
                 }
 
+                // A relevant change was delivered, which proves the watcher is working, so forget any
+                // remembered error; a later identical error then starts over rather than being treated
+                // as a persistent recurrence. This should run only for changes inside _root that aren't
+                // excluded, so unrelated events don't reset the detection while an unwatchable-root
+                // error loop is in progress.
+                ClearLastError();
+
                 string relativePath = fullPath.Substring(_root.Length);
                 ReportChangeForMatchedEntries(relativePath);
             }
diff --git a/src/libraries/Microsoft.Extensions.FileProviders.Physical/tests/PhysicalFilesWatcherTests.cs b/src/libraries/Microsoft.Extensions.FileProviders.Physical/tests/PhysicalFilesWatcherTests.cs
index ec6a5059cfe279..173bbdc52d98f8 100644
--- a/src/libraries/Microsoft.Extensions.FileProviders.Physical/tests/PhysicalFilesWatcherTests.cs
+++ b/src/libraries/Microsoft.Extensions.FileProviders.Physical/tests/PhysicalFilesWatcherTests.cs
@@ -3,6 +3,7 @@
 
 using System;
 using System.Collections.Concurrent;
+using System.ComponentModel;
 using System.IO;
 using System.Linq;
 using System.Threading;
@@ -781,6 +782,155 @@ public async Task Watch_DoesNotFireForSiblingDirectoryWithSharedPrefix()
             await changed;
         }
 
+        [Theory]
+        [InlineData(true)]  // Win32Exception -> matched on NativeErrorCode
+        [InlineData(false)] // IOException -> matched on HResult
+        [SkipOnPlatform(TestPlatforms.Browser | TestPlatforms.iOS | TestPlatforms.tvOS, "System.IO.FileSystem.Watcher is not supported on Browser/iOS/tvOS")]
+        public async Task OnError_SameErrorRecurs_SecondOccurrenceIsSuppressed(bool win32)
+        {
+            // Regression test for https://github.com/dotnet/runtime/issues/121475:
+            // On a file system that can't be watched (e.g. a WSL path accessed from Windows), enabling
+            // the FileSystemWatcher keeps raising the same Error, which cancels tokens, which re-creates
+            // tokens and re-enables the watcher, recursing until the stack overflows. The first
+            // occurrence of an error is reported, but an identical recurrence (same type and error code)
+            // with no change delivered in between is suppressed so the loop can't form.
+            using var root = new TempDirectory(GetTestFilePath());
+            using var fileSystemWatcher = new MockFileSystemWatcher(root.Path);
+            using var physicalFilesWatcher = new PhysicalFilesWatcher(root.Path, fileSystemWatcher, pollForChanges: false);
+
+            // First error is reported: it cancels the token created before it.
+            IChangeToken first = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(MakeError(win32, code: 5)));
+            await WhenChanged(first);
+
+            // The same error (same code) recurs: it must NOT cancel the new token.
+            IChangeToken second = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(MakeError(win32, code: 5)));
+            await Task.Delay(WaitTimeForTokenToFire);
+            Assert.False(second.HasChanged, "A repeated identical error must not cancel tokens.");
+        }
+
+        [Theory]
+        [InlineData(true)]
+        [InlineData(false)]
+        [SkipOnPlatform(TestPlatforms.Browser | TestPlatforms.iOS | TestPlatforms.tvOS, "System.IO.FileSystem.Watcher is not supported on Browser/iOS/tvOS")]
+        public async Task OnError_DifferentErrorCode_IsReported(bool win32)
+        {
+            // Distinct errors (same type, different error code) are not the same persistent failure, so
+            // each is reported.
+            using var root = new TempDirectory(GetTestFilePath());
+            using var fileSystemWatcher = new MockFileSystemWatcher(root.Path);
+            using var physicalFilesWatcher = new PhysicalFilesWatcher(root.Path, fileSystemWatcher, pollForChanges: false);
+
+            IChangeToken first = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(MakeError(win32, code: 5)));
+            await WhenChanged(first);
+
+            IChangeToken second = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(MakeError(win32, code: 6)));
+            await WhenChanged(second);
+        }
+
+        [Theory]
+        [InlineData(true)]  // InternalBufferOverflowException
+        [InlineData(false)] // DirectoryNotFoundException
+        [SkipOnPlatform(TestPlatforms.Browser | TestPlatforms.iOS | TestPlatforms.tvOS, "System.IO.FileSystem.Watcher is not supported on Browser/iOS/tvOS")]
+        public async Task OnError_RecoverableError_IsAlwaysReported(bool bufferOverflow)
+        {
+            // InternalBufferOverflowException (events were dropped, rescan needed) and
+            // DirectoryNotFoundException (the watched directory was deleted/moved) mean the watcher is
+            // still functioning or a real change happened, so every occurrence must be reported even when
+            // it repeats identically.
+            using var root = new TempDirectory(GetTestFilePath());
+            using var fileSystemWatcher = new MockFileSystemWatcher(root.Path);
+            using var physicalFilesWatcher = new PhysicalFilesWatcher(root.Path, fileSystemWatcher, pollForChanges: false);
+
+            Func<Exception> createError = bufferOverflow
+                ? () => new InternalBufferOverflowException()
+                : () => new DirectoryNotFoundException();
+
+            IChangeToken first = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(createError()));
+            await WhenChanged(first);
+
+            IChangeToken second = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(createError()));
+            await WhenChanged(second);
+        }
+
+        private static Exception MakeError(bool win32, int code)
+            => win32 ? new Win32Exception(code) : new IOException("watcher error", code);
+
+        [Fact]
+        [SkipOnPlatform(TestPlatforms.Browser | TestPlatforms.iOS | TestPlatforms.tvOS, "System.IO.FileSystem.Watcher is not supported on Browser/iOS/tvOS")]
+        public async Task OnError_SameError_AfterDeliveredChange_IsReportedAgain()
+        {
+            // A change delivered between two identical errors proves the watcher works, so the second
+            // error starts over and is reported rather than suppressed as a persistent recurrence.
+            using var root = new TempDirectory(GetTestFilePath());
+            using var fileSystemWatcher = new MockFileSystemWatcher(root.Path);
+            using var physicalFilesWatcher = new PhysicalFilesWatcher(root.Path, fileSystemWatcher, pollForChanges: false);
+
+            IChangeToken first = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(MakeError(win32: false, code: 5)));
+            await WhenChanged(first);
+
+            // A delivered change resets the remembered error.
+            fileSystemWatcher.CallOnChanged(new FileSystemEventArgs(WatcherChangeTypes.Changed, root.Path, "unrelated.txt"));
+
+            IChangeToken second = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(MakeError(win32: false, code: 5)));
+            await WhenChanged(second);
+        }
+
+        [Fact]
+        [SkipOnPlatform(TestPlatforms.Browser | TestPlatforms.iOS | TestPlatforms.tvOS, "System.IO.FileSystem.Watcher is not supported on Browser/iOS/tvOS")]
+        public async Task OnError_ChangeOutsideRoot_DoesNotResetDetection()
+        {
+            // When the watcher watches an ancestor, it can deliver events for
+            // siblings outside _root. Such events must not reset the persistent-error detection, otherwise
+            // unrelated activity could prevent suppression from engaging during an unwatchable-root loop.
+            using var tempDir = new TempDirectory(GetTestFilePath());
+            string rootDir = Path.Combine(tempDir.Path, "rootDir");
+            Directory.CreateDirectory(rootDir);
+
+            // The FSW watches the ancestor (tempDir), so it can raise events outside rootDir.
+            using var fileSystemWatcher = new MockFileSystemWatcher(tempDir.Path);
+            using var physicalFilesWatcher = new PhysicalFilesWatcher(rootDir, fileSystemWatcher, pollForChanges: false);
+
+            IChangeToken first = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(MakeError(win32: false, code: 5)));
+            await WhenChanged(first);
+
+            // A change to a sibling outside rootDir must NOT reset the remembered error.
+            fileSystemWatcher.CallOnChanged(new FileSystemEventArgs(WatcherChangeTypes.Changed, tempDir.Path, "outside.txt"));
+
+            // The same error recurs: it must still be suppressed.
+            IChangeToken second = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(MakeError(win32: false, code: 5)));
+            await Task.Delay(WaitTimeForTokenToFire);
+            Assert.False(second.HasChanged, "An out-of-root change must not reset persistent-error detection.");
+        }
+
+        [Fact]
+        [SkipOnPlatform(TestPlatforms.Browser | TestPlatforms.iOS | TestPlatforms.tvOS, "System.IO.FileSystem.Watcher is not supported on Browser/iOS/tvOS")]
+        public async Task OnError_NullException_IsAlwaysReported()
+        {
+            // An Error with no exception carries no identity to de-duplicate, so every occurrence is
+            // reported rather than suppressed.
+            using var root = new TempDirectory(GetTestFilePath());
+            using var fileSystemWatcher = new MockFileSystemWatcher(root.Path);
+            using var physicalFilesWatcher = new PhysicalFilesWatcher(root.Path, fileSystemWatcher, pollForChanges: false);
+
+            IChangeToken first = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(null!));
+            await WhenChanged(first);
+
+            IChangeToken second = physicalFilesWatcher.CreateFileChangeToken("appsettings.json");
+            fileSystemWatcher.CallOnError(new ErrorEventArgs(null!));
+            await WhenChanged(second);
+        }
+
         private class TestPollingChangeToken : IPollingChangeToken
         {
             public int Id { get; set; }