diff --git a/src/Cli/dotnet/Commands/Workload/Install/WorkloadInstallCommand.cs b/src/Cli/dotnet/Commands/Workload/Install/WorkloadInstallCommand.cs
index 15049f909b09..ceff25cd8884 100644
--- a/src/Cli/dotnet/Commands/Workload/Install/WorkloadInstallCommand.cs
+++ b/src/Cli/dotnet/Commands/Workload/Install/WorkloadInstallCommand.cs
@@ -155,7 +155,9 @@ public override int Execute()
             throw new GracefulException(string.Format(CliCommandStrings.CannotCombineSkipManifestAndRollback,
                 WorkloadInstallCommandParser.SkipManifestUpdateOption.Name, InstallingWorkloadCommandParser.FromRollbackFileOption.Name), isUserError: true);
         }
-        else if (_skipManifestUpdate && SpecifiedWorkloadSetVersionOnCommandLine)
+        else if (_skipManifestUpdate && SpecifiedWorkloadSetVersionOnCommandLine &&
+            !IsRunningRestore)  //  When running restore, we first update workloads, then query the projects to figure out what workloads should be installed, then run the install command.
+                                //  When we run the install command we set skipManifestUpdate to true as an optimization to avoid trying to update twice
         {
             throw new GracefulException(string.Format(CliCommandStrings.CannotCombineSkipManifestAndVersion,
                 WorkloadInstallCommandParser.SkipManifestUpdateOption.Name, InstallingWorkloadCommandParser.VersionOption.Name), isUserError: true);
diff --git a/test/dotnet.Tests/CommandTests/Workload/Restore/GivenDotnetWorkloadRestore.cs b/test/dotnet.Tests/CommandTests/Workload/Restore/GivenDotnetWorkloadRestore.cs
index 301293b0141f..d36199b3df81 100644
--- a/test/dotnet.Tests/CommandTests/Workload/Restore/GivenDotnetWorkloadRestore.cs
+++ b/test/dotnet.Tests/CommandTests/Workload/Restore/GivenDotnetWorkloadRestore.cs
@@ -15,7 +15,7 @@ public GivenDotnetWorkloadRestore(ITestOutputHelper log) : base(log)
     [Fact]
     public void ProjectsThatDoNotSupportWorkloadsAreNotInspected()
     {
-        if(IsRunningInContainer())
+        if (IsRunningInContainer())
         {
             // Skipping test in a Helix container environment due to read-only DOTNET_ROOT, which causes workload restore to fail when writing workload metadata.
             return;
@@ -38,7 +38,7 @@ public void ProjectsThatDoNotSupportWorkloadsAreNotInspected()
     [Fact]
     public void ProjectsThatDoNotSupportWorkloadsAndAreTransitivelyReferencedDoNotBreakTheBuild()
     {
-        if(IsRunningInContainer())
+        if (IsRunningInContainer())
         {
             // Skipping test in a Helix container environment due to read-only DOTNET_ROOT, which causes workload restore to fail when writing workload metadata.
             return;
@@ -58,6 +58,31 @@ public void ProjectsThatDoNotSupportWorkloadsAndAreTransitivelyReferencedDoNotBr
         .Pass();
     }
 
+    [Fact]
+    public void VersionOptionShouldNotConflictWithSkipManifestUpdate()
+    {
+        if (IsRunningInContainer())
+        {
+            // Skipping test in a Helix container environment due to read-only DOTNET_ROOT, which causes workload restore to fail when writing workload metadata.
+            return;
+        }
+
+        var projectPath =
+            _testAssetsManager
+                .CopyTestAsset(TransitiveReferenceNoWorkloadsAssetName)
+                .WithSource()
+                .Path;
+
+        var result = new DotnetWorkloadCommand(Log, "restore", "--version", "9.0.100")
+        .WithWorkingDirectory(projectPath)
+        .Execute();
+
+        // Should not fail with "Cannot use the --skip-manifest-update and --sdk-version options together"
+        // The command may fail for other reasons (e.g., version not found), but it should not fail with the skip-manifest-update error
+        result.StdErr.Should().NotContain("Cannot use the");
+        result.StdErr.Should().NotContain("--skip-manifest-update");
+    }
+
     private bool IsRunningInContainer()
     {
         if (!File.Exists("/.dockerenv"))