diff --git a/src/Aspire.Hosting.Sdk/Aspire.Hosting.Sdk.csproj b/src/Aspire.Hosting.Sdk/Aspire.Hosting.Sdk.csproj
index ee8eaa6c1fb..f785b101c2d 100644
--- a/src/Aspire.Hosting.Sdk/Aspire.Hosting.Sdk.csproj
+++ b/src/Aspire.Hosting.Sdk/Aspire.Hosting.Sdk.csproj
@@ -15,7 +15,7 @@
     <None Include="..\Aspire.Hosting\build\*.targets" Link="SDK\%(Filename)%(Extension)" Pack="true" PackagePath="Sdk\%(Filename)%(Extension)" CopyToOutputDirectory="PreserveNewest" />
     <None Update="SDK\AutoImport.props;SDK\*.targets" Pack="true" PackagePath="Sdk\%(Filename)%(Extension)" CopyToOutputDirectory="PreserveNewest" />
     <None Update="SDK\Sdk.in.props" Pack="true" PerformTextReplacement="True" PackagePath="Sdk\Sdk.props" CopyToOutputDirectory="PreserveNewest" />
-    <None Update="SDK\Sdk.targets" Pack="true" PackagePath="Sdk\Sdk.targets" />
+    <None Update="SDK\Sdk.in.targets" Pack="true" PerformTextReplacement="True" PackagePath="Sdk\Sdk.targets" />
   </ItemGroup>
 
 </Project>
diff --git a/src/Aspire.Hosting.Sdk/SDK/Sdk.targets b/src/Aspire.Hosting.Sdk/SDK/Sdk.in.targets
similarity index 87%
rename from src/Aspire.Hosting.Sdk/SDK/Sdk.targets
rename to src/Aspire.Hosting.Sdk/SDK/Sdk.in.targets
index c508b67ab3e..3987bf67320 100644
--- a/src/Aspire.Hosting.Sdk/SDK/Sdk.targets
+++ b/src/Aspire.Hosting.Sdk/SDK/Sdk.in.targets
@@ -71,13 +71,17 @@
       <_AppHostVersion>%(_AppHostPackageReference.Version)</_AppHostVersion>
     </PropertyGroup>
 
-    <PropertyGroup Condition="'$(_AppHostVersion)' != ''">
-      <__CurrentAppHostVersionMessage> You are using version $(_AppHostVersion).</__CurrentAppHostVersionMessage>
+    <PropertyGroup Condition="'$(_AppHostVersion)' != '' and $([MSBuild]::VersionLessThan('$(_AppHostVersion)', '8.2.0'))">
+      <!-- If we find the version to Aspire.Hosting.AppHost package but it is lower than 8.2.0, then we fall back
+      to use the Dashboard and DCP packages that match the version of the installed workload for backwards compatibility.
+      This results in the same behavior that we had before moving Dashboard and DCP out of the workload, since the version
+      is again just matching to the one the workload has. -->
+      <_AppHostVersion>@VERSION@</_AppHostVersion>
     </PropertyGroup>
 
     <!-- At this point, we should have the version either by CPM or PackageReference, so we fail if not.  -->
-    <Error Condition="'$(_AppHostVersion)' == '' or $([MSBuild]::VersionLessThan('$(_AppHostVersion)', '8.2.0'))" 
-       Text="$(MSBuildProjectName) is a .NET Aspire AppHost project that needs a package reference to Aspire.Hosting.AppHost version 8.2.0 or above to work correctly.$(__CurrentAppHostVersionMessage)" />
+    <Error Condition="'$(_AppHostVersion)' == ''" 
+       Text="$(MSBuildProjectName) is a .NET Aspire AppHost project that needs a package reference to Aspire.Hosting.AppHost version 8.2.0 or above to work correctly." />
 
     <!-- Now that we have the version, we add the package references -->
     <ItemGroup>
diff --git a/tests/Aspire.Hosting.Testing.Tests/Directory.Build.targets b/tests/Aspire.Hosting.Testing.Tests/Directory.Build.targets
index bf347a727b0..dac9790b14d 100644
--- a/tests/Aspire.Hosting.Testing.Tests/Directory.Build.targets
+++ b/tests/Aspire.Hosting.Testing.Tests/Directory.Build.targets
@@ -4,7 +4,7 @@
 
   <!-- NOTE: These lines are only required because we are using P2P references, not NuGet. They will not exist in real apps. -->
   <Import Project="..\..\src\Aspire.Hosting.AppHost\build\Aspire.Hosting.AppHost.targets" />
-  <Import Project="..\..\src\Aspire.Hosting.Sdk\SDK\Sdk.targets" />
+  <Import Project="..\..\src\Aspire.Hosting.Sdk\SDK\Sdk.in.targets" />
 
   <PropertyGroup>
     <!-- This is for in-repo testing and required for Aspire.Hosting.AppHost targets loading correctly. On real projects, this comes from SDK.props in Aspire.Hosting.SDK. -->
diff --git a/tests/Aspire.Hosting.Tests/MSBuildTests.cs b/tests/Aspire.Hosting.Tests/MSBuildTests.cs
index fd902967644..024e96ad69a 100644
--- a/tests/Aspire.Hosting.Tests/MSBuildTests.cs
+++ b/tests/Aspire.Hosting.Tests/MSBuildTests.cs
@@ -87,7 +87,7 @@ the Aspire.Hosting.SDK targets that will automatically add these references to p
             File.WriteAllText(Path.Combine(appHostDirectory, "Directory.Build.targets"), $"""
 <Project>
   <Import Project="{repoRoot}\src\Aspire.Hosting.AppHost\build\Aspire.Hosting.AppHost.targets" />
-  <Import Project="{repoRoot}\src\Aspire.Hosting.Sdk\SDK\Sdk.targets" />
+  <Import Project="{repoRoot}\src\Aspire.Hosting.Sdk\SDK\Sdk.in.targets" />
 </Project>
 """);
 
diff --git a/tests/Aspire.Workload.Tests/AppHostTemplateTests.cs b/tests/Aspire.Workload.Tests/AppHostTemplateTests.cs
new file mode 100644
index 00000000000..e25efa56b09
--- /dev/null
+++ b/tests/Aspire.Workload.Tests/AppHostTemplateTests.cs
@@ -0,0 +1,42 @@
+// Licensed to the .NET Foundation under one or more agreements.
+// The .NET Foundation licenses this file to you under the MIT license.
+
+using Xunit;
+using Xunit.Abstractions;
+using System.Text.RegularExpressions;
+
+namespace Aspire.Workload.Tests;
+
+public partial class AppHostTemplateTests : WorkloadTestsBase
+{
+    public AppHostTemplateTests(ITestOutputHelper testOutput)
+        : base(testOutput)
+    {
+    }
+
+    [Fact]
+    public async Task EnsureProjectsReferencing8_1_0AppHostWithNewerWorkloadCanBuild()
+    {
+        string projectId = "aspire-can-reference-8.1.0";
+        await using var project = await AspireProject.CreateNewTemplateProjectAsync(
+            projectId,
+            "aspire-apphost",
+            _testOutput,
+            BuildEnvironment.ForDefaultFramework,
+            string.Empty,
+            false);
+        
+        var projectPath = Path.Combine(project.RootDir, $"{projectId}.csproj");
+
+        // Replace the reference to Aspire.Hosting.AppHost with version 8.1.0
+        var newContents = AppHostPackageReferenceRegex().Replace(File.ReadAllText(projectPath), @"$1""8.1.0""");
+
+        File.WriteAllText(projectPath, newContents);
+
+        // Ensure project builds successfully
+        await project.BuildAsync(workingDirectory: project.RootDir);
+    }
+
+    [GeneratedRegex(@"(PackageReference\s.*""Aspire\.Hosting\.AppHost.*Version=)""[^""]+""")]
+    private static partial Regex AppHostPackageReferenceRegex();
+}
diff --git a/tests/Shared/RepoTesting/Aspire.RepoTesting.targets b/tests/Shared/RepoTesting/Aspire.RepoTesting.targets
index 14b270a8593..b0650e8931c 100644
--- a/tests/Shared/RepoTesting/Aspire.RepoTesting.targets
+++ b/tests/Shared/RepoTesting/Aspire.RepoTesting.targets
@@ -140,7 +140,7 @@
 
   <ImportGroup Condition="'$(RepoRoot)' != 'null' and '$(TestsRunningOutsideOfRepo)' != 'true' and '$(IsAspireHost)' == 'true'">
     <Import Project="$(RepoRoot)src\Aspire.Hosting.AppHost\build\Aspire.Hosting.AppHost.targets" Condition="Exists('$(RepoRoot)src\Aspire.Hosting.AppHost\build\Aspire.Hosting.AppHost.targets')" />
-    <Import Project="$(RepoRoot)src\Aspire.Hosting.Sdk\SDK\Sdk.targets" Condition="Exists('$(RepoRoot)src\Aspire.Hosting.Sdk\SDK\Sdk.targets')" />
+    <Import Project="$(RepoRoot)src\Aspire.Hosting.Sdk\SDK\Sdk.in.targets" Condition="Exists('$(RepoRoot)src\Aspire.Hosting.Sdk\SDK\Sdk.in.targets')" />
   </ImportGroup>
 
   <PropertyGroup Condition="'$(RepoRoot)' != 'null' and '$(TestsRunningOutsideOfRepo)' != 'true' and '$(IsAspireHost)' == 'true'">
diff --git a/tests/Shared/WorkloadTesting/AspireProject.cs b/tests/Shared/WorkloadTesting/AspireProject.cs
index 602ea38762f..af4f4dcc737 100644
--- a/tests/Shared/WorkloadTesting/AspireProject.cs
+++ b/tests/Shared/WorkloadTesting/AspireProject.cs
@@ -261,10 +261,12 @@ public async Task StartAppHostAsync(string[]? extraArgs = default, Action<Proces
         _testOutput.WriteLine($"-- Ready to run tests --");
     }
 
-    public async Task BuildAsync(string[]? extraBuildArgs = default, CancellationToken token = default)
+    public async Task BuildAsync(string[]? extraBuildArgs = default, CancellationToken token = default, string? workingDirectory = null)
     {
+        workingDirectory ??= Path.Combine(RootDir, $"{Id}.AppHost");
+
         using var restoreCmd = new DotNetCommand(_testOutput, buildEnv: _buildEnv, label: "restore")
-                                    .WithWorkingDirectory(Path.Combine(RootDir, $"{Id}.AppHost"));
+                                    .WithWorkingDirectory(workingDirectory);
         var res = await restoreCmd.ExecuteAsync($"restore \"-bl:{Path.Combine(LogPath!, $"{Id}-restore.binlog")}\" /p:TreatWarningsAsErrors=true");
         res.EnsureSuccessful();
 
@@ -274,7 +276,7 @@ public async Task BuildAsync(string[]? extraBuildArgs = default, CancellationTok
             buildArgs += " " + string.Join(" ", extraBuildArgs);
         }
         using var buildCmd = new DotNetCommand(_testOutput, buildEnv: _buildEnv, label: "build")
-                                        .WithWorkingDirectory(Path.Combine(RootDir, $"{Id}.AppHost"));
+                                        .WithWorkingDirectory(workingDirectory);
         res = await buildCmd.ExecuteAsync(buildArgs);
         res.EnsureSuccessful();
     }