diff --git a/pkg/cmd/dependency_update_test.go b/pkg/cmd/dependency_update_test.go
index eed251b32..0f6a223b7 100644
--- a/pkg/cmd/dependency_update_test.go
+++ b/pkg/cmd/dependency_update_test.go
@@ -396,3 +396,52 @@ func TestDependencyUpdateCmd_NestedLocalDependencies(t *testing.T) {
 		t.Fatalf("Expected reqtest dependency: %s", err)
 	}
 }
+
+func TestDependencyUpdateCmd_CircularDependency(t *testing.T) {
+	srv := repotest.NewTempServer(t)
+	defer srv.Stop()
+
+	dir := func(p ...string) string {
+		return filepath.Join(append([]string{srv.Root()}, p...)...)
+	}
+
+	// Create chart A that depends on B
+	chartA := &chart.Chart{
+		Metadata: &chart.Metadata{
+			APIVersion: chart.APIVersionV2,
+			Name:       "chart-a",
+			Version:    "1.0.0",
+			Dependencies: []*chart.Dependency{
+				{Name: "chart-b", Version: "1.0.0", Repository: "file://../chart-b"},
+			},
+		},
+	}
+	if err := chartutil.SaveDir(chartA, dir()); err != nil {
+		t.Fatal(err)
+	}
+
+	// Create chart B that depends on A (circular)
+	chartB := &chart.Chart{
+		Metadata: &chart.Metadata{
+			APIVersion: chart.APIVersionV2,
+			Name:       "chart-b",
+			Version:    "1.0.0",
+			Dependencies: []*chart.Dependency{
+				{Name: "chart-a", Version: "1.0.0", Repository: "file://../chart-a"},
+			},
+		},
+	}
+	if err := chartutil.SaveDir(chartB, dir()); err != nil {
+		t.Fatal(err)
+	}
+
+	_, out, err := executeActionCommand(
+		fmt.Sprintf("dependency update '%s'", dir("chart-a")),
+	)
+	if err == nil {
+		t.Fatal("Expected circular dependency error")
+	}
+	if !strings.Contains(out, "circular dependency detected") {
+		t.Fatalf("Expected 'circular dependency detected' in output, got: %s", out)
+	}
+}
diff --git a/pkg/downloader/manager.go b/pkg/downloader/manager.go
index be21a612b..5f175fcda 100644
--- a/pkg/downloader/manager.go
+++ b/pkg/downloader/manager.go
@@ -192,6 +192,11 @@ func (m *Manager) Update() error {
 		}
 	}
 
+	// Check for circular dependencies in local dependencies
+	if err := m.checkCircularDeps(req, nil); err != nil {
+		return err
+	}
+
 	// Do resolution for each local dependency first. Local dependencies may
 	// have their own dependencies which must be resolved.
 	for _, dep := range req {
@@ -940,3 +945,45 @@ func key(name string) (string, error) {
 	}
 	return hex.EncodeToString(hash.Sum(nil)), nil
 }
+
+// checkCircularDeps checks local dependencies for circular dependency issue.
+// When local charts depend on each other, helm will quit at the very beginning with the clear message.
+func (m *Manager) checkCircularDeps(deps []*chart.Dependency, chain []string) error {
+	absPath, err := filepath.Abs(m.ChartPath)
+	if err != nil {
+		return err
+	}
+
+	for i, visited := range chain {
+		if visited == absPath {
+			cycle := append(chain[i:], absPath)
+			return fmt.Errorf("circular dependency detected:\n%s", strings.Join(cycle, "\n -> "))
+		}
+	}
+
+	// Create a new chain with the current path to avoid modifying the caller's slice
+	newChain := make([]string, len(chain)+1)
+	copy(newChain, chain)
+	newChain[len(chain)] = absPath
+
+	for _, dep := range deps {
+		if !resolver.IsLocalDependency(dep.Repository) {
+			continue
+		}
+		chartpath, err := resolver.GetLocalPath(dep.Repository, m.ChartPath)
+		if err != nil {
+			return err
+		}
+		c, err := loader.LoadDir(chartpath)
+		if err != nil {
+			return err
+		}
+		man := *m
+		man.ChartPath = chartpath
+		if err := man.checkCircularDeps(c.Metadata.Dependencies, newChain); err != nil {
+			return err
+		}
+	}
+
+	return nil
+}