diff --git a/.dagger/modules/e2e/fixtures/generate/app/.gitattributes b/.dagger/modules/e2e/fixtures/generate/app/.gitattributes
new file mode 100644
index 0000000..8274184
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/generate/app/.gitattributes
@@ -0,0 +1 @@
+/sdk/** linguist-generated
diff --git a/.dagger/modules/e2e/main.dang b/.dagger/modules/e2e/main.dang
index 214c0cc..95069ff 100644
--- a/.dagger/modules/e2e/main.dang
+++ b/.dagger/modules/e2e/main.dang
@@ -46,6 +46,17 @@ type E2e {
     assert(contains(changes.addedPaths, path), "expected added path: " + path)
   }
 
+  """
+  Assert that a changeset reported none of `paths` as added.
+  """
+  let assertNoneAdded(changes: Changeset!, paths: [String!]!, what: String!): Void {
+    let reAdded = paths.filter { path => contains(changes.addedPaths, path) }
+    assert(
+      reAdded.length == 0,
+      what + " re-added files that already exist: " + reAdded.join(", "),
+    )
+  }
+
   """
   Assert that a string contains a substring.
   """
@@ -249,6 +260,27 @@ type E2e {
     null
   }
 
+  """
+  Generation should report only what generation produced.
+
+  The module's own config is engine-owned, and the fixture commits the
+  `.gitattributes` that generation emits: both are already on disk, so a
+  changeset claiming to add either describes the workspace base rather than the
+  generated context. Every other generated file is genuinely new on this
+  fixture, which is why only an already-present one can catch that.
+  """
+  pub generateSkipsExistingFilesCheck(ws: Workspace!): Void @check {
+    let existing = [
+      generateModulePath + "/dagger.json",
+      generateModulePath + "/.gitattributes",
+    ]
+
+    assertNoneAdded(pythonSdk.mod(ws, path: generateModulePath).generate, existing, "generate")
+    assertNoneAdded(pythonSdk.generateAll(ws), existing, "generateAll")
+
+    null
+  }
+
   """
   Generating an existing module should produce generated files rooted at that
   module without touching unrelated paths.
diff --git a/dagger.lock b/dagger.lock
index 677b7c3..13afe35 100644
--- a/dagger.lock
+++ b/dagger.lock
@@ -1,4 +1,5 @@
 [["version","2"]]
 ["","container.from",["docker.io/library/alpine:3.22","linux/amd64"],"sha256:14358309a308569c32bdc37e2e0e9694be33a9d99e68afb0f5ff33cc1f695dce"]
 ["","container.from",["docker.io/library/golang:1.25-alpine","linux/amd64"],"sha256:1ae0735f00daffa3aaf1363a5184c0d2dc55c78e3db4ec70241cdac97bf84b59"]
-["","git.ref",["https://github.com/dagger/sdk-sdk","HEAD"],{"ref":"refs/heads/main","sha":"00bb06748bcf22d724ed467f2298d31f1fb49be0"}]
\ No newline at end of file
+["","container.from",["docker.io/library/golang:1.26-alpine","linux/amd64"],"sha256:28d89ee9cc0ff9fec75c82ca201e6bf7fdf9a679d4b7b24dfa04f2bb766bb468"]
+["","git.ref",["https://github.com/dagger/sdk-sdk","HEAD"],{"ref":"refs/heads/main","sha":"334448911a8292fba0d677e5f31926c79ad80ad3"}]
\ No newline at end of file
diff --git a/mod.dang b/mod.dang
index 68d0508..f32bc28 100644
--- a/mod.dang
+++ b/mod.dang
@@ -58,7 +58,26 @@ type Mod {
     if (skipGenerate) {
       ws.changes(ws)
     } else {
-      ws.moduleSource("/" + rootPath).generate(ws).changes(ws)
+      # Stage the local dependency closure so this module's codegen sees
+      # up-to-date dependency bindings. It is only an input to resolving the
+      # module source, never the diff baseline, so the dependencies' codegen
+      # does not ride along.
+      let stagedWs = ws.withChanges(
+        ws.moduleSource("/" + rootPath).generateLocalDependencies(ws),
+      )
+      let generated = stagedWs
+        .moduleSource("/" + rootPath)
+        .generatedContextDirectory
+        .directory(rootPath)
+
+      # The generated context holds only generated files, and withNewDirectory
+      # replaces rather than layers, so merge it onto the module first.
+      # Workspace.changes then reports just the difference, rooted at the
+      # caller's cwd.
+      ws.withNewDirectory(
+        "/" + rootPath,
+        ws.directory("/" + rootPath).withDirectory(".", generated),
+      ).changes(ws)
     }
   }
 }
diff --git a/python-sdk.dang b/python-sdk.dang
index 5278837..02d96f2 100644
--- a/python-sdk.dang
+++ b/python-sdk.dang
@@ -216,11 +216,10 @@ type PythonSdk {
   Modules with the generate skip marker are skipped.
   """
   pub generateAll(ws: Workspace!): Changeset! @generate {
-    modules(ws)
-      .filter { mod => mod.skipGenerate == false }
-      .reduce(ws) { stagedWs, mod =>
-        stagedWs.moduleSource("/" + mod.rootPath).generate(stagedWs)
-      }
-      .changes(ws)
+    changeset.withChangesets(
+      modules(ws)
+        .filter { mod => mod.skipGenerate == false }
+        .map { mod => mod.generate },
+    )
   }
 }