diff --git a/src/main/java/com/google/devtools/build/lib/analysis/config/CoreOptions.java b/src/main/java/com/google/devtools/build/lib/analysis/config/CoreOptions.java
index bb77ae6..6a13252 100644
--- a/src/main/java/com/google/devtools/build/lib/analysis/config/CoreOptions.java
+++ b/src/main/java/com/google/devtools/build/lib/analysis/config/CoreOptions.java
@@ -261,9 +261,11 @@
   }
 
   /**
-   * This internal option is a *set* of names (e.g. "cpu") of *native* options that have been
-   * changed by starlark transitions at any point in the build at the time of accessing. This is
-   * used to regenerate {@code transitionDirectoryNameFragment} after each starlark transition.
+   * This internal option is a *set* of names of options that have been changed by starlark
+   * transitions at any point in the build at the time of accessing. It contains both native and
+   * starlark options in label form. e.g. "//command_line_option:cpu" for native options and
+   * "//myapp:foo" for starlark options. This is used to regenerate {@code
+   * transitionDirectoryNameFragment} after each starlark transition.
    */
   @Option(
       name = "affected by starlark transition",
diff --git a/src/main/java/com/google/devtools/build/lib/analysis/starlark/FunctionTransitionUtil.java b/src/main/java/com/google/devtools/build/lib/analysis/starlark/FunctionTransitionUtil.java
index 72f3acc..4e4d2a1 100644
--- a/src/main/java/com/google/devtools/build/lib/analysis/starlark/FunctionTransitionUtil.java
+++ b/src/main/java/com/google/devtools/build/lib/analysis/starlark/FunctionTransitionUtil.java
@@ -19,6 +19,7 @@
 import static java.util.stream.Collectors.joining;
 
 import com.google.common.base.Joiner;
+import com.google.common.base.VerifyException;
 import com.google.common.collect.ImmutableList;
 import com.google.common.collect.ImmutableMap;
 import com.google.common.collect.ImmutableSet;
@@ -289,13 +290,13 @@
 
       if (!optionName.startsWith(COMMAND_LINE_OPTION_PREFIX)) {
         // The transition changes a Starlark option.
-        Object oldValue =
-            fromOptions.getStarlarkOptions().get(Label.parseAbsoluteUnchecked(optionName));
+        Label optionLabel = Label.parseAbsoluteUnchecked(optionName);
+        Object oldValue = fromOptions.getStarlarkOptions().get(optionLabel);
         if ((oldValue == null && optionValue != null)
             || (oldValue != null && optionValue == null)
             || (oldValue != null && !oldValue.equals(optionValue))) {
-          changedStarlarkOptions.put(Label.parseAbsoluteUnchecked(optionName), optionValue);
-          convertedNewValues.add(optionName);
+          changedStarlarkOptions.put(optionLabel, optionValue);
+          convertedNewValues.add(optionLabel.toString());
         }
       } else {
         // The transition changes a native option.
@@ -398,9 +399,10 @@
   }
 
   /**
-   * Compute the output directory name fragment corresponding to the new BuildOptions based on (1)
-   * the names and values of all native options previously transitioned anywhere in the build by
-   * starlark transitions, (2) names and values of all entries in the starlark options map.
+   * Compute the output directory name fragment corresponding to the new BuildOptions based on the
+   * names and values of all options (both native and Starlark) previously transitioned anywhere in
+   * the build by Starlark transitions. Options only set on command line are not affecting the
+   * computation.
    *
    * @param changedOptions the names of all options changed by this transition in label form e.g.
    *     "//command_line_option:cpu" for native options and "//myapp:foo" for starlark options.
@@ -421,38 +423,34 @@
     }
 
     CoreOptions buildConfigOptions = toOptions.get(CoreOptions.class);
-    Set<String> updatedAffectedByStarlarkTransition =
-        new TreeSet<>(buildConfigOptions.affectedByStarlarkTransition);
-    // Add newly changed native options to overall list of changed native options
-    for (String option : changedOptions) {
-      if (option.startsWith(COMMAND_LINE_OPTION_PREFIX)) {
-        updatedAffectedByStarlarkTransition.add(
-            option.substring(COMMAND_LINE_OPTION_PREFIX.length()));
-      }
-    }
-    buildConfigOptions.affectedByStarlarkTransition =
-        ImmutableList.sortedCopyOf(updatedAffectedByStarlarkTransition);
 
-    // hash all relevant native option values;
+    updateAffectedByStarlarkTransition(buildConfigOptions, changedOptions);
+
     TreeMap<String, Object> toHash = new TreeMap<>();
-    for (String nativeOption : updatedAffectedByStarlarkTransition) {
-      Object value;
-      try {
-        value =
-            optionInfoMap
-                .get(nativeOption)
-                .getDefinition()
-                .getField()
-                .get(toOptions.get(optionInfoMap.get(nativeOption).getOptionClass()));
-      } catch (IllegalAccessException e) {
-        throw new RuntimeException(
-            "IllegalAccess for option " + nativeOption + ": " + e.getMessage());
+    for (String optionName : buildConfigOptions.affectedByStarlarkTransition) {
+      if (optionName.startsWith(COMMAND_LINE_OPTION_PREFIX)) {
+        String nativeOptionName = optionName.substring(COMMAND_LINE_OPTION_PREFIX.length());
+        Object value;
+        try {
+          value =
+              optionInfoMap
+                  .get(nativeOptionName)
+                  .getDefinition()
+                  .getField()
+                  .get(toOptions.get(optionInfoMap.get(nativeOptionName).getOptionClass()));
+        } catch (IllegalAccessException e) {
+          throw new VerifyException(
+              "IllegalAccess for option " + nativeOptionName + ": " + e.getMessage());
+        }
+        toHash.put(optionName, value);
+      } else {
+        Object value = toOptions.getStarlarkOptions().get(Label.parseAbsoluteUnchecked(optionName));
+        if (value != null) {
+          toHash.put(optionName, value);
+        }
       }
-      toHash.put(nativeOption, value);
     }
 
-    // hash all starlark options in map.
-    toOptions.getStarlarkOptions().forEach((opt, value) -> toHash.put(opt.toString(), value));
     ImmutableList.Builder<String> hashStrs = ImmutableList.builderWithExpectedSize(toHash.size());
     for (Map.Entry<String, Object> singleOptionAndValue : toHash.entrySet()) {
       String toAdd = singleOptionAndValue.getKey() + "=" + singleOptionAndValue.getValue();
@@ -462,6 +460,19 @@
         transitionDirectoryNameFragment(hashStrs.build());
   }
 
+  /**
+   * Extend the global build config affectedByStarlarkTransition, by adding any new option names
+   * from changedOptions
+   */
+  private static void updateAffectedByStarlarkTransition(
+      CoreOptions buildConfigOptions, Set<String> changedOptions) {
+    Set<String> mutableCopyToUpdate =
+        new TreeSet<>(buildConfigOptions.affectedByStarlarkTransition);
+    mutableCopyToUpdate.addAll(changedOptions);
+    buildConfigOptions.affectedByStarlarkTransition =
+        ImmutableList.sortedCopyOf(mutableCopyToUpdate);
+  }
+
   public static String transitionDirectoryNameFragment(Iterable<String> opts) {
     Fingerprint fp = new Fingerprint();
     for (String opt : opts) {
diff --git a/src/test/java/com/google/devtools/build/lib/analysis/StarlarkAttrTransitionProviderTest.java b/src/test/java/com/google/devtools/build/lib/analysis/StarlarkAttrTransitionProviderTest.java
index 268e03b..6e9106e 100644
--- a/src/test/java/com/google/devtools/build/lib/analysis/StarlarkAttrTransitionProviderTest.java
+++ b/src/test/java/com/google/devtools/build/lib/analysis/StarlarkAttrTransitionProviderTest.java
@@ -1137,10 +1137,59 @@
         .isEqualTo(StarlarkInt.of(42));
   }
 
+  @Test
+  public void testTransitionOnBuildSetting_onlyTransitionsAffectsDirectory() throws Exception {
+    writeAllowlistFile();
+    writeBuildSettingsBzl();
+    writeRulesWithAttrTransitionBzl();
+    scratch.file(
+        "test/starlark/BUILD",
+        "load('//test/starlark:rules.bzl', 'my_rule')",
+        "load('//test/starlark:build_settings.bzl', 'int_flag')",
+        "my_rule(name = 'test', dep = ':dep')",
+        "my_rule(name = 'dep')",
+        "int_flag(name = 'the-answer', build_setting_default = 0)",
+        "int_flag(name = 'cmd-line-option', build_setting_default = 0)");
+
+    useConfiguration(ImmutableMap.of("//test/starlark:cmd-line-option", 100), "--cpu=FOO");
+
+    ConfiguredTarget test = getConfiguredTarget("//test/starlark:test");
+
+    @SuppressWarnings("unchecked")
+    ConfiguredTarget dep =
+        Iterables.getOnlyElement(
+            (List<ConfiguredTarget>) getMyInfoFromTarget(test).getValue("dep"));
+
+    // Assert starlark option set via transition.
+    assertThat(getStarlarkOption(dep, "//test/starlark:the-answer")).isEqualTo(StarlarkInt.of(42));
+
+    // Assert starlark option set via command line.
+    assertThat(getStarlarkOption(dep, "//test/starlark:cmd-line-option")).isEqualTo(100);
+
+    // Assert native option set via command line.
+    assertThat(getCoreOptions(dep).cpu).isEqualTo("FOO");
+
+    // Assert that transitionDirectoryNameFragment is only affected by options
+    // set via transitions. Not by native or starlark options set via command line,
+    // never touched by any transition.
+    assertThat(getCoreOptions(dep).transitionDirectoryNameFragment)
+        .isEqualTo(
+            FunctionTransitionUtil.transitionDirectoryNameFragment(
+                ImmutableList.of("//test/starlark:the-answer=42")));
+  }
+
   private CoreOptions getCoreOptions(ConfiguredTarget target) {
     return getConfiguration(target).getOptions().get(CoreOptions.class);
   }
 
+  private ImmutableMap<Label, Object> getStarlarkOptions(ConfiguredTarget target) {
+    return getConfiguration(target).getOptions().getStarlarkOptions();
+  }
+
+  private Object getStarlarkOption(ConfiguredTarget target, String absName) {
+    return getStarlarkOptions(target).get(Label.parseAbsoluteUnchecked(absName));
+  }
+
   @Test
   public void testOutputDirHash_multipleNativeOptionTransitions() throws Exception {
     writeAllowlistFile();
@@ -1182,7 +1231,7 @@
 
     List<String> affectedOptions = getCoreOptions(test).affectedByStarlarkTransition;
 
-    assertThat(affectedOptions).containsExactly("foo");
+    assertThat(affectedOptions).containsExactly("//command_line_option:foo");
 
     @SuppressWarnings("unchecked")
     ConfiguredTarget dep =
@@ -1191,17 +1240,19 @@
 
     affectedOptions = getCoreOptions(dep).affectedByStarlarkTransition;
 
-    assertThat(affectedOptions).containsExactly("foo", "bar");
+    assertThat(affectedOptions)
+        .containsExactly("//command_line_option:foo", "//command_line_option:bar");
 
     assertThat(getCoreOptions(test).transitionDirectoryNameFragment)
         .isEqualTo(
             FunctionTransitionUtil.transitionDirectoryNameFragment(
-                ImmutableList.of("foo=foosball")));
+                ImmutableList.of("//command_line_option:foo=foosball")));
 
     assertThat(getCoreOptions(dep).transitionDirectoryNameFragment)
         .isEqualTo(
             FunctionTransitionUtil.transitionDirectoryNameFragment(
-                ImmutableList.of("bar=barsball", "foo=foosball")));
+                ImmutableList.of(
+                    "//command_line_option:bar=barsball", "//command_line_option:foo=foosball")));
   }
 
   // Test that a no-op starlark transition to an already starlark transitioned configuration
@@ -1523,8 +1574,7 @@
     List<String> affectedOptions =
         getConfiguration(dep).getOptions().get(CoreOptions.class).affectedByStarlarkTransition;
 
-    // Assert that affectedOptions is empty but final fragment is still different.
-    assertThat(affectedOptions).isEmpty();
+    assertThat(affectedOptions).containsExactly("//test:bar", "//test:foo");
     assertThat(getCoreOptions(test).transitionDirectoryNameFragment)
         .isEqualTo(
             FunctionTransitionUtil.transitionDirectoryNameFragment(
@@ -1611,12 +1661,12 @@
     List<String> affectedOptionsTop =
         getConfiguration(top).getOptions().get(CoreOptions.class).affectedByStarlarkTransition;
 
-    assertThat(affectedOptionsTop).containsExactly("foo");
+    assertThat(affectedOptionsTop).containsExactly("//command_line_option:foo");
     assertThat(getConfiguration(top).getOptions().getStarlarkOptions()).isEmpty();
     assertThat(getCoreOptions(top).transitionDirectoryNameFragment)
         .isEqualTo(
             FunctionTransitionUtil.transitionDirectoryNameFragment(
-                ImmutableList.of("foo=foosball")));
+                ImmutableList.of("//command_line_option:foo=foosball")));
 
     // test:middle (foo_transition, zee_transition, bar_transition)
     @SuppressWarnings("unchecked")
@@ -1626,14 +1676,20 @@
     List<String> affectedOptionsMiddle =
         getConfiguration(middle).getOptions().get(CoreOptions.class).affectedByStarlarkTransition;
 
-    assertThat(affectedOptionsMiddle).containsExactly("foo", "bar");
+    assertThat(affectedOptionsMiddle)
+        .containsExactly("//command_line_option:foo", "//command_line_option:bar", "//test:zee");
+
     assertThat(getConfiguration(middle).getOptions().getStarlarkOptions().entrySet())
         .containsExactly(
             Maps.immutableEntry(Label.parseAbsoluteUnchecked("//test:zee"), "zeesball"));
+
     assertThat(getCoreOptions(middle).transitionDirectoryNameFragment)
         .isEqualTo(
             FunctionTransitionUtil.transitionDirectoryNameFragment(
-                ImmutableList.of("//test:zee=zeesball", "bar=barsball", "foo=foosball")));
+                ImmutableList.of(
+                    "//command_line_option:bar=barsball",
+                    "//command_line_option:foo=foosball",
+                    "//test:zee=zeesball")));
 
     // test:bottom (foo_transition, zee_transition, bar_transition, xan_transition)
     @SuppressWarnings("unchecked")
@@ -1644,7 +1700,10 @@
     List<String> affectedOptionsBottom =
         getConfiguration(bottom).getOptions().get(CoreOptions.class).affectedByStarlarkTransition;
 
-    assertThat(affectedOptionsBottom).containsExactly("foo", "bar");
+    assertThat(affectedOptionsBottom)
+        .containsExactly(
+            "//command_line_option:foo", "//command_line_option:bar", "//test:xan", "//test:zee");
+
     assertThat(getConfiguration(bottom).getOptions().getStarlarkOptions().entrySet())
         .containsExactly(
             Maps.immutableEntry(Label.parseAbsoluteUnchecked("//test:zee"), "zeesball"),
@@ -1653,7 +1712,8 @@
         .isEqualTo(
             FunctionTransitionUtil.transitionDirectoryNameFragment(
                 ImmutableList.of(
-                    "//test:xan=xansball", "//test:zee=zeesball", "bar=barsball", "foo=foosball")));
+                    "//command_line_option:bar=barsball", "//command_line_option:foo=foosball",
+                    "//test:xan=xansball", "//test:zee=zeesball")));
   }
 
   @Test