diff --git a/compiler/packages/babel-plugin-react-compiler/src/Validation/ValidateNoDerivedComputationsInEffects_exp.ts b/compiler/packages/babel-plugin-react-compiler/src/Validation/ValidateNoDerivedComputationsInEffects_exp.ts
index b0b680b0a9c..5c9462fd551 100644
--- a/compiler/packages/babel-plugin-react-compiler/src/Validation/ValidateNoDerivedComputationsInEffects_exp.ts
+++ b/compiler/packages/babel-plugin-react-compiler/src/Validation/ValidateNoDerivedComputationsInEffects_exp.ts
@@ -358,8 +358,14 @@ function recordInstructionDerivations(
         context.effects.add(effectFunction.loweredFunc.func);
       }
     } else if (isUseStateType(lvalue.identifier) && value.args.length > 0) {
-      isSource = true;
-      typeOfValue = joinValue(typeOfValue, 'fromState');
+      typeOfValue = 'fromState';
+      context.derivationCache.addDerivationEntry(
+        lvalue,
+        new Set(),
+        typeOfValue,
+        true,
+      );
+      return;
     }
   }
 
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/effect-derived-computations/usestate-derived-from-prop-no-show-in-data-flow-tree.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/effect-derived-computations/usestate-derived-from-prop-no-show-in-data-flow-tree.expect.md
new file mode 100644
index 00000000000..7ab14466b25
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/effect-derived-computations/usestate-derived-from-prop-no-show-in-data-flow-tree.expect.md
@@ -0,0 +1,59 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects_exp
+
+function Component({ prop }) {
+  const [s, setS] = useState(prop)
+  const [second, setSecond] = useState(prop)
+
+  useEffect(() => {
+    setS(second)
+  }, [second])
+
+  return <div>{s}</div>
+}
+
+```
+
+## Code
+
+```javascript
+import { c as _c } from "react/compiler-runtime"; // @validateNoDerivedComputationsInEffects_exp
+
+function Component(t0) {
+  const $ = _c(5);
+  const { prop } = t0;
+  const [s, setS] = useState(prop);
+  const [second] = useState(prop);
+  let t1;
+  let t2;
+  if ($[0] !== second) {
+    t1 = () => {
+      setS(second);
+    };
+    t2 = [second];
+    $[0] = second;
+    $[1] = t1;
+    $[2] = t2;
+  } else {
+    t1 = $[1];
+    t2 = $[2];
+  }
+  useEffect(t1, t2);
+  let t3;
+  if ($[3] !== s) {
+    t3 = <div>{s}</div>;
+    $[3] = s;
+    $[4] = t3;
+  } else {
+    t3 = $[4];
+  }
+  return t3;
+}
+
+```
+      
+### Eval output
+(kind: exception) Fixture not implemented
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/effect-derived-computations/usestate-derived-from-prop-no-show-in-data-flow-tree.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/effect-derived-computations/usestate-derived-from-prop-no-show-in-data-flow-tree.js
new file mode 100644
index 00000000000..5c62fa2e8f1
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/effect-derived-computations/usestate-derived-from-prop-no-show-in-data-flow-tree.js
@@ -0,0 +1,18 @@
+// @validateNoDerivedComputationsInEffects_exp
+
+function Component({prop}) {
+  const [s, setS] = useState();
+  const [second, setSecond] = useState(prop);
+
+  /*
+   * `second` is a source of state. It will inherit the value of `prop` in
+   * the first render, but after that it will no longer be updated when
+   * `prop` changes. So we shouldn't consider `second` as being derived from
+   * `prop`
+   */
+  useEffect(() => {
+    setS(second);
+  }, [second]);
+
+  return <div>{s}</div>;
+}