diff --git a/src/Aspire.Cli/Projects/FallbackProjectParser.cs b/src/Aspire.Cli/Projects/FallbackProjectParser.cs
index 88c8501257a..3eb7b2eee40 100644
--- a/src/Aspire.Cli/Projects/FallbackProjectParser.cs
+++ b/src/Aspire.Cli/Projects/FallbackProjectParser.cs
@@ -3,97 +3,160 @@
 
 using System.Text.Json;
 using System.Text.Json.Nodes;
+using System.Text.RegularExpressions;
 using System.Xml.Linq;
 using Microsoft.Extensions.Logging;
 
 namespace Aspire.Cli.Projects;
 
 /// <summary>
-/// Provides fallback XML parsing capabilities when MSBuild evaluation fails.
+/// Provides fallback parsing capabilities when MSBuild evaluation fails.
+/// Supports both .csproj XML files and .cs single-file apphost files.
 /// Used primarily for AppHost projects with unresolvable SDK versions.
 /// </summary>
-internal sealed class FallbackProjectParser
+internal sealed partial class FallbackProjectParser
 {
     private readonly ILogger<FallbackProjectParser> _logger;
 
+    [GeneratedRegex(@"#:sdk\s+Aspire\.AppHost\.Sdk@([\d\.\-a-zA-Z]+|\*)")]
+    private static partial Regex SdkDirectiveRegex();
+
+    [GeneratedRegex(@"#:package\s+([a-zA-Z0-9\._]+)@([\d\.\-a-zA-Z]+|\*)")]
+    private static partial Regex PackageDirectiveRegex();
+
     public FallbackProjectParser(ILogger<FallbackProjectParser> logger)
     {
         _logger = logger;
     }
 
     /// <summary>
-    /// Parses a project file using direct XML parsing to extract basic project information.
+    /// Parses a project file using direct parsing to extract basic project information.
     /// Returns a synthetic JsonDocument that mimics MSBuild's GetProjectItemsAndProperties output.
+    /// Supports both .csproj XML files and .cs single-file apphost files.
     /// </summary>
     public JsonDocument ParseProject(FileInfo projectFile)
     {
         try
         {
-            _logger.LogDebug("Parsing project file '{ProjectFile}' using fallback XML parser", projectFile.FullName);
-
-            var doc = XDocument.Load(projectFile.FullName);
-            var root = doc.Root;
+            _logger.LogDebug("Parsing project file '{ProjectFile}' using fallback parser", projectFile.FullName);
 
-            if (root?.Name.LocalName != "Project")
+            // Detect file type and route to appropriate parser
+            if (string.Equals(projectFile.Extension, ".csproj", StringComparison.OrdinalIgnoreCase))
             {
-                throw new InvalidOperationException($"Invalid project file format: {projectFile.FullName}");
+                return ParseCsprojProjectFile(projectFile);
             }
-
-            // Extract SDK information
-            var aspireHostingSdkVersion = ExtractAspireHostingSdkVersion(root);
-
-            // Extract package references
-            var packageReferences = ExtractPackageReferences(root);
-
-            // Extract project references
-            var projectReferences = ExtractProjectReferences(root, projectFile);
-
-            // Build the synthetic JSON structure using JsonObject
-            var rootObject = new JsonObject();
-            
-            // Items section
-            var itemsObject = new JsonObject();
-            
-            // PackageReference items
-            var packageRefArray = new JsonArray();
-            foreach (var pkg in packageReferences)
+            else if (string.Equals(projectFile.Extension, ".cs", StringComparison.OrdinalIgnoreCase))
             {
-                var packageObj = new JsonObject();
-                packageObj["Identity"] = JsonValue.Create(pkg.Identity);
-                packageObj["Version"] = JsonValue.Create(pkg.Version);
-                packageRefArray.Add((JsonNode?)packageObj);
+                return ParseCsAppHostFile(projectFile);
             }
-            itemsObject["PackageReference"] = packageRefArray;
-            
-            // ProjectReference items
-            var projectRefArray = new JsonArray();
-            foreach (var proj in projectReferences)
+            else
             {
-                var projectObj = new JsonObject();
-                projectObj["Identity"] = JsonValue.Create(proj.Identity);
-                projectObj["FullPath"] = JsonValue.Create(proj.FullPath);
-                projectRefArray.Add((JsonNode?)projectObj);
+                throw new ProjectUpdaterException($"Unsupported project file type: {projectFile.Extension}. Expected .csproj or .cs file.");
             }
-            itemsObject["ProjectReference"] = projectRefArray;
-            
-            rootObject["Items"] = itemsObject;
-            
-            // Properties section
-            var propertiesObject = new JsonObject();
-            propertiesObject["AspireHostingSDKVersion"] = JsonValue.Create(aspireHostingSdkVersion);
-            rootObject["Properties"] = propertiesObject;
-            
-            // Fallback flag
-            rootObject["Fallback"] = JsonValue.Create(true);
-
-            // Convert JsonObject to JsonDocument
-            return JsonDocument.Parse(rootObject.ToJsonString());
+        }
+        catch (ProjectUpdaterException)
+        {
+            // Re-throw our custom exceptions
+            throw;
         }
         catch (Exception ex)
         {
-            _logger.LogError(ex, "Failed to parse project file '{ProjectFile}' using fallback XML parser", projectFile.FullName);
-            throw new ProjectUpdaterException($"Failed to parse project file '{projectFile.FullName}' using fallback XML parser: {ex.Message}", ex);
+            _logger.LogError(ex, "Failed to parse project file '{ProjectFile}' using fallback parser", projectFile.FullName);
+            throw new ProjectUpdaterException($"Failed to parse project file '{projectFile.FullName}' using fallback parser: {ex.Message}", ex);
+        }
+    }
+
+    /// <summary>
+    /// Parses a .csproj XML project file to extract SDK and package information.
+    /// </summary>
+    private static JsonDocument ParseCsprojProjectFile(FileInfo projectFile)
+    {
+        var doc = XDocument.Load(projectFile.FullName);
+        var root = doc.Root;
+
+        if (root?.Name.LocalName != "Project")
+        {
+            throw new InvalidOperationException($"Invalid project file format: {projectFile.FullName}");
         }
+
+        // Extract SDK information
+        var aspireHostingSdkVersion = ExtractAspireHostingSdkVersion(root);
+
+        // Extract package references
+        var packageReferences = ExtractPackageReferences(root);
+
+        // Extract project references
+        var projectReferences = ExtractProjectReferences(root, projectFile);
+
+        return BuildJsonDocument(aspireHostingSdkVersion, packageReferences, projectReferences);
+    }
+
+    /// <summary>
+    /// Parses a .cs single-file apphost to extract SDK and package information from directives.
+    /// </summary>
+    private static JsonDocument ParseCsAppHostFile(FileInfo projectFile)
+    {
+        var fileContent = File.ReadAllText(projectFile.FullName);
+
+        // Extract SDK version from #:sdk directive
+        var aspireHostingSdkVersion = ExtractSdkVersionFromDirective(fileContent);
+
+        // Extract package references from #:package directives
+        var packageReferences = ExtractPackageReferencesFromDirectives(fileContent);
+
+        // Single-file apphost projects don't have project references
+        var projectReferences = Array.Empty<ProjectReferenceInfo>();
+
+        return BuildJsonDocument(aspireHostingSdkVersion, packageReferences, projectReferences);
+    }
+
+    /// <summary>
+    /// Builds a synthetic JsonDocument from extracted project information.
+    /// </summary>
+    private static JsonDocument BuildJsonDocument(
+        string? aspireHostingSdkVersion,
+        PackageReferenceInfo[] packageReferences,
+        ProjectReferenceInfo[] projectReferences)
+    {
+        var rootObject = new JsonObject();
+        
+        // Items section
+        var itemsObject = new JsonObject();
+        
+        // PackageReference items
+        var packageRefArray = new JsonArray();
+        foreach (var pkg in packageReferences)
+        {
+            var packageObj = new JsonObject();
+            packageObj["Identity"] = JsonValue.Create(pkg.Identity);
+            packageObj["Version"] = JsonValue.Create(pkg.Version);
+            packageRefArray.Add((JsonNode?)packageObj);
+        }
+        itemsObject["PackageReference"] = packageRefArray;
+        
+        // ProjectReference items
+        var projectRefArray = new JsonArray();
+        foreach (var proj in projectReferences)
+        {
+            var projectObj = new JsonObject();
+            projectObj["Identity"] = JsonValue.Create(proj.Identity);
+            projectObj["FullPath"] = JsonValue.Create(proj.FullPath);
+            projectRefArray.Add((JsonNode?)projectObj);
+        }
+        itemsObject["ProjectReference"] = projectRefArray;
+        
+        rootObject["Items"] = itemsObject;
+        
+        // Properties section
+        var propertiesObject = new JsonObject();
+        propertiesObject["AspireHostingSDKVersion"] = JsonValue.Create(aspireHostingSdkVersion);
+        rootObject["Properties"] = propertiesObject;
+        
+        // Fallback flag
+        rootObject["Fallback"] = JsonValue.Create(true);
+
+        // Convert JsonObject to JsonDocument
+        return JsonDocument.Parse(rootObject.ToJsonString());
     }
 
     private static string? ExtractAspireHostingSdkVersion(XElement projectRoot)
@@ -172,6 +235,51 @@ private static ProjectReferenceInfo[] ExtractProjectReferences(XElement projectR
 
         return projectReferences.ToArray();
     }
+
+    /// <summary>
+    /// Extracts the Aspire.AppHost.Sdk version from the #:sdk directive in a single-file apphost.
+    /// </summary>
+    private static string? ExtractSdkVersionFromDirective(string fileContent)
+    {
+        // Match: #:sdk Aspire.AppHost.Sdk@<version>
+        // Where version can be a semantic version or wildcard (*)
+        var match = SdkDirectiveRegex().Match(fileContent);
+        
+        if (match.Success)
+        {
+            return match.Groups[1].Value;
+        }
+
+        return null;
+    }
+
+    /// <summary>
+    /// Extracts package references from #:package directives in a single-file apphost.
+    /// </summary>
+    private static PackageReferenceInfo[] ExtractPackageReferencesFromDirectives(string fileContent)
+    {
+        var packageReferences = new List<PackageReferenceInfo>();
+
+        // Match: #:package <PackageId>@<version>
+        // Where version can be a semantic version or wildcard (*)
+        var matches = PackageDirectiveRegex().Matches(fileContent);
+
+        foreach (Match match in matches)
+        {
+            var identity = match.Groups[1].Value;
+            var version = match.Groups[2].Value;
+
+            var packageRef = new PackageReferenceInfo
+            {
+                Identity = identity,
+                Version = version
+            };
+
+            packageReferences.Add(packageRef);
+        }
+
+        return packageReferences.ToArray();
+    }
 }
 
 internal record PackageReferenceInfo
diff --git a/src/Aspire.Cli/Projects/ProjectUpdater.cs b/src/Aspire.Cli/Projects/ProjectUpdater.cs
index 7277bc7f9c1..501d3e468d0 100644
--- a/src/Aspire.Cli/Projects/ProjectUpdater.cs
+++ b/src/Aspire.Cli/Projects/ProjectUpdater.cs
@@ -63,10 +63,10 @@ public async Task<ProjectUpdateResult> UpdateProjectAsync(FileInfo projectFile,
             interactionService.DisplayEmptyLine();
         }
 
-        // Display warning if fallback XML parsing was used
+        // Display warning if fallback parsing was used
         if (fallbackUsed)
         {
-            interactionService.DisplayMessage("warning", "[yellow]Note: Update plan generated using fallback XML parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.[/]");
+            interactionService.DisplayMessage("warning", $"[yellow]{UpdateCommandStrings.FallbackParsingWarning}[/]");
             interactionService.DisplayEmptyLine();
         }
 
@@ -157,7 +157,7 @@ private static bool IsGlobalNuGetConfig(string path)
             await analyzeStep.Callback();
         }
 
-        return (context.UpdateSteps, context.FallbackXmlParsing);
+        return (context.UpdateSteps, context.FallbackParsing);
     }
 
     private const string ItemsAndPropertiesCacheKeyPrefix = "ItemsAndProperties";
@@ -202,12 +202,12 @@ private async Task<JsonDocument> GetItemsAndPropertiesWithFallbackAsync(FileInfo
         catch (ProjectUpdaterException ex) when (IsAppHostProject(projectFile, context))
         {
             // Only use fallback for AppHost projects
-            logger.LogWarning("Falling back to XML parsing for '{ProjectFile}'. Reason: {Message}", projectFile.FullName, ex.Message);
+            logger.LogWarning("Falling back to parsing for '{ProjectFile}'. Reason: {Message}", projectFile.FullName, ex.Message);
 
-            if (!context.FallbackXmlParsing)
+            if (!context.FallbackParsing)
             {
-                context.FallbackXmlParsing = true;
-                logger.LogWarning("Update plan will be generated using fallback XML parsing; dependency accuracy may be reduced.");
+                context.FallbackParsing = true;
+                logger.LogWarning("Update plan will be generated using fallback parsing; dependency accuracy may be reduced.");
             }
 
             return fallbackParser.ParseProject(projectFile);
@@ -863,7 +863,7 @@ internal sealed class UpdateContext(FileInfo appHostProjectFile, PackageChannel
     public ConcurrentQueue<UpdateStep> UpdateSteps { get; } = new();
     public ConcurrentQueue<AnalyzeStep> AnalyzeSteps { get; } = new();
     public HashSet<string> VisitedProjects { get; } = new();
-    public bool FallbackXmlParsing { get; set; }
+    public bool FallbackParsing { get; set; }
 }
 
 internal abstract record UpdateStep(string Description, Func<Task> Callback)
diff --git a/src/Aspire.Cli/Resources/UpdateCommandStrings.Designer.cs b/src/Aspire.Cli/Resources/UpdateCommandStrings.Designer.cs
index 4ac9bed7349..e18496b9838 100644
--- a/src/Aspire.Cli/Resources/UpdateCommandStrings.Designer.cs
+++ b/src/Aspire.Cli/Resources/UpdateCommandStrings.Designer.cs
@@ -98,5 +98,6 @@ internal static string ProjectArgumentDescription {
     internal static string MappingAddedFormat => ResourceManager.GetString("MappingAddedFormat", resourceCulture);
     internal static string MappingRemovedFormat => ResourceManager.GetString("MappingRemovedFormat", resourceCulture);
     internal static string MappingRetainedFormat => ResourceManager.GetString("MappingRetainedFormat", resourceCulture);
+    internal static string FallbackParsingWarning => ResourceManager.GetString("FallbackParsingWarning", resourceCulture);
     }
 }
diff --git a/src/Aspire.Cli/Resources/UpdateCommandStrings.resx b/src/Aspire.Cli/Resources/UpdateCommandStrings.resx
index 164b6857af6..a7dde2726fd 100644
--- a/src/Aspire.Cli/Resources/UpdateCommandStrings.resx
+++ b/src/Aspire.Cli/Resources/UpdateCommandStrings.resx
@@ -111,4 +111,7 @@
   <data name="MappingRetainedFormat" xml:space="preserve">
     <value>   Mapping: {0}</value>
   </data>
+  <data name="FallbackParsingWarning" xml:space="preserve">
+    <value>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</value>
+  </data>
 </root>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.cs.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.cs.xlf
index 31922d185d2..bc71025f673 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.cs.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.cs.xlf
@@ -77,6 +77,11 @@
         <target state="translated">Nepodařilo se aktualizovat odkaz na balíček pro {0} v projektu {1}.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Mapování: {0} (přidáno)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.de.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.de.xlf
index 05bf1b34eb8..37ce2c7e70f 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.de.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.de.xlf
@@ -77,6 +77,11 @@
         <target state="translated">Beim Aktualisieren des Paketverweises für {0} im Projekt {1} ist ein Fehler aufgetreten.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Zuordnung: {0} (hinzugefügt)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.es.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.es.xlf
index 2d83e9d6d78..0090072ba0e 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.es.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.es.xlf
@@ -77,6 +77,11 @@
         <target state="translated">No se pudo actualizar la referencia del paquete para {0} en el proyecto {1}.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Asignación: {0} (agregado)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.fr.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.fr.xlf
index 0ade8865774..3cb8ac57456 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.fr.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.fr.xlf
@@ -77,6 +77,11 @@
         <target state="translated">Échec de la mise à jour de la référence de package pour {0} dans le projet {1}.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Mappage : {0} (ajouté)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.it.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.it.xlf
index a89c47612f0..c8ac74cee07 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.it.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.it.xlf
@@ -77,6 +77,11 @@
         <target state="translated">Non è possibile aggiornare il riferimento al pacchetto per {0} nel progetto {1}.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Mapping: {0} (aggiunto)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ja.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ja.xlf
index ff647943924..db386eeef55 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ja.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ja.xlf
@@ -77,6 +77,11 @@
         <target state="translated">プロジェクト {1} の {0} に対するパッケージ参照の更新に失敗しました。</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   マッピング: {0} (追加済み)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ko.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ko.xlf
index 9773bb39b53..f7c23864ac9 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ko.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ko.xlf
@@ -77,6 +77,11 @@
         <target state="translated">프로젝트 {1}에서 {0}에 대한 패키지 참조를 업데이트하지 못 했습니다.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   매핑: {0}(추가됨)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.pl.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.pl.xlf
index 33f6cbca0f7..727fe1f3fc2 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.pl.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.pl.xlf
@@ -77,6 +77,11 @@
         <target state="translated">Nie można zaktualizować odwołania do pakietu {0} w projekcie {1}.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Mapowanie: {0} (dodano)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.pt-BR.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.pt-BR.xlf
index 26e6aeb98d1..a1b80b9a975 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.pt-BR.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.pt-BR.xlf
@@ -77,6 +77,11 @@
         <target state="translated">Falha ao atualizar a referência de pacote para {0} no projeto {1}.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Mapeamento: {0} (adicionado)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ru.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ru.xlf
index ff91d82c2d7..450b502695c 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ru.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.ru.xlf
@@ -77,6 +77,11 @@
         <target state="translated">Не удалось обновить ссылку на пакет для {0} в проекте {1}.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Сопоставление: {0} (добавлено)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.tr.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.tr.xlf
index 1b565e3c42f..8b53b4fa1d1 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.tr.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.tr.xlf
@@ -77,6 +77,11 @@
         <target state="translated">{1} projesinde {0} için paket başvurusu güncellenemedi.</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   Eşleme: {0} (eklendi)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.zh-Hans.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.zh-Hans.xlf
index eb496d06b16..d0663526544 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.zh-Hans.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.zh-Hans.xlf
@@ -77,6 +77,11 @@
         <target state="translated">未能更新项目 {1} 中 {0} 的包引用。</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   映射: {0} (已添加)</target>
diff --git a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.zh-Hant.xlf b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.zh-Hant.xlf
index 15141f4ef52..11bc2dd1594 100644
--- a/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.zh-Hant.xlf
+++ b/src/Aspire.Cli/Resources/xlf/UpdateCommandStrings.zh-Hant.xlf
@@ -77,6 +77,11 @@
         <target state="translated">無法更新專案 {1} 中 {0} 的套件參考。</target>
         <note />
       </trans-unit>
+      <trans-unit id="FallbackParsingWarning">
+        <source>Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</source>
+        <target state="new">Note: Update plan generated using fallback parsing due to unresolvable AppHost SDK. Dependency analysis may have reduced accuracy.</target>
+        <note />
+      </trans-unit>
       <trans-unit id="MappingAddedFormat">
         <source>   Mapping: {0} (added)</source>
         <target state="translated">   對應: {0} (已新增)</target>
diff --git a/tests/Aspire.Cli.Tests/Projects/FallbackProjectParserTests.cs b/tests/Aspire.Cli.Tests/Projects/FallbackProjectParserTests.cs
index 69db21c45ae..53c01618087 100644
--- a/tests/Aspire.Cli.Tests/Projects/FallbackProjectParserTests.cs
+++ b/tests/Aspire.Cli.Tests/Projects/FallbackProjectParserTests.cs
@@ -13,16 +13,16 @@ public class FallbackProjectParserTests
     public void ParseProject_ExtractsAspireAppHostSdk()
     {
         // Arrange
-        var tempDir = Path.GetTempPath();
-        var projectFile = Path.Combine(tempDir, $"Test{Guid.NewGuid()}.csproj");
-        var projectContent = """
-            <Project Sdk="Microsoft.NET.Sdk">
-                <Sdk Name="Aspire.AppHost.Sdk" Version="9.5.0-test" />
-            </Project>
-            """;
-
+        var tempDir = Directory.CreateTempSubdirectory();
         try
         {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.csproj");
+            var projectContent = """
+                <Project Sdk="Microsoft.NET.Sdk">
+                    <Sdk Name="Aspire.AppHost.Sdk" Version="9.5.0-test" />
+                </Project>
+                """;
+
             File.WriteAllText(projectFile, projectContent);
             var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
 
@@ -39,10 +39,7 @@ public void ParseProject_ExtractsAspireAppHostSdk()
         }
         finally
         {
-            if (File.Exists(projectFile))
-            {
-                File.Delete(projectFile);
-            }
+            tempDir.Delete(recursive: true);
         }
     }
 
@@ -50,20 +47,20 @@ public void ParseProject_ExtractsAspireAppHostSdk()
     public void ParseProject_ExtractsPackageReferences()
     {
         // Arrange
-        var tempDir = Path.GetTempPath();
-        var projectFile = Path.Combine(tempDir, $"Test{Guid.NewGuid()}.csproj");
-        var projectContent = """
-            <Project Sdk="Microsoft.NET.Sdk">
-                <Sdk Name="Aspire.AppHost.Sdk" Version="9.5.0-test" />
-                <ItemGroup>
-                    <PackageReference Include="Aspire.Hosting.AppHost" Version="9.5.0-test" />
-                    <PackageReference Include="Aspire.Hosting.Redis" Version="9.4.1" />
-                </ItemGroup>
-            </Project>
-            """;
-
+        var tempDir = Directory.CreateTempSubdirectory();
         try
         {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.csproj");
+            var projectContent = """
+                <Project Sdk="Microsoft.NET.Sdk">
+                    <Sdk Name="Aspire.AppHost.Sdk" Version="9.5.0-test" />
+                    <ItemGroup>
+                        <PackageReference Include="Aspire.Hosting.AppHost" Version="9.5.0-test" />
+                        <PackageReference Include="Aspire.Hosting.Redis" Version="9.4.1" />
+                    </ItemGroup>
+                </Project>
+                """;
+
             File.WriteAllText(projectFile, projectContent);
             var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
 
@@ -88,10 +85,7 @@ public void ParseProject_ExtractsPackageReferences()
         }
         finally
         {
-            if (File.Exists(projectFile))
-            {
-                File.Delete(projectFile);
-            }
+            tempDir.Delete(recursive: true);
         }
     }
 
@@ -99,20 +93,20 @@ public void ParseProject_ExtractsPackageReferences()
     public void ParseProject_ExtractsProjectReferences()
     {
         // Arrange
-        var tempDir = Path.GetTempPath();
-        var projectFile = Path.Combine(tempDir, $"Test{Guid.NewGuid()}.csproj");
-        var projectContent = """
-            <Project Sdk="Microsoft.NET.Sdk">
-                <Sdk Name="Aspire.AppHost.Sdk" Version="9.5.0-test" />
-                <ItemGroup>
-                    <ProjectReference Include="../ServiceDefaults/ServiceDefaults.csproj" />
-                    <ProjectReference Include="../WebApp/WebApp.csproj" />
-                </ItemGroup>
-            </Project>
-            """;
-
+        var tempDir = Directory.CreateTempSubdirectory();
         try
         {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.csproj");
+            var projectContent = """
+                <Project Sdk="Microsoft.NET.Sdk">
+                    <Sdk Name="Aspire.AppHost.Sdk" Version="9.5.0-test" />
+                    <ItemGroup>
+                        <ProjectReference Include="../ServiceDefaults/ServiceDefaults.csproj" />
+                        <ProjectReference Include="../WebApp/WebApp.csproj" />
+                    </ItemGroup>
+                </Project>
+                """;
+
             File.WriteAllText(projectFile, projectContent);
             var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
 
@@ -135,10 +129,7 @@ public void ParseProject_ExtractsProjectReferences()
         }
         finally
         {
-            if (File.Exists(projectFile))
-            {
-                File.Delete(projectFile);
-            }
+            tempDir.Delete(recursive: true);
         }
     }
 
@@ -146,18 +137,18 @@ public void ParseProject_ExtractsProjectReferences()
     public void ParseProject_InvalidXml_ThrowsProjectUpdaterException()
     {
         // Arrange
-        var tempDir = Path.GetTempPath();
-        var projectFile = Path.Combine(tempDir, $"Test{Guid.NewGuid()}.csproj");
-        var invalidProjectContent = """
-            <Project Sdk="Microsoft.NET.Sdk">
-                <Sdk Name="Aspire.AppHost.Sdk" Version="9.5.0-test" />
-                <!-- Missing closing tag -->
-                <ItemGroup>
-                    <PackageReference Include="Test" Version="1.0.0" />
-            """;
-
+        var tempDir = Directory.CreateTempSubdirectory();
         try
         {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.csproj");
+            var invalidProjectContent = """
+                <Project Sdk="Microsoft.NET.Sdk">
+                    <Sdk Name="Aspire.AppHost.Sdk" Version="9.5.0-test" />
+                    <!-- Missing closing tag -->
+                    <ItemGroup>
+                        <PackageReference Include="Test" Version="1.0.0" />
+                """;
+
             File.WriteAllText(projectFile, invalidProjectContent);
             var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
 
@@ -167,10 +158,262 @@ public void ParseProject_InvalidXml_ThrowsProjectUpdaterException()
         }
         finally
         {
-            if (File.Exists(projectFile))
-            {
-                File.Delete(projectFile);
-            }
+            tempDir.Delete(recursive: true);
+        }
+    }
+
+    [Fact]
+    public void ParseProject_SingleFileAppHost_ExtractsAspireAppHostSdk()
+    {
+        // Arrange
+        var tempDir = Directory.CreateTempSubdirectory();
+        try
+        {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.cs");
+            var projectContent = """
+                #:sdk Aspire.AppHost.Sdk@13.0.0-preview.1.25519.5
+                #:package Aspire.Hosting.NodeJs@9.5.1
+
+                var builder = DistributedApplication.CreateBuilder(args);
+                builder.Build().Run();
+                """;
+
+            File.WriteAllText(projectFile, projectContent);
+            var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
+
+            // Act
+            var result = parser.ParseProject(new FileInfo(projectFile));
+
+            // Assert
+            var properties = result.RootElement.GetProperty("Properties");
+            var sdkVersion = properties.GetProperty("AspireHostingSDKVersion").GetString();
+            Assert.Equal("13.0.0-preview.1.25519.5", sdkVersion);
+
+            // Should have fallback flag
+            Assert.True(result.RootElement.GetProperty("Fallback").GetBoolean());
+        }
+        finally
+        {
+            tempDir.Delete(recursive: true);
+        }
+    }
+
+    [Fact]
+    public void ParseProject_SingleFileAppHost_ExtractsPackageReferences()
+    {
+        // Arrange
+        var tempDir = Directory.CreateTempSubdirectory();
+        try
+        {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.cs");
+            var projectContent = """
+                #:sdk Aspire.AppHost.Sdk@13.0.0-preview.1.25519.5
+                #:package Aspire.Hosting.NodeJs@9.5.1
+                #:package Aspire.Hosting.Python@9.5.1
+                #:package Aspire.Hosting.Redis@9.5.1
+                #:package CommunityToolkit.Aspire.Hosting.NodeJS.Extensions@9.8.0
+
+                #pragma warning disable ASPIREHOSTINGPYTHON001
+
+                var builder = DistributedApplication.CreateBuilder(args);
+                var cache = builder.AddRedis("cache");
+                builder.Build().Run();
+                """;
+
+            File.WriteAllText(projectFile, projectContent);
+            var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
+
+            // Act
+            var result = parser.ParseProject(new FileInfo(projectFile));
+
+            // Assert
+            var items = result.RootElement.GetProperty("Items");
+            var packageRefs = items.GetProperty("PackageReference").EnumerateArray().ToArray();
+            
+            Assert.Equal(4, packageRefs.Length);
+            
+            var nodeJsPkg = packageRefs.FirstOrDefault(p => 
+                p.GetProperty("Identity").GetString() == "Aspire.Hosting.NodeJs");
+            Assert.NotEqual(default(JsonElement), nodeJsPkg);
+            Assert.Equal("9.5.1", nodeJsPkg.GetProperty("Version").GetString());
+            
+            var pythonPkg = packageRefs.FirstOrDefault(p => 
+                p.GetProperty("Identity").GetString() == "Aspire.Hosting.Python");
+            Assert.NotEqual(default(JsonElement), pythonPkg);
+            Assert.Equal("9.5.1", pythonPkg.GetProperty("Version").GetString());
+
+            var redisPkg = packageRefs.FirstOrDefault(p => 
+                p.GetProperty("Identity").GetString() == "Aspire.Hosting.Redis");
+            Assert.NotEqual(default(JsonElement), redisPkg);
+            Assert.Equal("9.5.1", redisPkg.GetProperty("Version").GetString());
+
+            var toolkitPkg = packageRefs.FirstOrDefault(p => 
+                p.GetProperty("Identity").GetString() == "CommunityToolkit.Aspire.Hosting.NodeJS.Extensions");
+            Assert.NotEqual(default(JsonElement), toolkitPkg);
+            Assert.Equal("9.8.0", toolkitPkg.GetProperty("Version").GetString());
+        }
+        finally
+        {
+            tempDir.Delete(recursive: true);
+        }
+    }
+
+    [Fact]
+    public void ParseProject_SingleFileAppHost_NoPackageReferences()
+    {
+        // Arrange
+        var tempDir = Directory.CreateTempSubdirectory();
+        try
+        {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.cs");
+            var projectContent = """
+                #:sdk Aspire.AppHost.Sdk@9.5.0
+
+                var builder = DistributedApplication.CreateBuilder(args);
+                builder.Build().Run();
+                """;
+
+            File.WriteAllText(projectFile, projectContent);
+            var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
+
+            // Act
+            var result = parser.ParseProject(new FileInfo(projectFile));
+
+            // Assert
+            var items = result.RootElement.GetProperty("Items");
+            var packageRefs = items.GetProperty("PackageReference").EnumerateArray().ToArray();
+            
+            Assert.Empty(packageRefs);
+        }
+        finally
+        {
+            tempDir.Delete(recursive: true);
+        }
+    }
+
+    [Fact]
+    public void ParseProject_SingleFileAppHost_WithWildcardVersion()
+    {
+        // Arrange
+        var tempDir = Directory.CreateTempSubdirectory();
+        try
+        {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.cs");
+            var projectContent = """
+                #:sdk Aspire.AppHost.Sdk@*
+                #:package Aspire.Hosting.Redis@*
+
+                var builder = DistributedApplication.CreateBuilder(args);
+                builder.Build().Run();
+                """;
+
+            File.WriteAllText(projectFile, projectContent);
+            var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
+
+            // Act
+            var result = parser.ParseProject(new FileInfo(projectFile));
+
+            // Assert
+            var properties = result.RootElement.GetProperty("Properties");
+            var sdkVersion = properties.GetProperty("AspireHostingSDKVersion").GetString();
+            Assert.Equal("*", sdkVersion);
+
+            var items = result.RootElement.GetProperty("Items");
+            var packageRefs = items.GetProperty("PackageReference").EnumerateArray().ToArray();
+            Assert.Single(packageRefs);
+            Assert.Equal("*", packageRefs[0].GetProperty("Version").GetString());
+        }
+        finally
+        {
+            tempDir.Delete(recursive: true);
+        }
+    }
+
+    [Fact]
+    public void ParseProject_SingleFileAppHost_NoProjectReferences()
+    {
+        // Arrange - single-file apphosts don't support project references
+        var tempDir = Directory.CreateTempSubdirectory();
+        try
+        {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.cs");
+            var projectContent = """
+                #:sdk Aspire.AppHost.Sdk@9.5.0
+
+                var builder = DistributedApplication.CreateBuilder(args);
+                builder.Build().Run();
+                """;
+
+            File.WriteAllText(projectFile, projectContent);
+            var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
+
+            // Act
+            var result = parser.ParseProject(new FileInfo(projectFile));
+
+            // Assert
+            var items = result.RootElement.GetProperty("Items");
+            var projectRefs = items.GetProperty("ProjectReference").EnumerateArray().ToArray();
+            
+            Assert.Empty(projectRefs);
+        }
+        finally
+        {
+            tempDir.Delete(recursive: true);
+        }
+    }
+
+    [Fact]
+    public void ParseProject_SingleFileAppHost_NoSdkDirective()
+    {
+        // Arrange
+        var tempDir = Directory.CreateTempSubdirectory();
+        try
+        {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.cs");
+            var projectContent = """
+                // Missing SDK directive
+                var builder = DistributedApplication.CreateBuilder(args);
+                builder.Build().Run();
+                """;
+
+            File.WriteAllText(projectFile, projectContent);
+            var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
+
+            // Act
+            var result = parser.ParseProject(new FileInfo(projectFile));
+
+            // Assert - should return null SDK version
+            var properties = result.RootElement.GetProperty("Properties");
+            var sdkVersion = properties.GetProperty("AspireHostingSDKVersion");
+            Assert.Equal(JsonValueKind.Null, sdkVersion.ValueKind);
+        }
+        finally
+        {
+            tempDir.Delete(recursive: true);
+        }
+    }
+
+    [Fact]
+    public void ParseProject_UnsupportedFileType_ThrowsProjectUpdaterException()
+    {
+        // Arrange
+        var tempDir = Directory.CreateTempSubdirectory();
+        try
+        {
+            var projectFile = Path.Combine(tempDir.FullName, $"Test{Guid.NewGuid()}.txt");
+            var projectContent = "Some random content";
+
+            File.WriteAllText(projectFile, projectContent);
+            var parser = new FallbackProjectParser(NullLogger<FallbackProjectParser>.Instance);
+
+            // Act & Assert
+            var exception = Assert.Throws<ProjectUpdaterException>(() => 
+                parser.ParseProject(new FileInfo(projectFile)));
+            Assert.Contains("Unsupported project file type", exception.Message);
+        }
+        finally
+        {
+            tempDir.Delete(recursive: true);
         }
     }
 }
\ No newline at end of file