diff --git a/build_defs/cc.build_defs b/build_defs/cc.build_defs
index ec41ea0..c7d64b8 100644
--- a/build_defs/cc.build_defs
+++ b/build_defs/cc.build_defs
@@ -91,7 +91,6 @@ def cc_library(name:str, srcs:list=[], hdrs:list=[], private_hdrs:list=[], deps:
               ['cc:pc:' + lib for lib in pkg_config_libs] +
               ['cc:pcc:' + cflag for cflag in pkg_config_cflags] +
               ['cc:inc:' + join_path(pkg_name, include) for include in includes] +
-              ['cc:def:' + define for define in defines] +
               labels)
 
     if not srcs and not _interfaces:
@@ -120,14 +119,14 @@ def cc_library(name:str, srcs:list=[], hdrs:list=[], private_hdrs:list=[], deps:
     )
     provides = {'cc_hdrs': hdrs_rule}
 
-    # TODO(pebers): handle includes and defines in _library_cmds as well.
-    pre_build = _library_transitive_labels(_c, compiler_flags, pkg_config_libs, pkg_config_cflags) if (deps or includes or defines or _interfaces) else None
+    # TODO(pebers): handle includes in _library_cmds as well.
+    pre_build = _library_apply_labels(_c, compiler_flags, pkg_config_libs, pkg_config_cflags, defines) if (deps or includes or _interfaces) else None
     pkg = package_name()
 
     if _interfaces:
         # Generate the module interface file
         xflags = _MODULE_FLAGS + ["--precompile", "-x", "c++-module", "-o", '"$OUT"']
-        cmds, tools = _library_cmds(_c, compiler_flags + xflags, pkg_config_libs, pkg_config_cflags, archive=False)
+        cmds, tools = _library_cmds(_c, compiler_flags + xflags, pkg_config_libs, pkg_config_cflags, defines, archive=False)
         interface_rule = build_rule(
             name = name,
             tag = 'interface',
@@ -147,7 +146,7 @@ def cc_library(name:str, srcs:list=[], hdrs:list=[], private_hdrs:list=[], deps:
     else:
         all_deps = deps
 
-    cmds, tools = _library_cmds(_c, compiler_flags, pkg_config_libs, pkg_config_cflags)
+    cmds, tools = _library_cmds(_c, compiler_flags, pkg_config_libs, pkg_config_cflags, defines)
     if not out:
         out = f'{name}.a' if name.startswith('lib') else f'lib{name}.a'
     if len(srcs) > 1:
@@ -296,11 +295,10 @@ def cc_object(name:str, src:str, hdrs:list=[], private_hdrs:list=[], out:str=Non
               ['cc:pc:' + lib for lib in pkg_config_libs] +
               ['cc:pcc:' + cflag for cflag in pkg_config_cflags] +
               [f'cc:inc:{pkg}/{include}' for include in includes] +
-              ['cc:def:' + define for define in defines] +
               labels)
     if alwayslink:
         labels += ['cc:al:{pkg}/{name}.a']
-    cmds, tools = _library_cmds(_c, compiler_flags, pkg_config_libs, pkg_config_cflags, archive=False)
+    cmds, tools = _library_cmds(_c, compiler_flags, pkg_config_libs, pkg_config_cflags, defines, archive=False)
 
     return build_rule(
         name=name,
@@ -314,8 +312,8 @@ def cc_object(name:str, src:str, hdrs:list=[], private_hdrs:list=[], out:str=Non
         test_only=test_only,
         labels=labels,
         tools=tools,
-        pre_build=_library_transitive_labels(_c, compiler_flags, pkg_config_libs, pkg_config_cflags, archive=False)
-                  if (deps or includes or defines) else None,
+        pre_build=_library_apply_labels(_c, compiler_flags, pkg_config_libs, pkg_config_cflags, defines, archive=False)
+                  if (deps or includes) else None,
         needs_transitive_deps=True,
     )
 
@@ -821,8 +819,8 @@ def _escape_linker_flag(flag:str):
         return "-Wl," + flag.replace(" ", ",")
 
 
-def _library_cmds(c:bool=False, compiler_flags:list=[], pkg_config_libs:list=[], pkg_config_cflags:list=[], extra_flags:list=[],
-                  archive:bool=True):
+def _library_cmds(c:bool=False, compiler_flags:list=[], pkg_config_libs:list=[], pkg_config_cflags:list=[], defines:list=[],
+                  extra_flags:list=[], archive:bool=True):
     """Returns the commands needed for a cc_library rule."""
     # Most compilers allow multiple action flags to be specified, with later flags overriding earlier ones. However,
     # specifying more than one action is an error (-Wunused-command-line-argument) as of Clang 20, so if the compiler
@@ -831,8 +829,8 @@ def _library_cmds(c:bool=False, compiler_flags:list=[], pkg_config_libs:list=[],
     common_flags = [] if any([cf in _ACTION_FLAGS for cf in compiler_flags]) else ["-c"]
 
     common_flags += ["-I", "."]
-    dbg_flags = _build_flags(compiler_flags, pkg_config_libs, pkg_config_cflags, c=c, dbg=True)
-    opt_flags = _build_flags(compiler_flags, pkg_config_libs, pkg_config_cflags, c=c)
+    dbg_flags = _build_flags(compiler_flags, pkg_config_libs, pkg_config_cflags, defines, c=c, dbg=True)
+    opt_flags = _build_flags(compiler_flags, pkg_config_libs, pkg_config_cflags, defines, c=c)
     cmd_template = '"$TOOLS_PLEASE_CC" cc "$TOOLS_CC" %s ${SRCS_SRCS}'
     if archive:
         cmd_template += ' && "$TOOLS_ARCAT" ar -r && "$TOOLS_AR" s "$OUT"'
@@ -891,28 +889,33 @@ def _module_file_flag(module_file:str):
     )
 
 
-def _library_transitive_labels(c:bool=False, compiler_flags:list=[], pkg_config_libs:list=[], pkg_config_cflags:list=[], archive:bool=True):
-    """Applies commands from transitive labels to a cc_library rule."""
-    def apply_transitive_labels(name):
-        labels = get_labels(name, 'cc:')
+def _library_apply_labels(c:bool=False, compiler_flags:list=[], pkg_config_libs:list=[], pkg_config_cflags:list=[],
+                          defines:list=[], archive:bool=True):
+    """Extracts options from the labels of dependencies - transitively, in some cases - and adds them to the command of
+    a cc_library target.
+    """
+    def apply_labels(name):
         flags = []
-        for l in labels:
-            if l.startswith("inc:"):
-                flags += ["-isystem", l[4:]]
-            elif l.startswith("def:"):
-                flags += ["-D", l[4:]]
-
-        pkg_config_libs += [l[3:] for l in labels if l.startswith('pc:') and l[3:] not in pkg_config_libs]
-        pkg_config_cflags += [l[4:] for l in labels if l.startswith('pcc:') and l[4:] not in pkg_config_cflags]
-        mods = [_module_file_flag(l[4:]) for l in labels if l.startswith('mod:')]
+        mods = []
+        # Only the headers for this library's direct dependencies should be collected - transitive dependencies aren't
+        # needed at compile time, and just pollute the build environment.
+        for l in get_labels(name, "cc:inc:", maxdepth=1):
+            flags += ["-isystem", l]
+        for l in get_labels(name, "cc:"):
+            if l.startswith("pc:") and l[3:] not in pkg_config_libs:
+                pkg_config_libs += [l[3:]]
+            elif l.startswith("pcc:") and l[4:] not in pkg_config_cflags:
+                pkg_config_cflags += [l[4:]]
+            elif l.startswith("mod:"):
+                mods += [_module_file_flag(l[4:])]
         flags += mods
         if mods:
             flags += _MODULE_FLAGS
         if flags:  # Don't update if there aren't any relevant labels
-            cmds, _ = _library_cmds(c, compiler_flags, pkg_config_libs, pkg_config_cflags, flags, archive=archive)
+            cmds, _ = _library_cmds(c, compiler_flags, pkg_config_libs, pkg_config_cflags, defines, flags, archive=archive)
             for k, v in cmds.items():
                 set_command(name, k, v)
-    return apply_transitive_labels
+    return apply_labels
 
 
 def _binary_transitive_labels(c:bool=False, linker_flags:list=[], pkg_config_libs:list=[], strip:bool=None, shared:bool=False,
diff --git a/test/BUILD b/test/BUILD
index 8282d4d..d1b76d1 100644
--- a/test/BUILD
+++ b/test/BUILD
@@ -109,3 +109,12 @@ plugin_e2e_test(
         "file": "executable" if CONFIG.TARGET_OS == "darwin" else "statically linked",
     },
 )
+
+plugin_e2e_test(
+    name = "transitive_deps_test",
+    repo = "transitive_deps_repo",
+    test_cmd = "plz run //:binary > out",
+    expected_output = {
+        "out": "one=1 one_plus_one=2",
+    },
+)
diff --git a/test/labels/BUILD b/test/labels/BUILD
deleted file mode 100644
index 65ab5ed..0000000
--- a/test/labels/BUILD
+++ /dev/null
@@ -1,19 +0,0 @@
-subinclude("//build_defs:cc")
-
-cc_library(
-    name = "lib1",
-    hdrs = ["lib1/include/lib.hpp"],
-    includes = ["lib1/include"],
-)
-
-cc_library(
-    name = "another_lib",
-    srcs = ["another_lib.cpp"],
-    deps = [":lib1"],
-)
-
-cc_test(
-    name = "lib_test",
-    srcs = ["lib_test.cpp"],
-    deps = [":another_lib"],
-)
diff --git a/test/labels/another_lib.cpp b/test/labels/another_lib.cpp
deleted file mode 100644
index e69de29..0000000
diff --git a/test/labels/lib1/include/lib.hpp b/test/labels/lib1/include/lib.hpp
deleted file mode 100644
index 932b324..0000000
--- a/test/labels/lib1/include/lib.hpp
+++ /dev/null
@@ -1,3 +0,0 @@
-inline int GetAnswer() {
-  return 42;
-}
diff --git a/test/labels/lib_test.cpp b/test/labels/lib_test.cpp
deleted file mode 100644
index 1168b35..0000000
--- a/test/labels/lib_test.cpp
+++ /dev/null
@@ -1,9 +0,0 @@
-#include <UnitTest++/UnitTest++.h>
-
-#include "lib.hpp"
-
-// The real test is at compilation time, this is here just to
-// have a test that proves we really are doing something.
-TEST(TheAnswer) {
-  CHECK_EQUAL(42, GetAnswer());
-}
diff --git a/test/transitive_deps_repo/.plzconfig b/test/transitive_deps_repo/.plzconfig
new file mode 100644
index 0000000..14ee086
--- /dev/null
+++ b/test/transitive_deps_repo/.plzconfig
@@ -0,0 +1,2 @@
+[Plugin "cc"]
+Target = //plugins:cc
diff --git a/test/transitive_deps_repo/BUILD_FILE b/test/transitive_deps_repo/BUILD_FILE
new file mode 100644
index 0000000..168b8aa
--- /dev/null
+++ b/test/transitive_deps_repo/BUILD_FILE
@@ -0,0 +1,9 @@
+subinclude("///cc//build_defs:c")
+
+c_binary(
+    name = "binary",
+    srcs = ["binary.c"],
+    deps = [
+        "//one",
+    ],
+)
diff --git a/test/transitive_deps_repo/binary.c b/test/transitive_deps_repo/binary.c
new file mode 100644
index 0000000..9f2115f
--- /dev/null
+++ b/test/transitive_deps_repo/binary.c
@@ -0,0 +1,16 @@
+#include <stdio.h>
+
+#include "one.h"
+
+#ifdef BUILDING_LIBONE
+#error "BUILDING_LIBONE should not be defined"
+#endif
+
+#ifdef BUILDING_LIBTWO
+#error "BUILDING_LIBTWO should not be defined"
+#endif
+
+int main() {
+    printf("one=%d one_plus_one=%d\n", one(), one_plus_one());
+    return 0;
+}
diff --git a/test/transitive_deps_repo/one/BUILD_FILE b/test/transitive_deps_repo/one/BUILD_FILE
new file mode 100644
index 0000000..ac96908
--- /dev/null
+++ b/test/transitive_deps_repo/one/BUILD_FILE
@@ -0,0 +1,16 @@
+subinclude("///cc//build_defs:c")
+
+c_library(
+    name = "one",
+    srcs = ["one.c"],
+    hdrs = ["one.h"],
+    private_hdrs = ["one_private.h"],
+    defines = ["BUILDING_LIBONE"],
+    includes = ["."],
+    visibility = [
+        "//:binary",
+    ],
+    deps = [
+        "//two",
+    ],
+)
diff --git a/test/transitive_deps_repo/one/one.c b/test/transitive_deps_repo/one/one.c
new file mode 100644
index 0000000..f321993
--- /dev/null
+++ b/test/transitive_deps_repo/one/one.c
@@ -0,0 +1,19 @@
+#include "one.h"
+#include "two.h"
+#include "one_private.h"
+
+#ifndef BUILDING_LIBONE
+#error "BUILDING_LIBONE should be defined"
+#endif
+
+#ifdef BUILDING_LIBTWO
+#error "BUILDING_LIBTWO should not be defined"
+#endif
+
+int one() {
+    return ONE_INT;
+}
+
+int one_plus_one() {
+    return two();
+}
diff --git a/test/transitive_deps_repo/one/one.h b/test/transitive_deps_repo/one/one.h
new file mode 100644
index 0000000..391b571
--- /dev/null
+++ b/test/transitive_deps_repo/one/one.h
@@ -0,0 +1,3 @@
+int one();
+
+int one_plus_one();
diff --git a/test/transitive_deps_repo/one/one_private.h b/test/transitive_deps_repo/one/one_private.h
new file mode 100644
index 0000000..46b3d36
--- /dev/null
+++ b/test/transitive_deps_repo/one/one_private.h
@@ -0,0 +1,9 @@
+#ifndef BUILDING_LIBONE
+#error "BUILDING_LIBONE should be defined"
+#endif
+
+#ifdef BUILDING_LIBTWO
+#error "BUILDING_LIBTWO should not be defined"
+#endif
+
+#define ONE_INT 1
diff --git a/test/transitive_deps_repo/plugins/BUILD_FILE b/test/transitive_deps_repo/plugins/BUILD_FILE
new file mode 100644
index 0000000..c355374
--- /dev/null
+++ b/test/transitive_deps_repo/plugins/BUILD_FILE
@@ -0,0 +1,4 @@
+plugin_repo(
+    name = "cc",
+    revision = "e2e",
+)
diff --git a/test/transitive_deps_repo/two/BUILD_FILE b/test/transitive_deps_repo/two/BUILD_FILE
new file mode 100644
index 0000000..273707d
--- /dev/null
+++ b/test/transitive_deps_repo/two/BUILD_FILE
@@ -0,0 +1,13 @@
+subinclude("///cc//build_defs:c")
+
+c_library(
+    name = "two",
+    srcs = ["two.c"],
+    hdrs = ["two.h"],
+    private_hdrs = ["two_private.h"],
+    defines = ["BUILDING_LIBTWO"],
+    includes = ["."],
+    visibility = [
+        "//one",
+    ],
+)
diff --git a/test/transitive_deps_repo/two/two.c b/test/transitive_deps_repo/two/two.c
new file mode 100644
index 0000000..f841e17
--- /dev/null
+++ b/test/transitive_deps_repo/two/two.c
@@ -0,0 +1,10 @@
+#include "two.h"
+#include "two_private.h"
+
+#ifndef BUILDING_LIBTWO
+#error "BUILDING_LIBTWO should be defined"
+#endif
+
+int two() {
+    return TWO_INT;
+}
diff --git a/test/transitive_deps_repo/two/two.h b/test/transitive_deps_repo/two/two.h
new file mode 100644
index 0000000..6108197
--- /dev/null
+++ b/test/transitive_deps_repo/two/two.h
@@ -0,0 +1 @@
+int two();
diff --git a/test/transitive_deps_repo/two/two_private.h b/test/transitive_deps_repo/two/two_private.h
new file mode 100644
index 0000000..6b0bff1
--- /dev/null
+++ b/test/transitive_deps_repo/two/two_private.h
@@ -0,0 +1,5 @@
+#ifndef BUILDING_LIBTWO
+#error "BUILDING_LIBTWO should be defined"
+#endif
+
+#define TWO_INT 2