diff --git a/backend/app/pypi_cache_worker.py b/backend/app/pypi_cache_worker.py
index 785f845..ceb6628 100644
--- a/backend/app/pypi_cache_worker.py
+++ b/backend/app/pypi_cache_worker.py
@@ -192,8 +192,8 @@ def _process_cache_task(task_id: UUID):
             _mark_task_failed(db, task, f"Max depth {max_depth} exceeded")
             return
 
-        # Do the actual caching
-        result = _fetch_and_cache_package(task.package_name, task.version_constraint)
+        # Do the actual caching - pass depth so nested deps are queued at depth+1
+        result = _fetch_and_cache_package(task.package_name, task.version_constraint, depth=task.depth)
 
         if result["success"]:
             _mark_task_completed(db, task, cached_artifact_id=result.get("artifact_id"))
@@ -256,6 +256,7 @@ def _find_cached_package(db: Session, package_name: str) -> Optional[str]:
 def _fetch_and_cache_package(
     package_name: str,
     version_constraint: Optional[str] = None,
+    depth: int = 0,
 ) -> dict:
     """
     Fetch and cache a PyPI package by making requests through our own proxy.
@@ -263,6 +264,7 @@ def _fetch_and_cache_package(
     Args:
         package_name: The package name to cache.
         version_constraint: Optional version constraint (currently not used for selection).
+        depth: Current recursion depth for dependency tracking.
 
     Returns:
         Dict with "success" bool, "artifact_id" on success, "error" on failure.
@@ -317,6 +319,11 @@ def _fetch_and_cache_package(
             elif not download_url.startswith("http"):
                 download_url = f"{base_url}/pypi/simple/{normalized_name}/{download_url}"
 
+            # Add cache-depth query parameter to track recursion depth
+            # The proxy will queue dependencies at depth+1
+            separator = "&" if "?" in download_url else "?"
+            download_url = f"{download_url}{separator}cache-depth={depth}"
+
             # Step 3: Download the file through our proxy (this caches it)
             logger.debug(f"Downloading: {download_url}")
             response = client.get(download_url)
@@ -337,6 +344,10 @@ def _fetch_and_cache_package(
         return {"success": False, "error": str(e)}
 
 
+# Alias for backward compatibility and clearer naming
+_fetch_and_cache_package_with_depth = _fetch_and_cache_package
+
+
 def _mark_task_completed(
     db: Session,
     task: PyPICacheTask,
diff --git a/backend/app/pypi_proxy.py b/backend/app/pypi_proxy.py
index d5bf3a5..2a117e5 100644
--- a/backend/app/pypi_proxy.py
+++ b/backend/app/pypi_proxy.py
@@ -516,6 +516,7 @@ async def pypi_download_file(
     package_name: str,
     filename: str,
     upstream: Optional[str] = None,
+    cache_depth: int = Query(default=0, ge=0, le=100, alias="cache-depth"),
     db: Session = Depends(get_db),
     storage: S3Storage = Depends(get_storage),
 ):
@@ -526,6 +527,7 @@ async def pypi_download_file(
         package_name: The package name
         filename: The filename to download
         upstream: URL-encoded upstream URL to fetch from
+        cache_depth: Current cache recursion depth (used by cache worker for nested deps)
     """
     if not upstream:
         raise HTTPException(
@@ -772,17 +774,19 @@ async def pypi_download_file(
                     db.add(dep)
 
         # Proactively cache dependencies via task queue
+        # Dependencies are queued at cache_depth + 1 to track recursion
         if unique_deps:
+            next_depth = cache_depth + 1
             for dep_name, dep_version in unique_deps:
                 enqueue_cache_task(
                     db,
                     package_name=dep_name,
                     version_constraint=dep_version,
                     parent_task_id=None,  # Top-level, triggered by user download
-                    depth=0,
+                    depth=next_depth,
                     triggered_by_artifact=sha256,
                 )
-            logger.info(f"PyPI proxy: queued {len(unique_deps)} dependencies for caching")
+            logger.info(f"PyPI proxy: queued {len(unique_deps)} dependencies for caching (depth={next_depth})")
 
         db.commit()
 
diff --git a/backend/tests/test_pypi_cache_worker.py b/backend/tests/test_pypi_cache_worker.py
index 2f5f09a..aacf2ce 100644
--- a/backend/tests/test_pypi_cache_worker.py
+++ b/backend/tests/test_pypi_cache_worker.py
@@ -261,3 +261,104 @@ class TestWorkerPoolLifecycle:
         # We just verify the functions are callable
         assert callable(init_cache_worker_pool)
         assert callable(shutdown_cache_worker_pool)
+
+
+class TestNestedDependencyDepthTracking:
+    """Tests for nested dependency depth tracking.
+
+    When the cache worker downloads a package, its dependencies should be
+    queued with depth = current_task_depth + 1, not depth = 0.
+    """
+
+    def test_enqueue_with_depth_increments_for_nested_deps(self):
+        """Test that enqueue_cache_task properly tracks depth for nested dependencies.
+
+        When a task at depth=2 discovers a new dependency, that dependency
+        should be queued at depth=3.
+        """
+        from unittest.mock import MagicMock, patch
+        from app.pypi_cache_worker import enqueue_cache_task
+
+        mock_db = MagicMock()
+
+        # No existing task for this package
+        mock_db.query.return_value.filter.return_value.first.return_value = None
+
+        # Mock _find_cached_package to return None (not cached)
+        with patch('app.pypi_cache_worker._find_cached_package', return_value=None):
+            task = enqueue_cache_task(
+                mock_db,
+                package_name="nested-dep",
+                version_constraint=">=1.0",
+                parent_task_id=None,
+                depth=3,  # Parent task was at depth 2, so this dep is at depth 3
+                triggered_by_artifact="abc123",
+            )
+
+        # Verify db.add was called
+        mock_db.add.assert_called_once()
+
+        # Get the task that was added
+        added_task = mock_db.add.call_args[0][0]
+
+        # The task should have the correct depth
+        assert added_task.depth == 3, f"Expected depth=3, got depth={added_task.depth}"
+        assert added_task.package_name == "nested-dep"
+
+    def test_proxy_download_accepts_cache_depth_param(self):
+        """Test that proxy download endpoint accepts cache-depth query parameter.
+
+        The cache worker should pass its current depth via query param so the proxy
+        can queue dependencies at the correct depth.
+        """
+        # Verify that pypi_download_file has a cache_depth parameter
+        import inspect
+        from app.pypi_proxy import pypi_download_file
+
+        sig = inspect.signature(pypi_download_file)
+        params = list(sig.parameters.keys())
+
+        # The endpoint should accept a cache_depth parameter
+        assert 'cache_depth' in params, \
+            f"pypi_download_file should accept cache_depth parameter. Got params: {params}"
+
+    def test_worker_sends_depth_in_url_when_fetching(self):
+        """Test that _fetch_and_cache_package includes depth in download URL.
+
+        When the worker fetches a package, it should include its current depth
+        in the URL query params so nested dependencies get queued at depth+1.
+        """
+        from unittest.mock import patch, MagicMock
+        import httpx
+
+        # We need to verify that the httpx.Client.get call includes the depth in URL
+        with patch('app.pypi_cache_worker.httpx.Client') as mock_client_class:
+            mock_client = MagicMock()
+            mock_client_class.return_value.__enter__ = MagicMock(return_value=mock_client)
+            mock_client_class.return_value.__exit__ = MagicMock(return_value=False)
+
+            # Mock successful responses
+            mock_response_index = MagicMock()
+            mock_response_index.status_code = 200
+            mock_response_index.text = '''
+            <html><body>
+            <a href="/pypi/simple/test-pkg/test_pkg-1.0.0-py3-none-any.whl?upstream=http%3A%2F%2Fexample.com">test_pkg-1.0.0-py3-none-any.whl</a>
+            </body></html>
+            '''
+
+            mock_response_download = MagicMock()
+            mock_response_download.status_code = 200
+            mock_response_download.headers = {"X-Checksum-SHA256": "abc123"}
+
+            mock_client.get.side_effect = [mock_response_index, mock_response_download]
+
+            from app.pypi_cache_worker import _fetch_and_cache_package_with_depth
+
+            # This function should exist and accept depth parameter
+            result = _fetch_and_cache_package_with_depth("test-pkg", None, depth=2)
+
+            # Verify the download request included the cache-depth query param
+            download_call = mock_client.get.call_args_list[1]
+            download_url = download_call[0][0]  # First positional arg is URL
+            assert "cache-depth=2" in download_url, \
+                f"Expected cache-depth=2 in URL, got: {download_url}"