diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-one-time-init-no-error.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-one-time-init-no-error.expect.md
new file mode 100644
index 0000000000..07a58aeef3
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-one-time-init-no-error.expect.md
@@ -0,0 +1,87 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({initialName}) {
+  const [name, setName] = useState('');
+
+  useEffect(() => {
+    setName(initialName);
+  }, []);
+
+  return (
+    <div>
+      <input value={name} onChange={e => setName(e.target.value)} />
+    </div>
+  );
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{initialName: 'John'}],
+};
+
+```
+
+## Code
+
+```javascript
+import { c as _c } from "react/compiler-runtime"; // @validateNoDerivedComputationsInEffects
+import { useEffect, useState } from "react";
+
+function Component(t0) {
+  const $ = _c(6);
+  const { initialName } = t0;
+  const [name, setName] = useState("");
+  let t1;
+  if ($[0] !== initialName) {
+    t1 = () => {
+      setName(initialName);
+    };
+    $[0] = initialName;
+    $[1] = t1;
+  } else {
+    t1 = $[1];
+  }
+  let t2;
+  if ($[2] === Symbol.for("react.memo_cache_sentinel")) {
+    t2 = [];
+    $[2] = t2;
+  } else {
+    t2 = $[2];
+  }
+  useEffect(t1, t2);
+  let t3;
+  if ($[3] === Symbol.for("react.memo_cache_sentinel")) {
+    t3 = (e) => setName(e.target.value);
+    $[3] = t3;
+  } else {
+    t3 = $[3];
+  }
+  let t4;
+  if ($[4] !== name) {
+    t4 = (
+      <div>
+        <input value={name} onChange={t3} />
+      </div>
+    );
+    $[4] = name;
+    $[5] = t4;
+  } else {
+    t4 = $[5];
+  }
+  return t4;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{ initialName: "John" }],
+};
+
+```
+      
+### Eval output
+(kind: ok) <div><input value="John"></div>
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-one-time-init-no-error.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-one-time-init-no-error.js
new file mode 100644
index 0000000000..c6705378a5
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-one-time-init-no-error.js
@@ -0,0 +1,21 @@
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({initialName}) {
+  const [name, setName] = useState('');
+
+  useEffect(() => {
+    setName(initialName);
+  }, []);
+
+  return (
+    <div>
+      <input value={name} onChange={e => setName(e.target.value)} />
+    </div>
+  );
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{initialName: 'John'}],
+};
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-conditional-no-error.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-conditional-no-error.expect.md
new file mode 100644
index 0000000000..b7a1c85d52
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-conditional-no-error.expect.md
@@ -0,0 +1,79 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({value, enabled}) {
+  const [localValue, setLocalValue] = useState('');
+
+  useEffect(() => {
+    if (enabled) {
+      setLocalValue(value);
+    } else {
+      setLocalValue('disabled');
+    }
+  }, [value, enabled]);
+
+  return <div>{localValue}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{value: 'test', enabled: true}],
+};
+
+```
+
+## Code
+
+```javascript
+import { c as _c } from "react/compiler-runtime"; // @validateNoDerivedComputationsInEffects
+import { useEffect, useState } from "react";
+
+function Component(t0) {
+  const $ = _c(6);
+  const { value, enabled } = t0;
+  const [localValue, setLocalValue] = useState("");
+  let t1;
+  let t2;
+  if ($[0] !== enabled || $[1] !== value) {
+    t1 = () => {
+      if (enabled) {
+        setLocalValue(value);
+      } else {
+        setLocalValue("disabled");
+      }
+    };
+
+    t2 = [value, enabled];
+    $[0] = enabled;
+    $[1] = value;
+    $[2] = t1;
+    $[3] = t2;
+  } else {
+    t1 = $[2];
+    t2 = $[3];
+  }
+  useEffect(t1, t2);
+  let t3;
+  if ($[4] !== localValue) {
+    t3 = <div>{localValue}</div>;
+    $[4] = localValue;
+    $[5] = t3;
+  } else {
+    t3 = $[5];
+  }
+  return t3;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{ value: "test", enabled: true }],
+};
+
+```
+      
+### Eval output
+(kind: ok) <div>test</div>
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-conditional-no-error.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-conditional-no-error.js
new file mode 100644
index 0000000000..79d83b8925
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-conditional-no-error.js
@@ -0,0 +1,21 @@
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({value, enabled}) {
+  const [localValue, setLocalValue] = useState('');
+
+  useEffect(() => {
+    if (enabled) {
+      setLocalValue(value);
+    } else {
+      setLocalValue('disabled');
+    }
+  }, [value, enabled]);
+
+  return <div>{localValue}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{value: 'test', enabled: true}],
+};
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-side-effects-no-error.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-side-effects-no-error.expect.md
new file mode 100644
index 0000000000..e0708dd1f7
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-side-effects-no-error.expect.md
@@ -0,0 +1,74 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({value}) {
+  const [localValue, setLocalValue] = useState('');
+
+  useEffect(() => {
+    console.log('Value changed:', value);
+    setLocalValue(value);
+    document.title = `Value: ${value}`;
+  }, [value]);
+
+  return <div>{localValue}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{value: 'test'}],
+};
+
+```
+
+## Code
+
+```javascript
+import { c as _c } from "react/compiler-runtime"; // @validateNoDerivedComputationsInEffects
+import { useEffect, useState } from "react";
+
+function Component(t0) {
+  const $ = _c(5);
+  const { value } = t0;
+  const [localValue, setLocalValue] = useState("");
+  let t1;
+  let t2;
+  if ($[0] !== value) {
+    t1 = () => {
+      console.log("Value changed:", value);
+      setLocalValue(value);
+      document.title = `Value: ${value}`;
+    };
+    t2 = [value];
+    $[0] = value;
+    $[1] = t1;
+    $[2] = t2;
+  } else {
+    t1 = $[1];
+    t2 = $[2];
+  }
+  useEffect(t1, t2);
+  let t3;
+  if ($[3] !== localValue) {
+    t3 = <div>{localValue}</div>;
+    $[3] = localValue;
+    $[4] = t3;
+  } else {
+    t3 = $[4];
+  }
+  return t3;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{ value: "test" }],
+};
+
+```
+      
+### Eval output
+(kind: ok) <div>test</div>
+logs: ['Value changed:','test']
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-side-effects-no-error.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-side-effects-no-error.js
new file mode 100644
index 0000000000..b948dda6cb
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/derived-state-with-side-effects-no-error.js
@@ -0,0 +1,19 @@
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({value}) {
+  const [localValue, setLocalValue] = useState('');
+
+  useEffect(() => {
+    console.log('Value changed:', value);
+    setLocalValue(value);
+    document.title = `Value: ${value}`;
+  }, [value]);
+
+  return <div>{localValue}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{value: 'test'}],
+};
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.bug-derived-state-from-mixed-deps.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.bug-derived-state-from-mixed-deps.expect.md
new file mode 100644
index 0000000000..54c95d68e3
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.bug-derived-state-from-mixed-deps.expect.md
@@ -0,0 +1,49 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({prefix}) {
+  const [name, setName] = useState('');
+  const [displayName, setDisplayName] = useState('');
+
+  useEffect(() => {
+    setDisplayName(prefix + name);
+  }, [prefix, name]);
+
+  return (
+    <div>
+      <input value={name} onChange={e => setName(e.target.value)} />
+      <div>{displayName}</div>
+    </div>
+  );
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{prefix: 'Hello, '}],
+};
+
+```
+
+
+## Error
+
+```
+Found 1 error:
+
+Error: Values derived from props and state should be calculated during render, not in an effect. (https://react.dev/learn/you-might-not-need-an-effect#updating-state-based-on-props-or-state)
+
+error.derived-state-from-mixed-deps-no-error.ts:9:4
+   7 |
+   8 |   useEffect(() => {
+>  9 |     setDisplayName(prefix + name);
+     |     ^^^^^^^^^^^^^^ Values derived from props and state should be calculated during render, not in an effect. (https://react.dev/learn/you-might-not-need-an-effect#updating-state-based-on-props-or-state)
+  10 |   }, [prefix, name]);
+  11 |
+  12 |   return (
+```
+          
+      
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.bug-derived-state-from-mixed-deps.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.bug-derived-state-from-mixed-deps.js
new file mode 100644
index 0000000000..0004ab0ebf
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.bug-derived-state-from-mixed-deps.js
@@ -0,0 +1,23 @@
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({prefix}) {
+  const [name, setName] = useState('');
+  const [displayName, setDisplayName] = useState('');
+
+  useEffect(() => {
+    setDisplayName(prefix + name);
+  }, [prefix, name]);
+
+  return (
+    <div>
+      <input value={name} onChange={e => setName(e.target.value)} />
+      <div>{displayName}</div>
+    </div>
+  );
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{prefix: 'Hello, '}],
+};
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-destructured.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-destructured.expect.md
new file mode 100644
index 0000000000..cb18bd12a3
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-destructured.expect.md
@@ -0,0 +1,43 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({user: {firstName, lastName}}) {
+  const [fullName, setFullName] = useState('');
+
+  useEffect(() => {
+    setFullName(firstName + ' ' + lastName);
+  }, [firstName, lastName]);
+
+  return <div>{fullName}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{user: {firstName: 'John', lastName: 'Doe'}}],
+};
+
+```
+
+
+## Error
+
+```
+Found 1 error:
+
+Error: Values derived from props and state should be calculated during render, not in an effect. (https://react.dev/learn/you-might-not-need-an-effect#updating-state-based-on-props-or-state)
+
+error.invalid-derived-state-from-props-destructured.ts:8:4
+   6 |
+   7 |   useEffect(() => {
+>  8 |     setFullName(firstName + ' ' + lastName);
+     |     ^^^^^^^^^^^ Values derived from props and state should be calculated during render, not in an effect. (https://react.dev/learn/you-might-not-need-an-effect#updating-state-based-on-props-or-state)
+   9 |   }, [firstName, lastName]);
+  10 |
+  11 |   return <div>{fullName}</div>;
+```
+          
+      
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-destructured.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-destructured.js
new file mode 100644
index 0000000000..130d31c11a
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-destructured.js
@@ -0,0 +1,17 @@
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({user: {firstName, lastName}}) {
+  const [fullName, setFullName] = useState('');
+
+  useEffect(() => {
+    setFullName(firstName + ' ' + lastName);
+  }, [firstName, lastName]);
+
+  return <div>{fullName}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{user: {firstName: 'John', lastName: 'Doe'}}],
+};
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-in-effect.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-in-effect.expect.md
new file mode 100644
index 0000000000..15d94c39ad
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-in-effect.expect.md
@@ -0,0 +1,43 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({firstName, lastName}) {
+  const [fullName, setFullName] = useState('');
+
+  useEffect(() => {
+    setFullName(firstName + ' ' + lastName);
+  }, [firstName, lastName]);
+
+  return <div>{fullName}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{firstName: 'John', lastName: 'Doe'}],
+};
+
+```
+
+
+## Error
+
+```
+Found 1 error:
+
+Error: Values derived from props and state should be calculated during render, not in an effect. (https://react.dev/learn/you-might-not-need-an-effect#updating-state-based-on-props-or-state)
+
+error.invalid-derived-state-from-props-in-effect.ts:8:4
+   6 |
+   7 |   useEffect(() => {
+>  8 |     setFullName(firstName + ' ' + lastName);
+     |     ^^^^^^^^^^^ Values derived from props and state should be calculated during render, not in an effect. (https://react.dev/learn/you-might-not-need-an-effect#updating-state-based-on-props-or-state)
+   9 |   }, [firstName, lastName]);
+  10 |
+  11 |   return <div>{fullName}</div>;
+```
+          
+      
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-in-effect.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-in-effect.js
new file mode 100644
index 0000000000..966f09ea89
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-props-in-effect.js
@@ -0,0 +1,17 @@
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component({firstName, lastName}) {
+  const [fullName, setFullName] = useState('');
+
+  useEffect(() => {
+    setFullName(firstName + ' ' + lastName);
+  }, [firstName, lastName]);
+
+  return <div>{fullName}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{firstName: 'John', lastName: 'Doe'}],
+};
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-state-in-effect.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-state-in-effect.expect.md
new file mode 100644
index 0000000000..7466edb3c5
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-state-in-effect.expect.md
@@ -0,0 +1,51 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component() {
+  const [firstName, setFirstName] = useState('John');
+  const [lastName, setLastName] = useState('Doe');
+  const [fullName, setFullName] = useState('');
+
+  useEffect(() => {
+    setFullName(firstName + ' ' + lastName);
+  }, [firstName, lastName]);
+
+  return (
+    <div>
+      <input value={firstName} onChange={e => setFirstName(e.target.value)} />
+      <input value={lastName} onChange={e => setLastName(e.target.value)} />
+      <div>{fullName}</div>
+    </div>
+  );
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [],
+};
+
+```
+
+
+## Error
+
+```
+Found 1 error:
+
+Error: Values derived from props and state should be calculated during render, not in an effect. (https://react.dev/learn/you-might-not-need-an-effect#updating-state-based-on-props-or-state)
+
+error.invalid-derived-state-from-state-in-effect.ts:10:4
+   8 |
+   9 |   useEffect(() => {
+> 10 |     setFullName(firstName + ' ' + lastName);
+     |     ^^^^^^^^^^^ Values derived from props and state should be calculated during render, not in an effect. (https://react.dev/learn/you-might-not-need-an-effect#updating-state-based-on-props-or-state)
+  11 |   }, [firstName, lastName]);
+  12 |
+  13 |   return (
+```
+          
+      
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-state-in-effect.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-state-in-effect.js
new file mode 100644
index 0000000000..2b4f9f7066
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/error.invalid-derived-state-from-state-in-effect.js
@@ -0,0 +1,25 @@
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component() {
+  const [firstName, setFirstName] = useState('John');
+  const [lastName, setLastName] = useState('Doe');
+  const [fullName, setFullName] = useState('');
+
+  useEffect(() => {
+    setFullName(firstName + ' ' + lastName);
+  }, [firstName, lastName]);
+
+  return (
+    <div>
+      <input value={firstName} onChange={e => setFirstName(e.target.value)} />
+      <input value={lastName} onChange={e => setLastName(e.target.value)} />
+      <div>{fullName}</div>
+    </div>
+  );
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [],
+};
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/invalid-derived-state-from-props-computed.expect.md b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/invalid-derived-state-from-props-computed.expect.md
new file mode 100644
index 0000000000..3d0c4fe9c8
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/invalid-derived-state-from-props-computed.expect.md
@@ -0,0 +1,72 @@
+
+## Input
+
+```javascript
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component(props) {
+  const [displayValue, setDisplayValue] = useState('');
+
+  useEffect(() => {
+    const computed = props.prefix + props.value + props.suffix;
+    setDisplayValue(computed);
+  }, [props.prefix, props.value, props.suffix]);
+
+  return <div>{displayValue}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{prefix: '[', value: 'test', suffix: ']'}],
+};
+
+```
+
+## Code
+
+```javascript
+import { c as _c } from "react/compiler-runtime"; // @validateNoDerivedComputationsInEffects
+import { useEffect, useState } from "react";
+
+function Component(props) {
+  const $ = _c(7);
+  const [displayValue, setDisplayValue] = useState("");
+  let t0;
+  let t1;
+  if ($[0] !== props.prefix || $[1] !== props.suffix || $[2] !== props.value) {
+    t0 = () => {
+      const computed = props.prefix + props.value + props.suffix;
+      setDisplayValue(computed);
+    };
+    t1 = [props.prefix, props.value, props.suffix];
+    $[0] = props.prefix;
+    $[1] = props.suffix;
+    $[2] = props.value;
+    $[3] = t0;
+    $[4] = t1;
+  } else {
+    t0 = $[3];
+    t1 = $[4];
+  }
+  useEffect(t0, t1);
+  let t2;
+  if ($[5] !== displayValue) {
+    t2 = <div>{displayValue}</div>;
+    $[5] = displayValue;
+    $[6] = t2;
+  } else {
+    t2 = $[6];
+  }
+  return t2;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{ prefix: "[", value: "test", suffix: "]" }],
+};
+
+```
+      
+### Eval output
+(kind: ok) <div>[test]</div>
\ No newline at end of file
diff --git a/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/invalid-derived-state-from-props-computed.js b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/invalid-derived-state-from-props-computed.js
new file mode 100644
index 0000000000..0e726f86ab
--- /dev/null
+++ b/compiler/packages/babel-plugin-react-compiler/src/__tests__/fixtures/compiler/useEffect/invalid-derived-state-from-props-computed.js
@@ -0,0 +1,18 @@
+// @validateNoDerivedComputationsInEffects
+import {useEffect, useState} from 'react';
+
+function Component(props) {
+  const [displayValue, setDisplayValue] = useState('');
+
+  useEffect(() => {
+    const computed = props.prefix + props.value + props.suffix;
+    setDisplayValue(computed);
+  }, [props.prefix, props.value, props.suffix]);
+
+  return <div>{displayValue}</div>;
+}
+
+export const FIXTURE_ENTRYPOINT = {
+  fn: Component,
+  params: [{prefix: '[', value: 'test', suffix: ']'}],
+};