diff --git a/CHANGELOG.md b/CHANGELOG.md
index 1414946a..ee0a68ef 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -22,6 +22,7 @@
 - Fixed framework search paths when using `.xcframework`s. [#1015](https://github.com/yonaskolb/XcodeGen/pull/1015) @FranzBusch
 - Fixed bug where schemes without a build target would crash instead of displaying an error [#1040](https://github.com/yonaskolb/XcodeGen/pull/1040) @dalemyers
 - Fixed files with names ending in **Info.plist** (such as **GoogleServices-Info.plist**) from being omitted from the Copy Resources build phase. Now, only the resolved info plist file for each specific target is omitted. [#1027](https://github.com/yonaskolb/XcodeGen/pull/1027) @liamnichols
+- Carthage frameworks are no longer embedded for "order-only" target dependencies. This avoid redundant embeds in situations where a target's sources _import_ a Carthage framework but do not have a binary dependency on it (like a test target which runs in a host app). [#1041](https://github.com/yonaskolb/XcodeGen/pull/1041) @elliottwilliams
 
 #### Internal
 - Build universal binaries for release. XcodeGen now runs natively on Apple Silicon. [#1024](https://github.com/yonaskolb/XcodeGen/pull/1024) @thii
diff --git a/Sources/XcodeGenKit/CarthageDependencyResolver.swift b/Sources/XcodeGenKit/CarthageDependencyResolver.swift
index 8a0b256a..ac4588fb 100644
--- a/Sources/XcodeGenKit/CarthageDependencyResolver.swift
+++ b/Sources/XcodeGenKit/CarthageDependencyResolver.swift
@@ -68,6 +68,9 @@ public class CarthageDependencyResolver {
 
             if let target = projectTarget as? Target {
                 for dependency in target.dependencies {
+                    if case (false, false) = (dependency.link, dependency.embed ?? topLevelTarget.shouldEmbedCarthageDependencies) {
+                        continue
+                    }
                     guard !frameworks.contains(where: { $0.dependency == dependency }) else {
                         continue
                     }
diff --git a/Tests/Fixtures/TestProject/Project.xcodeproj/project.pbxproj b/Tests/Fixtures/TestProject/Project.xcodeproj/project.pbxproj
index bb0de533..4b8df8bc 100644
--- a/Tests/Fixtures/TestProject/Project.xcodeproj/project.pbxproj
+++ b/Tests/Fixtures/TestProject/Project.xcodeproj/project.pbxproj
@@ -2809,10 +2809,6 @@
 		00FD318C7418F3351FC00744 /* Test Debug */ = {
 			isa = XCBuildConfiguration;
 			buildSettings = {
-				FRAMEWORK_SEARCH_PATHS = (
-					"$(inherited)",
-					"$(PROJECT_DIR)/Carthage/Build/watchOS",
-				);
 				INFOPLIST_FILE = App_watchOS/Info.plist;
 				PRODUCT_BUNDLE_IDENTIFIER = com.project.app.watch;
 				SDKROOT = watchos;
@@ -3333,10 +3329,6 @@
 		20803EC42C26E4EA13474E5A /* Production Debug */ = {
 			isa = XCBuildConfiguration;
 			buildSettings = {
-				FRAMEWORK_SEARCH_PATHS = (
-					"$(inherited)",
-					"$(PROJECT_DIR)/Carthage/Build/watchOS",
-				);
 				INFOPLIST_FILE = App_watchOS/Info.plist;
 				PRODUCT_BUNDLE_IDENTIFIER = com.project.app.watch;
 				SDKROOT = watchos;
@@ -4704,10 +4696,6 @@
 		7B2A1BE6CA654E9903A4C680 /* Staging Release */ = {
 			isa = XCBuildConfiguration;
 			buildSettings = {
-				FRAMEWORK_SEARCH_PATHS = (
-					"$(inherited)",
-					"$(PROJECT_DIR)/Carthage/Build/watchOS",
-				);
 				INFOPLIST_FILE = App_watchOS/Info.plist;
 				PRODUCT_BUNDLE_IDENTIFIER = com.project.app.watch;
 				SDKROOT = watchos;
@@ -5457,10 +5445,6 @@
 		AABC1E325EADF86C5137D659 /* Production Release */ = {
 			isa = XCBuildConfiguration;
 			buildSettings = {
-				FRAMEWORK_SEARCH_PATHS = (
-					"$(inherited)",
-					"$(PROJECT_DIR)/Carthage/Build/watchOS",
-				);
 				INFOPLIST_FILE = App_watchOS/Info.plist;
 				PRODUCT_BUNDLE_IDENTIFIER = com.project.app.watch;
 				SDKROOT = watchos;
@@ -5965,10 +5949,6 @@
 		C4397CDA0D458BAD55C911B0 /* Staging Debug */ = {
 			isa = XCBuildConfiguration;
 			buildSettings = {
-				FRAMEWORK_SEARCH_PATHS = (
-					"$(inherited)",
-					"$(PROJECT_DIR)/Carthage/Build/watchOS",
-				);
 				INFOPLIST_FILE = App_watchOS/Info.plist;
 				PRODUCT_BUNDLE_IDENTIFIER = com.project.app.watch;
 				SDKROOT = watchos;
@@ -6869,10 +6849,6 @@
 		F3AC6A112F81D0958A316D82 /* Test Release */ = {
 			isa = XCBuildConfiguration;
 			buildSettings = {
-				FRAMEWORK_SEARCH_PATHS = (
-					"$(inherited)",
-					"$(PROJECT_DIR)/Carthage/Build/watchOS",
-				);
 				INFOPLIST_FILE = App_watchOS/Info.plist;
 				PRODUCT_BUNDLE_IDENTIFIER = com.project.app.watch;
 				SDKROOT = watchos;
diff --git a/Tests/XcodeGenKitTests/CarthageDependencyResolverTests.swift b/Tests/XcodeGenKitTests/CarthageDependencyResolverTests.swift
index 935c8842..0e160ea9 100644
--- a/Tests/XcodeGenKitTests/CarthageDependencyResolverTests.swift
+++ b/Tests/XcodeGenKitTests/CarthageDependencyResolverTests.swift
@@ -146,6 +146,29 @@ class CarthageDependencyResolverTests: XCTestCase {
 
                 try expect(related) == expectedDependencies
             }
+
+            $0.it("skips dependencies which are not embedded") {
+                let resolver = CarthageDependencyResolver(project: makeTestProject())
+
+                let target = Target(name: "1", type: .application, platform: .iOS, dependencies: [
+                    Dependency(type: .carthage(findFrameworks: false, linkType: .dynamic), reference: dependencyFixtureName, embed: false, link: false)
+                ])
+                try expect(resolver.dependencies(for: target)) == []
+            }
+
+            $0.it("skips dependencies nested in targets which are not embedded") {
+                let nestedTarget = Target(name: "1", type: .framework, platform: .iOS, dependencies: [
+                    Dependency(type: .carthage(findFrameworks: false, linkType: .dynamic), reference: dependencyFixtureName)
+                ])
+
+                let resolver = CarthageDependencyResolver(project: makeTestProject(with: [nestedTarget]))
+
+                let target = Target(name: "2", type: .application, platform: .iOS, dependencies: [
+                    Dependency(type: .target, reference: "1", embed: false, link: false)
+                ])
+                try expect(resolver.dependencies(for: target)) == []
+
+            }
         }
     }