diff --git a/src/lock_file/resolve/pypi.rs b/src/lock_file/resolve/pypi.rs
index 6f76eedaf..1adfb9383 100644
--- a/src/lock_file/resolve/pypi.rs
+++ b/src/lock_file/resolve/pypi.rs
@@ -285,7 +285,13 @@ pub async fn resolve_pypi(
     };
 
     // Create a shared in-memory index.
-    let in_memory_index = InMemoryIndex::default();
+    // We need two in-memory indexes, one for the build dispatch and one for the resolver.
+    // because we manually override requests for the resolver,
+    // but we don't want to override requests for the build dispatch.
+    //
+    // The BuildDispatch might resolve or install when building wheels which will be mostly
+    // with build isolation. In that case we want to use fresh non-tampered requests.
+    let build_dispatch_in_memory_index = InMemoryIndex::default();
     let config_settings = ConfigSettings::default();
 
     let env = PythonEnvironment::from_interpreter(interpreter.clone());
@@ -303,7 +309,7 @@ pub async fn resolve_pypi(
         &interpreter,
         &index_locations,
         &flat_index,
-        &in_memory_index,
+        &build_dispatch_in_memory_index,
         &git_resolver,
         &context.in_flight,
         IndexStrategy::default(),
@@ -406,6 +412,9 @@ pub async fn resolve_pypi(
         package_requests: package_requests.clone(),
     };
 
+    // We need a new in-memory index for the resolver so that it does not conflict with the build dispatch
+    // one. As we have noted in the comment above.
+    let resolver_in_memory_index = InMemoryIndex::default();
     let python_version = PythonVersion::from_str(&interpreter_version.to_string())
         .expect("could not get version from interpreter");
     let resolution = Resolver::new_custom_io(
@@ -414,7 +423,7 @@ pub async fn resolve_pypi(
         &context.hash_strategy,
         ResolverMarkers::SpecificEnvironment(marker_environment.into()),
         &PythonRequirement::from_python_version(&interpreter, &python_version),
-        &in_memory_index,
+        &resolver_in_memory_index,
         &git_resolver,
         provider,
         EmptyInstalledPackages,
diff --git a/src/lock_file/resolve/resolver_provider.rs b/src/lock_file/resolve/resolver_provider.rs
index 19100870f..8dcdc816f 100644
--- a/src/lock_file/resolve/resolver_provider.rs
+++ b/src/lock_file/resolve/resolver_provider.rs
@@ -39,6 +39,13 @@ impl<'a, Context: BuildContext> ResolverProvider for CondaResolverProvider<'a, C
     ) -> impl Future<Output = uv_resolver::PackageVersionsResult> + 'io {
         if let Some((repodata_record, identifier)) = self.conda_python_identifiers.get(package_name)
         {
+            let version = repodata_record.version().to_string();
+
+            tracing::debug!(
+                "overriding PyPI package version request {}=={}",
+                package_name,
+                version
+            );
             // If we encounter a package that was installed by conda we simply return a single
             // available version in the form of a source distribution with the URL of the
             // conda package.
@@ -60,11 +67,7 @@ impl<'a, Context: BuildContext> ResolverProvider for CondaResolverProvider<'a, C
 
             let source_dist = RegistrySourceDist {
                 name: identifier.name.as_normalized().clone(),
-                version: repodata_record
-                    .version()
-                    .to_string()
-                    .parse()
-                    .expect("could not convert to pypi version"),
+                version: version.parse().expect("could not convert to pypi version"),
                 file: Box::new(file),
                 index: IndexUrl::Pypi(VerbatimUrl::from_url(
                     consts::DEFAULT_PYPI_INDEX_URL.clone(),
@@ -104,6 +107,7 @@ impl<'a, Context: BuildContext> ResolverProvider for CondaResolverProvider<'a, C
     ) -> impl Future<Output = WheelMetadataResult> + 'io {
         if let Dist::Source(SourceDist::Registry(RegistrySourceDist { name, .. })) = dist {
             if let Some((_, iden)) = self.conda_python_identifiers.get(name) {
+                tracing::debug!("overriding PyPI package metadata request {}", name);
                 // If this is a Source dist and the package is actually installed by conda we
                 // create fake metadata with no dependencies. We assume that all conda installed
                 // packages are properly installed including its dependencies.
diff --git a/tests/install_tests.rs b/tests/install_tests.rs
index ede9b7204..8396f2ab0 100644
--- a/tests/install_tests.rs
+++ b/tests/install_tests.rs
@@ -650,6 +650,30 @@ setup(
     pixi.install().await.expect("cannot install project");
 }
 
+#[tokio::test(flavor = "multi_thread", worker_threads = 1)]
+#[cfg_attr(not(feature = "slow_integration_tests"), ignore)]
+async fn test_setuptools_override_failure() {
+    // This was causing issues like: https://github.com/prefix-dev/pixi/issues/1686
+    let manifest = format!(
+        r#"
+        [project]
+        channels = ["conda-forge"]
+        name = "pixi-source-problem"
+        platforms = ["{platform}"]
+
+        [dependencies]
+        pip = ">=24.0,<25"
+
+        # The transitive dependencies of viser were causing issues
+        [pypi-dependencies]
+        viser = "==0.2.7"
+        "#,
+        platform = Platform::current()
+    );
+    let pixi = PixiControl::from_manifest(&manifest).expect("cannot instantiate pixi project");
+    pixi.install().await.expect("cannot install project");
+}
+
 #[tokio::test(flavor = "multi_thread", worker_threads = 1)]
 #[cfg_attr(not(feature = "slow_integration_tests"), ignore)]
 async fn test_many_linux_wheel_tag() {