diff --git a/packages/orm/src/client/crud-types.ts b/packages/orm/src/client/crud-types.ts
index b92854807..d0e9ef940 100644
--- a/packages/orm/src/client/crud-types.ts
+++ b/packages/orm/src/client/crud-types.ts
@@ -2137,11 +2137,16 @@ type UpdateRelationFieldPayload<
         ? ToManyRelationUpdateInput<Schema, Model, Field, Options>
         : ToOneRelationUpdateInput<Schema, Model, Field, Options>;
 
+// Variance-annotated for the same reason as `ToOneRelationUpdateInput` below: without the
+// annotations, comparing two instantiations with different `Options` (e.g. a generated
+// `XxxUpdateArgs`/`XxxUpsertArgs` type passed to a client method) makes TypeScript measure
+// variance structurally through the recursive nested update/upsert types, which blows up into
+// "Type instantiation is excessively deep and possibly infinite" (#2778).
 type ToManyRelationUpdateInput<
-    Schema extends SchemaDef,
-    Model extends GetModels<Schema>,
-    Field extends RelationFields<Schema, Model>,
-    Options extends QueryOptions<Schema>,
+    in out Schema extends SchemaDef,
+    in out Model extends GetModels<Schema>,
+    in out Field extends RelationFields<Schema, Model>,
+    in out Options extends QueryOptions<Schema>,
 > = Omit<
     {
         /**
diff --git a/tests/regression/test/issue-2778/regression.test.ts b/tests/regression/test/issue-2778/regression.test.ts
new file mode 100644
index 000000000..35043ed60
--- /dev/null
+++ b/tests/regression/test/issue-2778/regression.test.ts
@@ -0,0 +1,39 @@
+import { createTestClient } from '@zenstackhq/testtools';
+import type { UpdateArgs, UpsertArgs } from '@zenstackhq/orm';
+import path from 'node:path';
+import { describe, expect, it } from 'vitest';
+import { schema, type SchemaType } from './schema';
+
+// https://github.com/zenstackhq/zenstack/issues/2778
+
+// These mirror the types emitted by `zenstack generate` into `input.ts`
+type TagUpsertArgs = UpsertArgs<SchemaType, 'Tag'>;
+type TagUpdateArgs = UpdateArgs<SchemaType, 'Tag'>;
+
+describe('Regression for issue #2778', () => {
+    it('accepts generated UpsertArgs/UpdateArgs with many-to-many relations without deep instantiation', async () => {
+        const db = await createTestClient(schema, {
+            usePrismaPush: true,
+            schemaFile: path.join(__dirname, 'schema.zmodel'),
+        });
+
+        // passing the generated args type directly to the client method used to trigger
+        // "Type instantiation is excessively deep and possibly infinite"
+        const upsertTag = (args: TagUpsertArgs) => db.tag.upsert(args);
+        const updateTag = (args: TagUpdateArgs) => db.tag.update(args);
+
+        const tag = await upsertTag({
+            where: { name: 't1' },
+            create: { name: 't1', products: { create: { name: 'p1' } } },
+            update: { name: 't2' },
+        });
+        expect(tag.name).toBe('t1');
+
+        const updated = await updateTag({
+            where: { id: tag.id },
+            data: { name: 't3', products: { create: { name: 'p2' } } },
+        });
+        expect(updated.name).toBe('t3');
+        await expect(db.product.count()).resolves.toBe(2);
+    });
+});
diff --git a/tests/regression/test/issue-2778/schema.ts b/tests/regression/test/issue-2778/schema.ts
new file mode 100644
index 000000000..7b925b640
--- /dev/null
+++ b/tests/regression/test/issue-2778/schema.ts
@@ -0,0 +1,72 @@
+//////////////////////////////////////////////////////////////////////////////////////////////
+// DO NOT MODIFY THIS FILE                                                                  //
+// This file is automatically generated by ZenStack CLI and should not be manually updated. //
+//////////////////////////////////////////////////////////////////////////////////////////////
+
+/* eslint-disable */
+
+import { type SchemaDef, type AttributeApplication, type FieldDefault, ExpressionUtils } from "@zenstackhq/schema";
+export class SchemaType implements SchemaDef {
+    provider = {
+        type: "sqlite"
+    } as const;
+    models = {
+        Tag: {
+            name: "Tag",
+            fields: {
+                id: {
+                    name: "id",
+                    type: "String",
+                    id: true,
+                    attributes: [{ name: "@id" }, { name: "@default", args: [{ name: "value", value: ExpressionUtils.call("uuid") }] }] as readonly AttributeApplication[],
+                    default: ExpressionUtils.call("uuid") as FieldDefault
+                },
+                name: {
+                    name: "name",
+                    type: "String",
+                    unique: true,
+                    attributes: [{ name: "@unique" }] as readonly AttributeApplication[]
+                },
+                products: {
+                    name: "products",
+                    type: "Product",
+                    array: true,
+                    relation: { opposite: "tags" }
+                }
+            },
+            idFields: ["id"],
+            uniqueFields: {
+                id: { type: "String" },
+                name: { type: "String" }
+            }
+        },
+        Product: {
+            name: "Product",
+            fields: {
+                id: {
+                    name: "id",
+                    type: "String",
+                    id: true,
+                    attributes: [{ name: "@id" }, { name: "@default", args: [{ name: "value", value: ExpressionUtils.call("uuid") }] }] as readonly AttributeApplication[],
+                    default: ExpressionUtils.call("uuid") as FieldDefault
+                },
+                name: {
+                    name: "name",
+                    type: "String"
+                },
+                tags: {
+                    name: "tags",
+                    type: "Tag",
+                    array: true,
+                    relation: { opposite: "products" }
+                }
+            },
+            idFields: ["id"],
+            uniqueFields: {
+                id: { type: "String" }
+            }
+        }
+    } as const;
+    plugins = {};
+}
+export const schema = new SchemaType();
diff --git a/tests/regression/test/issue-2778/schema.zmodel b/tests/regression/test/issue-2778/schema.zmodel
new file mode 100644
index 000000000..5b90d8f76
--- /dev/null
+++ b/tests/regression/test/issue-2778/schema.zmodel
@@ -0,0 +1,16 @@
+datasource db {
+    provider = 'sqlite'
+    url = 'file:./dev.db'
+}
+
+model Tag {
+    id       String    @id @default(uuid())
+    name     String    @unique
+    products Product[]
+}
+
+model Product {
+    id    String @id @default(uuid())
+    name  String
+    tags  Tag[]
+}