diff --git a/.changes/unreleased/Fixes-20231004-154558.yaml b/.changes/unreleased/Fixes-20231004-154558.yaml
new file mode 100644
index 00000000000..9f26a05f870
--- /dev/null
+++ b/.changes/unreleased/Fixes-20231004-154558.yaml
@@ -0,0 +1,6 @@
+kind: Fixes
+body: Foreign key constraint on incremental model results in Database Error
+time: 2023-10-04T15:45:58.298548+01:00
+custom:
+  Author: aranke
+  Issue: "8022"
diff --git a/core/dbt/include/global_project/macros/materializations/models/table/create_table_as.sql b/core/dbt/include/global_project/macros/materializations/models/table/create_table_as.sql
index 8e15d85d9cd..7b50195b177 100644
--- a/core/dbt/include/global_project/macros/materializations/models/table/create_table_as.sql
+++ b/core/dbt/include/global_project/macros/materializations/models/table/create_table_as.sql
@@ -26,7 +26,7 @@
   create {% if temporary: -%}temporary{%- endif %} table
     {{ relation.include(database=(not temporary), schema=(not temporary)) }}
   {% set contract_config = config.get('contract') %}
-  {% if contract_config.enforced %}
+  {% if contract_config.enforced and (not temporary) %}
     {{ get_assert_columns_equivalent(sql) }}
     {{ get_table_columns_and_constraints() }}
     {%- set sql = get_select_subquery(sql) %}
diff --git a/plugins/postgres/dbt/include/postgres/macros/adapters.sql b/plugins/postgres/dbt/include/postgres/macros/adapters.sql
index 0c56232bb22..6fbb5fd0a1b 100644
--- a/plugins/postgres/dbt/include/postgres/macros/adapters.sql
+++ b/plugins/postgres/dbt/include/postgres/macros/adapters.sql
@@ -10,7 +10,7 @@
     unlogged
   {%- endif %} table {{ relation }}
   {% set contract_config = config.get('contract') %}
-  {% if contract_config.enforced %}
+  {% if contract_config.enforced and (not temporary) %}
     {{ get_assert_columns_equivalent(sql) }}
     {{ get_table_columns_and_constraints() }} ;
     insert into {{ relation }} (
diff --git a/tests/adapter/dbt/tests/adapter/constraints/fixtures.py b/tests/adapter/dbt/tests/adapter/constraints/fixtures.py
index c8c98b26bd5..5c0620194c1 100644
--- a/tests/adapter/dbt/tests/adapter/constraints/fixtures.py
+++ b/tests/adapter/dbt/tests/adapter/constraints/fixtures.py
@@ -539,3 +539,47 @@
       - name: column_name
         data_type: text
 """
+
+create_table_macro_sql = """
+{% macro create_table_macro() %}
+create table if not exists numbers (n int not null primary key)
+{% endmacro %}
+"""
+
+incremental_foreign_key_schema_yml = """
+version: 2
+
+models:
+  - name: raw_numbers
+    config:
+      contract:
+        enforced: true
+      materialized: table
+    columns:
+        - name: n
+          data_type: integer
+          constraints:
+            - type: primary_key
+            - type: not_null
+  - name: stg_numbers
+    config:
+      contract:
+        enforced: true
+      materialized: incremental
+      on_schema_change: append_new_columns
+      unique_key: n
+    columns:
+      - name: n
+        data_type: integer
+        constraints:
+          - type: foreign_key
+            expression: {schema}.raw_numbers (n)
+"""
+
+incremental_foreign_key_model_raw_numbers_sql = """
+select 1 as n
+"""
+
+incremental_foreign_key_model_stg_numbers_sql = """
+select * from {{ ref('raw_numbers') }}
+"""
diff --git a/tests/adapter/dbt/tests/adapter/constraints/test_constraints.py b/tests/adapter/dbt/tests/adapter/constraints/test_constraints.py
index 188c3793032..28257d177db 100644
--- a/tests/adapter/dbt/tests/adapter/constraints/test_constraints.py
+++ b/tests/adapter/dbt/tests/adapter/constraints/test_constraints.py
@@ -34,6 +34,10 @@
     my_model_contract_sql_header_sql,
     my_model_incremental_contract_sql_header_sql,
     model_contract_header_schema_yml,
+    create_table_macro_sql,
+    incremental_foreign_key_schema_yml,
+    incremental_foreign_key_model_raw_numbers_sql,
+    incremental_foreign_key_model_stg_numbers_sql,
 )
 
 
@@ -530,3 +534,31 @@ def expected_sql(self):
 
 class TestConstraintQuotedColumn(BaseConstraintQuotedColumn):
     pass
+
+
+class TestIncrementalForeignKeyConstraint:
+    @pytest.fixture(scope="class")
+    def macros(self):
+        return {
+            "create_table.sql": create_table_macro_sql,
+        }
+
+    @pytest.fixture(scope="class")
+    def models(self):
+        return {
+            "schema.yml": incremental_foreign_key_schema_yml,
+            "raw_numbers.sql": incremental_foreign_key_model_raw_numbers_sql,
+            "stg_numbers.sql": incremental_foreign_key_model_stg_numbers_sql,
+        }
+
+    def test_incremental_foreign_key_constraint(self, project):
+        unformatted_constraint_schema_yml = read_file("models", "schema.yml")
+        write_file(
+            unformatted_constraint_schema_yml.format(schema=project.test_schema),
+            "models",
+            "schema.yml",
+        )
+
+        run_dbt(["run", "--select", "raw_numbers"])
+        run_dbt(["run", "--select", "stg_numbers"])
+        run_dbt(["run", "--select", "stg_numbers"])