diff --git a/Lib/test/test_import/__init__.py b/Lib/test/test_import/__init__.py
index f9e8558d1a71c8..3048894350e896 100644
--- a/Lib/test/test_import/__init__.py
+++ b/Lib/test/test_import/__init__.py
@@ -111,6 +111,24 @@ def require_frozen(module, *, skip=True):
 def require_pure_python(module, *, skip=False):
     _require_loader(module, SourceFileLoader, skip)
 
+def create_extension_loader(modname, filename):
+    # Apple extensions must be distributed as frameworks. This requires
+    # a specialist loader.
+    if is_apple_mobile:
+        return AppleFrameworkLoader(modname, filename)
+    else:
+        return ExtensionFileLoader(modname, filename)
+
+def import_extension_from_file(modname, filename, *, put_in_sys_modules=True):
+    loader = create_extension_loader(modname, filename)
+    spec = importlib.util.spec_from_loader(modname, loader)
+    module = importlib.util.module_from_spec(spec)
+    loader.exec_module(module)
+    if put_in_sys_modules:
+        sys.modules[modname] = module
+    return module
+
+
 def remove_files(name):
     for f in (name + ".py",
               name + ".pyc",
@@ -1913,6 +1931,37 @@ def test_absolute_circular_submodule(self):
             str(cm.exception),
         )
 
+    @requires_singlephase_init
+    @unittest.skipIf(_testsinglephase is None, "test requires _testsinglephase module")
+    def test_singlephase_circular(self):
+        """Regression test for gh-123950
+
+        Import a single-phase-init module that imports itself
+        from the PyInit_* function (before it's added to sys.modules).
+        Manages its own cache (which is `static`, and so incompatible
+        with multiple interpreters or interpreter reset).
+        """
+        name = '_testsinglephase_circular'
+        helper_name = 'test.test_import.data.circular_imports.singlephase'
+        with uncache(name, helper_name):
+            filename = _testsinglephase.__file__
+            # We don't put the module in sys.modules: that the *inner*
+            # import should do that.
+            mod = import_extension_from_file(name, filename,
+                                             put_in_sys_modules=False)
+
+            self.assertEqual(mod.helper_mod_name, helper_name)
+            self.assertIn(name, sys.modules)
+            self.assertIn(helper_name, sys.modules)
+
+            self.assertIn(name, sys.modules)
+            self.assertIn(helper_name, sys.modules)
+        self.assertNotIn(name, sys.modules)
+        self.assertNotIn(helper_name, sys.modules)
+        self.assertIs(mod.clear_static_var(), mod)
+        _testinternalcapi.clear_extension('_testsinglephase_circular',
+                                          mod.__spec__.origin)
+
     def test_unwritable_module(self):
         self.addCleanup(unload, "test.test_import.data.unwritable")
         self.addCleanup(unload, "test.test_import.data.unwritable.x")
@@ -1952,14 +2001,6 @@ def pipe(self):
             os.set_blocking(r, False)
         return (r, w)
 
-    def create_extension_loader(self, modname, filename):
-        # Apple extensions must be distributed as frameworks. This requires
-        # a specialist loader.
-        if is_apple_mobile:
-            return AppleFrameworkLoader(modname, filename)
-        else:
-            return ExtensionFileLoader(modname, filename)
-
     def import_script(self, name, fd, filename=None, check_override=None):
         override_text = ''
         if check_override is not None:
@@ -2176,11 +2217,7 @@ def test_multi_init_extension_compat(self):
     def test_multi_init_extension_non_isolated_compat(self):
         modname = '_test_non_isolated'
         filename = _testmultiphase.__file__
-        loader = self.create_extension_loader(modname, filename)
-        spec = importlib.util.spec_from_loader(modname, loader)
-        module = importlib.util.module_from_spec(spec)
-        loader.exec_module(module)
-        sys.modules[modname] = module
+        module = import_extension_from_file(modname, filename)
 
         require_extension(module)
         with self.subTest(f'{modname}: isolated'):
@@ -2195,11 +2232,7 @@ def test_multi_init_extension_non_isolated_compat(self):
     def test_multi_init_extension_per_interpreter_gil_compat(self):
         modname = '_test_shared_gil_only'
         filename = _testmultiphase.__file__
-        loader = self.create_extension_loader(modname, filename)
-        spec = importlib.util.spec_from_loader(modname, loader)
-        module = importlib.util.module_from_spec(spec)
-        loader.exec_module(module)
-        sys.modules[modname] = module
+        module = import_extension_from_file(modname, filename)
 
         require_extension(module)
         with self.subTest(f'{modname}: isolated, strict'):
diff --git a/Lib/test/test_import/data/circular_imports/singlephase.py b/Lib/test/test_import/data/circular_imports/singlephase.py
new file mode 100644
index 00000000000000..05618bc72f9327
--- /dev/null
+++ b/Lib/test/test_import/data/circular_imports/singlephase.py
@@ -0,0 +1,13 @@
+"""Circular import involving a single-phase-init extension.
+
+This module is imported from the _testsinglephase_circular module from
+_testsinglephase, and imports that module again.
+"""
+
+import importlib
+import _testsinglephase
+from test.test_import import import_extension_from_file
+
+name = '_testsinglephase_circular'
+filename = _testsinglephase.__file__
+mod = import_extension_from_file(name, filename)
diff --git a/Misc/NEWS.d/next/C_API/2024-09-12-16-16-24.gh-issue-123880.2-8vcj.rst b/Misc/NEWS.d/next/C_API/2024-09-12-16-16-24.gh-issue-123880.2-8vcj.rst
new file mode 100644
index 00000000000000..8a31c962ec7d93
--- /dev/null
+++ b/Misc/NEWS.d/next/C_API/2024-09-12-16-16-24.gh-issue-123880.2-8vcj.rst
@@ -0,0 +1,2 @@
+Fixed a bug that prevented circular imports of extension modules that use
+single-phase initialization.
diff --git a/Modules/_testsinglephase.c b/Modules/_testsinglephase.c
index 066e0dbfb63fbf..2c59085d15b5be 100644
--- a/Modules/_testsinglephase.c
+++ b/Modules/_testsinglephase.c
@@ -1,7 +1,7 @@
 
 /* Testing module for single-phase initialization of extension modules
 
-This file contains 8 distinct modules, meaning each as its own name
+This file contains several distinct modules, meaning each as its own name
 and its own init function (PyInit_...).  The default import system will
 only find the one matching the filename: _testsinglephase.  To load the
 others you must do so manually.  For example:
@@ -12,9 +12,13 @@ filename = _testsinglephase.__file__
 loader = importlib.machinery.ExtensionFileLoader(name, filename)
 spec = importlib.util.spec_from_file_location(name, filename, loader=loader)
 mod = importlib._bootstrap._load(spec)
+loader.exec_module(module)
+sys.modules[modname] = module
 ```
 
-Here are the 8 modules:
+(The last two lines are just for completeness.)
+
+Here are the modules:
 
 * _testsinglephase
    * def: _testsinglephase_basic,
@@ -163,6 +167,11 @@ Here are the 8 modules:
    * functions: none
    * import system: same as _testsinglephase_with_state
 
+* _testsinglephase_circular
+   Regression test for gh-123880.
+   Does not have the common attributes & methods.
+   See test_singlephase_circular test.test_import.SinglephaseInitTests.
+
 Module state:
 
 * fields
@@ -740,3 +749,53 @@ PyInit__testsinglephase_with_state_check_cache_first(void)
     }
     return PyModule_Create(&_testsinglephase_with_state_check_cache_first);
 }
+
+
+/****************************************/
+/* the _testsinglephase_circular module */
+/****************************************/
+
+static PyObject *static_module_circular;
+
+static PyObject *
+circularmod_clear_static_var(PyObject *self, PyObject *arg)
+{
+    PyObject *result = static_module_circular;
+    static_module_circular = NULL;
+    return result;
+}
+
+static struct PyModuleDef _testsinglephase_circular = {
+    PyModuleDef_HEAD_INIT,
+    .m_name = "_testsinglephase_circular",
+    .m_doc = PyDoc_STR("Test module _testsinglephase_circular"),
+    .m_methods = (PyMethodDef[]) {
+        {"clear_static_var", circularmod_clear_static_var, METH_NOARGS,
+         "Clear the static variable and return its previous value."},
+        {NULL, NULL}           /* sentinel */
+    }
+};
+
+PyMODINIT_FUNC
+PyInit__testsinglephase_circular(void)
+{
+    if (!static_module_circular) {
+        static_module_circular = PyModule_Create(&_testsinglephase_circular);
+        if (!static_module_circular) {
+            return NULL;
+        }
+    }
+    static const char helper_mod_name[] = (
+        "test.test_import.data.circular_imports.singlephase");
+    PyObject *helper_mod = PyImport_ImportModule(helper_mod_name);
+    Py_XDECREF(helper_mod);
+    if (!helper_mod) {
+        return NULL;
+    }
+    if(PyModule_AddStringConstant(static_module_circular,
+                                  "helper_mod_name",
+                                  helper_mod_name) < 0) {
+        return NULL;
+    }
+    return Py_NewRef(static_module_circular);
+}
diff --git a/Python/import.c b/Python/import.c
index 1056ddd370befb..e0eb740901b58a 100644
--- a/Python/import.c
+++ b/Python/import.c
@@ -814,6 +814,8 @@ static int clear_singlephase_extension(PyInterpreterState *interp,
 
 // Currently, this is only used for testing.
 // (See _testinternalcapi.clear_extension().)
+// If adding another use, be careful about modules that import themselves
+// recursively (see gh-123880).
 int
 _PyImport_ClearExtension(PyObject *name, PyObject *filename)
 {
@@ -1321,12 +1323,16 @@ _extensions_cache_set(PyObject *path, PyObject *name,
     value = entry == NULL
         ? NULL
         : (struct extensions_cache_value *)entry->value;
-    /* We should never be updating an existing cache value. */
-    assert(value == NULL);
     if (value != NULL) {
-        PyErr_Format(PyExc_SystemError,
-                     "extension module %R is already cached", name);
-        goto finally;
+        /* gh-123880: If there's an existing cache value, it means a module is
+         * being imported recursively from its PyInit_* or Py_mod_* function.
+         * (That function presumably handles returning a partially
+         *  constructed module in such a case.)
+         * We can reuse the existing cache value; it is owned by the cache.
+         * (Entries get removed from it in exceptional circumstances,
+         *  after interpreter shutdown, and in runtime shutdown.)
+         */
+        goto finally_oldvalue;
     }
     newvalue = alloc_extensions_cache_value();
     if (newvalue == NULL) {
@@ -1391,6 +1397,7 @@ _extensions_cache_set(PyObject *path, PyObject *name,
         cleanup_old_cached_def(&olddefbase);
     }
 
+finally_oldvalue:
     extensions_lock_release();
     if (key != NULL) {
         hashtable_destroy_str(key);
@@ -2127,6 +2134,7 @@ import_run_extension(PyThreadState *tstate, PyModInitFunction p0,
 }
 
 
+// Used in _PyImport_ClearExtension; see notes there.
 static int
 clear_singlephase_extension(PyInterpreterState *interp,
                             PyObject *name, PyObject *path)
diff --git a/Tools/c-analyzer/cpython/ignored.tsv b/Tools/c-analyzer/cpython/ignored.tsv
index adb7f8e5d64745..260eaa4f14f767 100644
--- a/Tools/c-analyzer/cpython/ignored.tsv
+++ b/Tools/c-analyzer/cpython/ignored.tsv
@@ -595,6 +595,7 @@ Modules/_testmultiphase.c	-	slots_nonmodule_with_exec_slots	-
 Modules/_testmultiphase.c	-	testexport_methods	-
 Modules/_testmultiphase.c	-	uninitialized_def	-
 Modules/_testsinglephase.c	-	global_state	-
+Modules/_testsinglephase.c	-	static_module_circular	-
 Modules/_xxtestfuzz/_xxtestfuzz.c	-	_fuzzmodule	-
 Modules/_xxtestfuzz/_xxtestfuzz.c	-	module_methods	-
 Modules/_xxtestfuzz/fuzzer.c	-	RE_FLAG_DEBUG	-