diff --git a/Cargo.lock b/Cargo.lock
index c4949656dfd0d..bea97f3c5f498 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -321,7 +321,7 @@ dependencies = [
 [[package]]
 name = "auto-hash-map"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "serde",
  "smallvec",
@@ -3497,7 +3497,7 @@ dependencies = [
 [[package]]
 name = "node-file-trace"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "serde",
@@ -7537,7 +7537,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "async-trait",
@@ -7569,7 +7569,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-build"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "cargo-lock",
@@ -7581,7 +7581,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-bytes"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "bytes",
@@ -7596,7 +7596,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-env"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "dotenvs",
@@ -7610,7 +7610,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-fetch"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "indexmap 1.9.3",
@@ -7627,7 +7627,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-fs"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "auto-hash-map",
@@ -7658,7 +7658,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-hash"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "base16",
  "hex",
@@ -7670,7 +7670,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-macros"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "convert_case 0.6.0",
@@ -7684,7 +7684,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-macros-shared"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "proc-macro2",
  "quote",
@@ -7694,7 +7694,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-malloc"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "mimalloc",
 ]
@@ -7702,7 +7702,7 @@ dependencies = [
 [[package]]
 name = "turbo-tasks-memory"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "auto-hash-map",
@@ -7727,7 +7727,7 @@ dependencies = [
 [[package]]
 name = "turbopack"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "async-recursion",
@@ -7759,7 +7759,7 @@ dependencies = [
 [[package]]
 name = "turbopack-binding"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "auto-hash-map",
  "mdxjs",
@@ -7800,7 +7800,7 @@ dependencies = [
 [[package]]
 name = "turbopack-build"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "indexmap 1.9.3",
@@ -7824,7 +7824,7 @@ dependencies = [
 [[package]]
 name = "turbopack-cli-utils"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "clap 4.4.2",
@@ -7842,7 +7842,7 @@ dependencies = [
 [[package]]
 name = "turbopack-core"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "async-recursion",
@@ -7872,7 +7872,7 @@ dependencies = [
 [[package]]
 name = "turbopack-css"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "async-trait",
@@ -7899,7 +7899,7 @@ dependencies = [
 [[package]]
 name = "turbopack-dev"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "indexmap 1.9.3",
@@ -7923,7 +7923,7 @@ dependencies = [
 [[package]]
 name = "turbopack-dev-server"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "async-compression",
@@ -7960,7 +7960,7 @@ dependencies = [
 [[package]]
 name = "turbopack-ecmascript"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "async-trait",
@@ -7995,7 +7995,7 @@ dependencies = [
 [[package]]
 name = "turbopack-ecmascript-hmr-protocol"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "serde",
  "serde_json",
@@ -8006,7 +8006,7 @@ dependencies = [
 [[package]]
 name = "turbopack-ecmascript-plugins"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "async-trait",
@@ -8029,7 +8029,7 @@ dependencies = [
 [[package]]
 name = "turbopack-ecmascript-runtime"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "indoc",
@@ -8046,7 +8046,7 @@ dependencies = [
 [[package]]
 name = "turbopack-env"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "indexmap 1.9.3",
@@ -8062,7 +8062,7 @@ dependencies = [
 [[package]]
 name = "turbopack-image"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "base64 0.21.4",
@@ -8082,7 +8082,7 @@ dependencies = [
 [[package]]
 name = "turbopack-json"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "serde",
@@ -8097,7 +8097,7 @@ dependencies = [
 [[package]]
 name = "turbopack-mdx"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "mdxjs",
@@ -8112,7 +8112,7 @@ dependencies = [
 [[package]]
 name = "turbopack-node"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "async-stream",
@@ -8147,7 +8147,7 @@ dependencies = [
 [[package]]
 name = "turbopack-static"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "serde",
@@ -8163,7 +8163,7 @@ dependencies = [
 [[package]]
 name = "turbopack-swc-utils"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "swc_core",
  "turbo-tasks",
@@ -8174,7 +8174,7 @@ dependencies = [
 [[package]]
 name = "turbopack-trace-utils"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "crossbeam-channel",
@@ -8190,7 +8190,7 @@ dependencies = [
 [[package]]
 name = "turbopack-wasm"
 version = "0.1.0"
-source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.1#145d71b0a0e4ddaffda006a07eccc55e33aad75e"
+source = "git+https://github.com/vercel/turbo.git?tag=turbopack-240117.3#438bdd0b198163a37ff6050cf8ae2c7ca8b07753"
 dependencies = [
  "anyhow",
  "indexmap 1.9.3",
@@ -8212,7 +8212,7 @@ version = "1.6.3"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "97fee6b57c6a41524a810daee9286c02d7752c4253064d0b05472833a438f675"
 dependencies = [
- "cfg-if 0.1.10",
+ "cfg-if 1.0.0",
  "rand",
  "static_assertions",
 ]
diff --git a/Cargo.toml b/Cargo.toml
index 23d31e5c05761..eb511e273c6be 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -37,11 +37,11 @@ swc_core = { version = "0.87.16", features = [
 testing = { version = "0.35.14" }
 
 # Turbo crates
-turbopack-binding = { git = "https://github.com/vercel/turbo.git", tag = "turbopack-240117.1" }
+turbopack-binding = { git = "https://github.com/vercel/turbo.git", tag = "turbopack-240117.3" }
 # [TODO]: need to refactor embed_directory! macro usages, as well as resolving turbo_tasks::function, macros..
-turbo-tasks = { git = "https://github.com/vercel/turbo.git", tag = "turbopack-240117.1" }
+turbo-tasks = { git = "https://github.com/vercel/turbo.git", tag = "turbopack-240117.3" }
 # [TODO]: need to refactor embed_directory! macro usage in next-core
-turbo-tasks-fs = { git = "https://github.com/vercel/turbo.git", tag = "turbopack-240117.1" }
+turbo-tasks-fs = { git = "https://github.com/vercel/turbo.git", tag = "turbopack-240117.3" }
 
 # General Deps
 
diff --git a/packages/next-swc/crates/next-core/src/next_client/context.rs b/packages/next-swc/crates/next-core/src/next_client/context.rs
index 43e32b2435674..96012a4b0c3b6 100644
--- a/packages/next-swc/crates/next-core/src/next_client/context.rs
+++ b/packages/next-swc/crates/next-core/src/next_client/context.rs
@@ -18,13 +18,16 @@ use turbopack_binding::{
         },
         dev::{react_refresh::assert_can_resolve_react_refresh, DevChunkingContext},
         ecmascript::{chunk::EcmascriptChunkingContext, TreeShakingMode},
-        node::execution_context::ExecutionContext,
+        node::{
+            execution_context::ExecutionContext,
+            transforms::postcss::{PostCssConfigLocation, PostCssTransformOptions},
+        },
         turbopack::{
             condition::ContextCondition,
             module_options::{
                 module_options_context::ModuleOptionsContext, CustomEcmascriptTransformPlugins,
-                JsxTransformOptions, MdxTransformModuleOptions, PostCssTransformOptions,
-                TypescriptTransformOptions, WebpackLoadersOptions,
+                JsxTransformOptions, MdxTransformModuleOptions, TypescriptTransformOptions,
+                WebpackLoadersOptions,
             },
             resolve_options_context::ResolveOptionsContext,
         },
@@ -258,23 +261,34 @@ pub async fn get_client_module_options_context(
         },
     ));
 
-    let postcss_transform_options = Some(PostCssTransformOptions {
+    let postcss_transform_options = PostCssTransformOptions {
         postcss_package: Some(get_postcss_package_mapping(project_path)),
+        config_location: PostCssConfigLocation::ProjectPathOrLocalPath,
         ..Default::default()
-    });
+    };
+    let postcss_foreign_transform_options = PostCssTransformOptions {
+        // For node_modules we don't want to resolve postcss config relative to the file being
+        // compiled, instead it only uses the project root postcss config.
+        config_location: PostCssConfigLocation::ProjectPath,
+        ..postcss_transform_options.clone()
+    };
+    let enable_postcss_transform = Some(postcss_transform_options.cell());
+    let enable_foreign_postcss_transform = Some(postcss_foreign_transform_options.cell());
 
     let module_options_context = ModuleOptionsContext {
         preset_env_versions: Some(env),
         execution_context: Some(execution_context),
         custom_ecma_transform_plugins,
         tree_shaking_mode: Some(TreeShakingMode::ReexportsOnly),
+        enable_postcss_transform,
         ..Default::default()
     };
 
+    // node_modules context
     let foreign_codes_options_context = ModuleOptionsContext {
         enable_webpack_loaders: foreign_webpack_loaders,
+        enable_postcss_transform: enable_foreign_postcss_transform,
         // NOTE(WEB-1016) PostCSS transforms should also apply to foreign code.
-        enable_postcss_transform: postcss_transform_options.clone(),
         ..module_options_context.clone()
     };
 
@@ -284,7 +298,6 @@ pub async fn get_client_module_options_context(
         // the modules.
         enable_jsx: Some(jsx_runtime_options),
         enable_webpack_loaders,
-        enable_postcss_transform: postcss_transform_options,
         enable_typescript_transform: Some(tsconfig),
         enable_mdx_rs,
         decorators: Some(decorators_options),
diff --git a/packages/next-swc/crates/next-core/src/next_server/context.rs b/packages/next-swc/crates/next-core/src/next_server/context.rs
index 9d516c340eaf0..32db4cec20d14 100644
--- a/packages/next-swc/crates/next-core/src/next_server/context.rs
+++ b/packages/next-swc/crates/next-core/src/next_server/context.rs
@@ -19,13 +19,15 @@ use turbopack_binding::{
         },
         ecmascript::{references::esm::UrlRewriteBehavior, TransformPlugin, TreeShakingMode},
         ecmascript_plugin::transform::directives::client::ClientDirectiveTransformer,
-        node::execution_context::ExecutionContext,
+        node::{
+            execution_context::ExecutionContext,
+            transforms::postcss::{PostCssConfigLocation, PostCssTransformOptions},
+        },
         turbopack::{
             condition::ContextCondition,
             module_options::{
                 CustomEcmascriptTransformPlugins, JsxTransformOptions, MdxTransformModuleOptions,
-                ModuleOptionsContext, PostCssTransformOptions, TypescriptTransformOptions,
-                WebpackLoadersOptions,
+                ModuleOptionsContext, TypescriptTransformOptions, WebpackLoadersOptions,
             },
             resolve_options_context::ResolveOptionsContext,
             transition::Transition,
@@ -280,10 +282,20 @@ pub async fn get_server_module_options_context(
 
     let foreign_code_context_condition =
         foreign_code_context_condition(next_config, project_path).await?;
-    let postcss_transform_options = Some(PostCssTransformOptions {
+    let postcss_transform_options = PostCssTransformOptions {
         postcss_package: Some(get_postcss_package_mapping(project_path)),
+        config_location: PostCssConfigLocation::ProjectPathOrLocalPath,
         ..Default::default()
-    });
+    };
+    let postcss_foreign_transform_options = PostCssTransformOptions {
+        // For node_modules we don't want to resolve postcss config relative to the file
+        // being compiled, instead it only uses the project root postcss
+        // config.
+        config_location: PostCssConfigLocation::ProjectPath,
+        ..postcss_transform_options.clone()
+    };
+    let enable_postcss_transform = Some(postcss_transform_options.cell());
+    let enable_foreign_postcss_transform = Some(postcss_foreign_transform_options.cell());
 
     // A separate webpack rules will be applied to codes matching
     // foreign_code_context_condition. This allows to import codes from
@@ -400,7 +412,7 @@ pub async fn get_server_module_options_context(
                 custom_rules: internal_custom_rules.clone(),
                 enable_webpack_loaders: foreign_webpack_loaders,
                 // NOTE(WEB-1016) PostCSS transforms should also apply to foreign code.
-                enable_postcss_transform: postcss_transform_options.clone(),
+                enable_postcss_transform: enable_foreign_postcss_transform,
                 ..module_options_context.clone()
             };
 
@@ -414,7 +426,7 @@ pub async fn get_server_module_options_context(
             ModuleOptionsContext {
                 enable_jsx: Some(jsx_runtime_options),
                 enable_webpack_loaders,
-                enable_postcss_transform: postcss_transform_options,
+                enable_postcss_transform,
                 enable_typescript_transform: Some(tsconfig),
                 enable_mdx_rs,
                 decorators: Some(decorators_options),
@@ -469,7 +481,7 @@ pub async fn get_server_module_options_context(
                 custom_rules: internal_custom_rules.clone(),
                 enable_webpack_loaders: foreign_webpack_loaders,
                 // NOTE(WEB-1016) PostCSS transforms should also apply to foreign code.
-                enable_postcss_transform: postcss_transform_options.clone(),
+                enable_postcss_transform: enable_foreign_postcss_transform,
                 ..module_options_context.clone()
             };
             let internal_module_options_context = ModuleOptionsContext {
@@ -491,7 +503,7 @@ pub async fn get_server_module_options_context(
             ModuleOptionsContext {
                 enable_jsx: Some(jsx_runtime_options),
                 enable_webpack_loaders,
-                enable_postcss_transform: postcss_transform_options,
+                enable_postcss_transform,
                 enable_typescript_transform: Some(tsconfig),
                 enable_mdx_rs,
                 decorators: Some(decorators_options),
@@ -555,7 +567,7 @@ pub async fn get_server_module_options_context(
                 custom_rules: internal_custom_rules.clone(),
                 enable_webpack_loaders: foreign_webpack_loaders,
                 // NOTE(WEB-1016) PostCSS transforms should also apply to foreign code.
-                enable_postcss_transform: postcss_transform_options.clone(),
+                enable_postcss_transform: enable_foreign_postcss_transform,
                 ..module_options_context.clone()
             };
             let internal_module_options_context = ModuleOptionsContext {
@@ -566,7 +578,7 @@ pub async fn get_server_module_options_context(
             ModuleOptionsContext {
                 enable_jsx: Some(jsx_runtime_options),
                 enable_webpack_loaders,
-                enable_postcss_transform: postcss_transform_options,
+                enable_postcss_transform,
                 enable_typescript_transform: Some(tsconfig),
                 enable_mdx_rs,
                 decorators: Some(decorators_options),
@@ -591,6 +603,13 @@ pub async fn get_server_module_options_context(
                 tree_shaking_mode: Some(TreeShakingMode::ReexportsOnly),
                 ..Default::default()
             };
+            let foreign_code_module_options_context = ModuleOptionsContext {
+                custom_rules: internal_custom_rules.clone(),
+                enable_webpack_loaders: foreign_webpack_loaders,
+                // NOTE(WEB-1016) PostCSS transforms should also apply to foreign code.
+                enable_postcss_transform: enable_foreign_postcss_transform,
+                ..module_options_context.clone()
+            };
             let internal_module_options_context = ModuleOptionsContext {
                 enable_typescript_transform: Some(TypescriptTransformOptions::default().cell()),
                 custom_rules: internal_custom_rules,
@@ -598,14 +617,14 @@ pub async fn get_server_module_options_context(
             };
             ModuleOptionsContext {
                 enable_webpack_loaders,
-                enable_postcss_transform: postcss_transform_options,
+                enable_postcss_transform,
                 enable_typescript_transform: Some(tsconfig),
                 enable_mdx_rs,
                 decorators: Some(decorators_options),
                 rules: vec![
                     (
                         foreign_code_context_condition,
-                        module_options_context.clone().cell(),
+                        foreign_code_module_options_context.cell(),
                     ),
                     (
                         ContextCondition::InPath(next_js_fs().root()),
@@ -640,6 +659,13 @@ pub async fn get_server_module_options_context(
                 tree_shaking_mode: Some(TreeShakingMode::ReexportsOnly),
                 ..Default::default()
             };
+            let foreign_code_module_options_context = ModuleOptionsContext {
+                custom_rules: internal_custom_rules.clone(),
+                enable_webpack_loaders: foreign_webpack_loaders,
+                // NOTE(WEB-1016) PostCSS transforms should also apply to foreign code.
+                enable_postcss_transform: enable_foreign_postcss_transform,
+                ..module_options_context.clone()
+            };
             let internal_module_options_context = ModuleOptionsContext {
                 enable_typescript_transform: Some(TypescriptTransformOptions::default().cell()),
                 custom_rules: internal_custom_rules,
@@ -648,14 +674,14 @@ pub async fn get_server_module_options_context(
             ModuleOptionsContext {
                 enable_jsx: Some(jsx_runtime_options),
                 enable_webpack_loaders,
-                enable_postcss_transform: postcss_transform_options,
+                enable_postcss_transform,
                 enable_typescript_transform: Some(tsconfig),
                 enable_mdx_rs,
                 decorators: Some(decorators_options),
                 rules: vec![
                     (
                         foreign_code_context_condition,
-                        module_options_context.clone().cell(),
+                        foreign_code_module_options_context.cell(),
                     ),
                     (
                         ContextCondition::InPath(next_js_fs().root()),
diff --git a/packages/next/package.json b/packages/next/package.json
index 74bd2af94c6da..a5ac3357b45af 100644
--- a/packages/next/package.json
+++ b/packages/next/package.json
@@ -194,7 +194,7 @@
     "@types/ws": "8.2.0",
     "@vercel/ncc": "0.34.0",
     "@vercel/nft": "0.26.2",
-    "@vercel/turbopack-ecmascript-runtime": "https://gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.1",
+    "@vercel/turbopack-ecmascript-runtime": "https://gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.3",
     "acorn": "8.5.0",
     "amphtml-validator": "1.0.35",
     "anser": "1.4.9",
diff --git a/pnpm-lock.yaml b/pnpm-lock.yaml
index eefa4a48de3b5..a092636f7357d 100644
--- a/pnpm-lock.yaml
+++ b/pnpm-lock.yaml
@@ -1077,8 +1077,8 @@ importers:
         specifier: 0.26.2
         version: 0.26.2
       '@vercel/turbopack-ecmascript-runtime':
-        specifier: https://gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.1
-        version: '@gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.1(react-refresh@0.12.0)(webpack@5.86.0)'
+        specifier: https://gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.3
+        version: '@gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.3(react-refresh@0.12.0)(webpack@5.86.0)'
       acorn:
         specifier: 8.5.0
         version: 8.5.0
@@ -25649,9 +25649,9 @@ packages:
   /zwitch@2.0.4:
     resolution: {integrity: sha512-bXE4cR/kVZhKZX/RjPEflHaKVhUVl85noU3v6b8apfQEc1x4A+zBxjZ4lN8LqGd6WZ3dl98pY4o717VFmoPp+A==}
 
-  '@gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.1(react-refresh@0.12.0)(webpack@5.86.0)':
-    resolution: {tarball: https://gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.1}
-    id: '@gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.1'
+  '@gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.3(react-refresh@0.12.0)(webpack@5.86.0)':
+    resolution: {tarball: https://gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.3}
+    id: '@gitpkg-fork.vercel.sh/vercel/turbo/crates/turbopack-ecmascript-runtime/js?turbopack-240117.3'
     name: '@vercel/turbopack-ecmascript-runtime'
     version: 0.0.0
     dependencies: