diff --git a/litellm/litellm_core_utils/prompt_templates/factory.py b/litellm/litellm_core_utils/prompt_templates/factory.py
index 89a708077f3..6eb4ee74490 100644
--- a/litellm/litellm_core_utils/prompt_templates/factory.py
+++ b/litellm/litellm_core_utils/prompt_templates/factory.py
@@ -4468,9 +4468,10 @@ def _bedrock_tools_pt(tools: List) -> List[BedrockToolBlock]:
 
         defs = parameters.pop("$defs", {})
         defs_copy = copy.deepcopy(defs)
-        # flatten the defs
-        for _, value in defs_copy.items():
-            unpack_defs(value, defs_copy)
+        # Expand $ref references in parameters using the definitions
+        # Note: We don't pre-flatten defs as that causes exponential memory growth
+        # with circular references (see issue #19098). unpack_defs handles nested
+        # refs recursively and correctly detects/skips circular references.
         unpack_defs(parameters, defs_copy)
         tool_input_schema = BedrockToolInputSchemaBlock(
             json=BedrockToolJsonSchemaBlock(
diff --git a/litellm/llms/vertex_ai/common_utils.py b/litellm/llms/vertex_ai/common_utils.py
index 2aa6a00c72b..8550de504b8 100644
--- a/litellm/llms/vertex_ai/common_utils.py
+++ b/litellm/llms/vertex_ai/common_utils.py
@@ -453,9 +453,10 @@ def _build_vertex_schema(parameters: dict, add_property_ordering: bool = False):
     valid_schema_fields = set(get_type_hints(Schema).keys())
 
     defs = parameters.pop("$defs", {})
-    # flatten the defs
-    for name, value in defs.items():
-        unpack_defs(value, defs)
+    # Expand $ref references in parameters using the definitions
+    # Note: We don't pre-flatten defs as that causes exponential memory growth
+    # with circular references (see issue #19098). unpack_defs handles nested
+    # refs recursively and correctly detects/skips circular references.
     unpack_defs(parameters, defs)
 
     # 5. Nullable fields:
diff --git a/tests/test_litellm/litellm_core_utils/prompt_templates/test_litellm_core_utils_prompt_templates_factory.py b/tests/test_litellm/litellm_core_utils/prompt_templates/test_litellm_core_utils_prompt_templates_factory.py
index 42a2b5d0971..a22fe13798f 100644
--- a/tests/test_litellm/litellm_core_utils/prompt_templates/test_litellm_core_utils_prompt_templates_factory.py
+++ b/tests/test_litellm/litellm_core_utils/prompt_templates/test_litellm_core_utils_prompt_templates_factory.py
@@ -1392,3 +1392,134 @@ def test_anthropic_messages_pt_server_tool_use_passthrough():
         b for b in assistant_msg["content"] if b.get("type") == "text"
     )
     assert text_block["text"] == "I found the time tool. How can I help you?"
+
+
+def test_bedrock_tools_unpack_defs_no_oom_with_nested_refs():
+    """
+    Regression test for issue #19098: unpack_defs() causes OOM with nested tool schemas.
+
+    The old implementation had a "flatten defs" loop that would pre-expand each def
+    using unpack_defs(), but since defs often reference each other, each subsequent
+    call would copy already-expanded content, causing exponential memory growth.
+
+    This test creates a schema with multiple nested $defs that reference each other
+    to verify the fix prevents memory explosion while still correctly resolving refs.
+    """
+    import sys
+    import copy
+
+    from litellm.litellm_core_utils.prompt_templates.factory import _bedrock_tools_pt
+
+    # Schema with multiple nested $defs that reference each other
+    # This pattern would cause OOM with the old "flatten defs" loop
+    complex_nested_schema = {
+        "type": "object",
+        "properties": {
+            "query": {"$ref": "#/$defs/Expression"},
+        },
+        "$defs": {
+            "Expression": {
+                "type": "object",
+                "properties": {
+                    "type": {"type": "string", "enum": ["and", "or", "not", "comparison"]},
+                    "left": {"$ref": "#/$defs/Operand"},
+                    "right": {"$ref": "#/$defs/Operand"},
+                    "operator": {"$ref": "#/$defs/Operator"},
+                },
+            },
+            "Operand": {
+                "type": "object",
+                "anyOf": [
+                    {"$ref": "#/$defs/Literal"},
+                    {"$ref": "#/$defs/FieldRef"},
+                    {"$ref": "#/$defs/Expression"},  # Circular: Operand -> Expression -> Operand
+                ],
+            },
+            "Literal": {
+                "type": "object",
+                "properties": {
+                    "type": {"type": "string", "const": "literal"},
+                    "value": {"$ref": "#/$defs/LiteralValue"},
+                },
+            },
+            "LiteralValue": {
+                "oneOf": [
+                    {"type": "string"},
+                    {"type": "number"},
+                    {"type": "boolean"},
+                    {"type": "null"},
+                ],
+            },
+            "FieldRef": {
+                "type": "object",
+                "properties": {
+                    "type": {"type": "string", "const": "field"},
+                    "name": {"type": "string"},
+                    "table": {"$ref": "#/$defs/TableRef"},
+                },
+            },
+            "TableRef": {
+                "type": "object",
+                "properties": {
+                    "name": {"type": "string"},
+                    "alias": {"type": "string"},
+                },
+            },
+            "Operator": {
+                "type": "string",
+                "enum": ["=", "!=", "<", ">", "<=", ">=", "LIKE", "IN"],
+            },
+        },
+    }
+
+    tools = [
+        {
+            "type": "function",
+            "function": {
+                "name": "execute_query",
+                "description": "Execute a query with complex expressions",
+                "parameters": complex_nested_schema,
+            },
+        }
+    ]
+
+    # Measure initial size
+    def get_size(obj, seen=None):
+        size = sys.getsizeof(obj)
+        if seen is None:
+            seen = set()
+        obj_id = id(obj)
+        if obj_id in seen:
+            return 0
+        seen.add(obj_id)
+        if isinstance(obj, dict):
+            size += sum([get_size(v, seen) for v in obj.values()])
+            size += sum([get_size(k, seen) for k in obj.keys()])
+        elif hasattr(obj, "__iter__") and not isinstance(obj, (str, bytes, bytearray)):
+            size += sum([get_size(i, seen) for i in obj])
+        return size
+
+    initial_size = get_size(tools)
+
+    # Process through _bedrock_tools_pt - this should complete without OOM
+    tools_copy = copy.deepcopy(tools)
+    result = _bedrock_tools_pt(tools=tools_copy)
+
+    final_size = get_size(result)
+
+    # The expansion factor should be reasonable (< 100x), not exponential (35000x as in #19098)
+    expansion_factor = final_size / initial_size
+    assert expansion_factor < 100, (
+        f"Memory expansion factor {expansion_factor:.1f}x is too high. "
+        f"Initial: {initial_size} bytes, Final: {final_size} bytes"
+    )
+
+    # Verify the result is valid Bedrock tools format
+    assert isinstance(result, list)
+    assert len(result) == 1
+    assert "toolSpec" in result[0]
+    assert result[0]["toolSpec"]["name"] == "execute_query"
+
+    # Verify $defs have been removed (Bedrock doesn't support them)
+    tool_schema = result[0]["toolSpec"].get("inputSchema", {}).get("json", {})
+    assert "$defs" not in tool_schema, "$defs should be removed after expansion"