diff --git a/src/ttsim/interface_dag_elements/automatically_added_functions.py b/src/ttsim/interface_dag_elements/automatically_added_functions.py
index 6f9a29cb9..4b60bc6d6 100644
--- a/src/ttsim/interface_dag_elements/automatically_added_functions.py
+++ b/src/ttsim/interface_dag_elements/automatically_added_functions.py
@@ -611,7 +611,7 @@ def create_agg_by_group_functions(
     potential_agg_by_group_sources = {
         qn: o for qn, o in all_functions_and_data.items() if not gp.match(qn)
     }
-    # Exclude objects that have been explicitly provided.u
+    # Exclude objects that have been explicitly provided.
 
     agg_by_group_function_names = {
         t
@@ -623,6 +623,19 @@ def create_agg_by_group_functions(
         match = gp.match(abgfn)
         base_name_with_time_unit = match.group("base_name_with_time_unit")
         if base_name_with_time_unit in potential_agg_by_group_sources:
+            # Check if the aggregation target is already a dependency of the source
+            # function to avoid creating cycles in the DAG. Consider a function `x` that
+            # takes `x_hh` as an input, assuming it to be provided in the input data. If
+            # we create a function `x_hh`, which would aggregate `x` by household, we
+            # create a cycle. If `x_hh` is actually provided as an input, `x_hh` would
+            # be overwritten, removing the cycle. However, if `x_hh` is not provided as
+            # an input, an error message would be shown that a cycle between `x` and
+            # `x_hh` was detected. This hides the actual problem, which is that `x_hh`
+            # is not provided as an input.
+            source_function = column_functions.get(base_name_with_time_unit)
+            if source_function and abgfn in get_free_arguments(source_function):
+                continue
+
             group_id = f"{match.group('group')}_id"
             mapper = {"group_id": group_id, "column": base_name_with_time_unit}
             agg_func = rename_arguments(
diff --git a/tests/ttsim/interface_dag_elements/test_automatically_added_functions.py b/tests/ttsim/interface_dag_elements/test_automatically_added_functions.py
index 327bcfe8b..3952f3149 100644
--- a/tests/ttsim/interface_dag_elements/test_automatically_added_functions.py
+++ b/tests/ttsim/interface_dag_elements/test_automatically_added_functions.py
@@ -345,7 +345,7 @@ def test_should_apply_converter(self):
         assert function(1) == 7
 
 
-def test_should_not_create_cycle():
+def test_time_conversions_should_not_create_cycle():
     # Check for:
     # https://github.com/iza-institute-of-labor-economics/gettsim/issues/621
     def x(test_m: int) -> int:
@@ -360,6 +360,28 @@ def x(test_m: int) -> int:
     assert "test_m" not in time_conversion_functions
 
 
+def test_grouping_functions_should_not_create_cycle():
+    @policy_function()
+    def x(x_hh: int) -> int:
+        return x_hh
+
+    @policy_function()
+    def some_other_function_requiring_x_hh(x_hh: int) -> int:
+        return x_hh
+
+    grouping_functions = create_agg_by_group_functions(
+        column_functions={
+            "x": x,
+            "some_other_function_requiring_x_hh": some_other_function_requiring_x_hh,
+        },
+        input_columns=set(),
+        tt_targets=("some_other_function_requiring_x_hh",),
+        grouping_levels=("hh",),
+    )
+
+    assert "x_hh" not in grouping_functions
+
+
 @pytest.mark.parametrize(
     (
         "column_functions",