diff --git a/tests/skill/understand/test_merge_batch_graphs.py b/tests/skill/understand/test_merge_batch_graphs.py
index 7239bfe6..54795e29 100644
--- a/tests/skill/understand/test_merge_batch_graphs.py
+++ b/tests/skill/understand/test_merge_batch_graphs.py
@@ -877,6 +877,276 @@ def test_linker_runs_during_merge(self) -> None:
         self.assertIn("tested", prod_node["tags"])
 
 
+class PruneExistingGraphTests(unittest.TestCase):
+    """Incremental prune of the existing graph, source-only.
+
+    Regression for issue #366 Bug 2 — the previous `source OR target` rule
+    silently dropped inbound edges from unchanged files (`U imports F`,
+    `U calls F`, `U tests F`) every time F was re-analyzed, because the
+    unchanged U never regenerates them.
+    """
+
+    def test_inbound_edges_from_unchanged_sources_survive(self) -> None:
+        # Fixture: F1 imports F2, F3 imports F2. F2 is the only changed file.
+        # Both inbound edges (F1→F2 and F3→F2) must survive the prune even
+        # though their target (F2) was removed.
+        existing = {
+            "nodes": [
+                _file_node("src/F1.ts"),
+                _file_node("src/F2.ts"),
+                _file_node("src/F3.ts"),
+            ],
+            "edges": [
+                {
+                    "source": "file:src/F1.ts",
+                    "target": "file:src/F2.ts",
+                    "type": "imports",
+                    "direction": "forward",
+                    "weight": 0.7,
+                },
+                {
+                    "source": "file:src/F3.ts",
+                    "target": "file:src/F2.ts",
+                    "type": "imports",
+                    "direction": "forward",
+                    "weight": 0.7,
+                },
+            ],
+        }
+
+        pruned = mbg.prune_existing_graph(existing, {"src/F2.ts"})
+
+        # F2's node was removed, F1 + F3 survive
+        surviving_ids = {n["id"] for n in pruned["nodes"]}
+        self.assertEqual(surviving_ids, {"file:src/F1.ts", "file:src/F3.ts"})
+
+        # Both inbound edges into F2 were retained (target removed, but
+        # source survived → keep). The merge's dangling-edge sweep will
+        # absorb them once fresh F2 batch lands.
+        edge_pairs = {(e["source"], e["target"]) for e in pruned["edges"]}
+        self.assertIn(("file:src/F1.ts", "file:src/F2.ts"), edge_pairs)
+        self.assertIn(("file:src/F3.ts", "file:src/F2.ts"), edge_pairs)
+        self.assertEqual(len(pruned["edges"]), 2)
+
+    def test_outbound_edges_from_removed_nodes_are_dropped(self) -> None:
+        # Edges sourced by a removed node have no use in the merged graph —
+        # the fresh batch for that file will regenerate them (or not).
+        existing = {
+            "nodes": [
+                _file_node("src/F1.ts"),
+                _file_node("src/F2.ts"),
+            ],
+            "edges": [
+                # Outbound from changed F2 — must be dropped (fresh batch
+                # will re-emit if still valid).
+                {
+                    "source": "file:src/F2.ts",
+                    "target": "file:src/F1.ts",
+                    "type": "imports",
+                    "direction": "forward",
+                    "weight": 0.7,
+                },
+            ],
+        }
+
+        pruned = mbg.prune_existing_graph(existing, {"src/F2.ts"})
+
+        # F2 dropped from nodes, F2's outbound edge dropped too
+        self.assertEqual({n["id"] for n in pruned["nodes"]}, {"file:src/F1.ts"})
+        self.assertEqual(pruned["edges"], [])
+
+    def test_function_level_nodes_inside_changed_file_are_removed(self) -> None:
+        # Function/class nodes share their host file's `filePath` — they
+        # must be dropped when that file changes (their fresh batch will
+        # re-emit them under canonical IDs).
+        existing = {
+            "nodes": [
+                _file_node("src/F1.ts"),
+                _file_node("src/F2.ts"),
+                {
+                    "id": "function:src/F2.ts:helper",
+                    "type": "function",
+                    "name": "helper",
+                    "filePath": "src/F2.ts",
+                    "summary": "",
+                    "tags": [],
+                    "complexity": "simple",
+                },
+            ],
+            "edges": [
+                # Inbound function-level edge: F1's caller → F2's helper.
+                # Retained at this step; merge's dangling sweep decides
+                # later (drops it if `function:src/F2.ts:helper` does not
+                # reappear in the fresh batch).
+                {
+                    "source": "file:src/F1.ts",
+                    "target": "function:src/F2.ts:helper",
+                    "type": "calls",
+                    "direction": "forward",
+                    "weight": 0.5,
+                },
+            ],
+        }
+
+        pruned = mbg.prune_existing_graph(existing, {"src/F2.ts"})
+
+        surviving_ids = {n["id"] for n in pruned["nodes"]}
+        self.assertEqual(surviving_ids, {"file:src/F1.ts"})
+        # Inbound edge retained — source F1 survived
+        self.assertEqual(len(pruned["edges"]), 1)
+        self.assertEqual(pruned["edges"][0]["target"], "function:src/F2.ts:helper")
+
+    def test_no_changed_files_is_noop(self) -> None:
+        existing = {
+            "nodes": [_file_node("src/a.ts"), _file_node("src/b.ts")],
+            "edges": [
+                {
+                    "source": "file:src/a.ts",
+                    "target": "file:src/b.ts",
+                    "type": "imports",
+                    "direction": "forward",
+                    "weight": 0.7,
+                },
+            ],
+        }
+        pruned = mbg.prune_existing_graph(existing, set())
+        self.assertEqual(len(pruned["nodes"]), 2)
+        self.assertEqual(len(pruned["edges"]), 1)
+
+    def test_unrelated_top_level_fields_preserved(self) -> None:
+        # Real graphs carry `projectName`, `frameworks`, `layers`, etc.
+        # alongside `nodes` and `edges`. Prune must not strip them.
+        existing = {
+            "projectName": "demo",
+            "frameworks": ["next"],
+            "layers": [{"id": "ui", "nodeIds": []}],
+            "nodes": [_file_node("src/F1.ts"), _file_node("src/F2.ts")],
+            "edges": [],
+        }
+        pruned = mbg.prune_existing_graph(existing, {"src/F2.ts"})
+        self.assertEqual(pruned["projectName"], "demo")
+        self.assertEqual(pruned["frameworks"], ["next"])
+        self.assertEqual(pruned["layers"], [{"id": "ui", "nodeIds": []}])
+
+    def test_does_not_mutate_input(self) -> None:
+        existing = {
+            "nodes": [_file_node("src/F1.ts"), _file_node("src/F2.ts")],
+            "edges": [
+                {
+                    "source": "file:src/F2.ts",
+                    "target": "file:src/F1.ts",
+                    "type": "imports",
+                    "direction": "forward",
+                    "weight": 0.7,
+                },
+            ],
+        }
+        original_node_count = len(existing["nodes"])
+        original_edge_count = len(existing["edges"])
+
+        mbg.prune_existing_graph(existing, {"src/F2.ts"})
+
+        # Input graph untouched
+        self.assertEqual(len(existing["nodes"]), original_node_count)
+        self.assertEqual(len(existing["edges"]), original_edge_count)
+
+    def test_merge_dangling_sweep_drops_truly_removed_function_target(self) -> None:
+        # End-to-end safety check: an inbound edge into a deleted function
+        # survives the source-only prune (good), then the merge's dangling
+        # sweep drops it because the function does NOT reappear in the
+        # fresh batch (also good — no zombie edges in the final graph).
+        existing = {
+            "nodes": [
+                _file_node("src/F1.ts"),
+                _file_node("src/F2.ts"),
+                {
+                    "id": "function:src/F2.ts:removedFn",
+                    "type": "function",
+                    "name": "removedFn",
+                    "filePath": "src/F2.ts",
+                    "summary": "",
+                    "tags": [],
+                    "complexity": "simple",
+                },
+            ],
+            "edges": [
+                # Inbound function-level edge from unchanged F1
+                {
+                    "source": "file:src/F1.ts",
+                    "target": "function:src/F2.ts:removedFn",
+                    "type": "calls",
+                    "direction": "forward",
+                    "weight": 0.5,
+                },
+            ],
+        }
+
+        pruned = mbg.prune_existing_graph(existing, {"src/F2.ts"})
+
+        # Fresh batch for F2: file-level only, removedFn is gone
+        fresh_batch = {
+            "nodes": [_file_node("src/F2.ts")],
+            "edges": [],
+        }
+
+        # Stitch into the merge pipeline by treating pruned as a batch
+        existing_batch = {"nodes": pruned["nodes"], "edges": pruned["edges"]}
+        assembled, _report = mbg.merge_and_normalize([existing_batch, fresh_batch])
+
+        node_ids = {n["id"] for n in assembled["nodes"]}
+        self.assertIn("file:src/F1.ts", node_ids)
+        self.assertIn("file:src/F2.ts", node_ids)
+        # removedFn never reappeared
+        self.assertNotIn("function:src/F2.ts:removedFn", node_ids)
+
+        # The inbound calls edge gets dropped by the dangling-edge sweep
+        # in merge_and_normalize Step 6 — its target node is missing.
+        edge_pairs = {(e["source"], e["target"]) for e in assembled["edges"]}
+        self.assertNotIn(
+            ("file:src/F1.ts", "function:src/F2.ts:removedFn"),
+            edge_pairs,
+        )
+
+    def test_merge_preserves_inbound_file_edge_after_prune(self) -> None:
+        # Full end-to-end: F1 imports F2, F3 imports F2. F2 is reanalyzed
+        # and the fresh batch re-emits file:F2. The inbound edges (file-level
+        # targets) survive prune + merge.
+        existing = {
+            "nodes": [
+                _file_node("src/F1.ts"),
+                _file_node("src/F2.ts"),
+                _file_node("src/F3.ts"),
+            ],
+            "edges": [
+                {
+                    "source": "file:src/F1.ts",
+                    "target": "file:src/F2.ts",
+                    "type": "imports",
+                    "direction": "forward",
+                    "weight": 0.7,
+                },
+                {
+                    "source": "file:src/F3.ts",
+                    "target": "file:src/F2.ts",
+                    "type": "imports",
+                    "direction": "forward",
+                    "weight": 0.7,
+                },
+            ],
+        }
+
+        pruned = mbg.prune_existing_graph(existing, {"src/F2.ts"})
+        fresh_batch = {"nodes": [_file_node("src/F2.ts")], "edges": []}
+
+        existing_batch = {"nodes": pruned["nodes"], "edges": pruned["edges"]}
+        assembled, _report = mbg.merge_and_normalize([existing_batch, fresh_batch])
+
+        edge_pairs = {(e["source"], e["target"], e["type"]) for e in assembled["edges"]}
+        # Both inbound imports edges into F2 survived end-to-end
+        self.assertIn(("file:src/F1.ts", "file:src/F2.ts", "imports"), edge_pairs)
+        self.assertIn(("file:src/F3.ts", "file:src/F2.ts", "imports"), edge_pairs)
+
+
 class NormalizeDirectionTests(unittest.TestCase):
     """`direction` canonicalization mirrors the dashboard schema validator."""
 
diff --git a/understand-anything-plugin/hooks/auto-update-prompt.md b/understand-anything-plugin/hooks/auto-update-prompt.md
index b20aa18d..2c83d364 100644
--- a/understand-anything-plugin/hooks/auto-update-prompt.md
+++ b/understand-anything-plugin/hooks/auto-update-prompt.md
@@ -187,10 +187,10 @@ Only re-analyze files with structural changes. This is the **only** phase that c
 
 5. **Merge with existing graph:**
    - Remove old nodes whose `filePath` matches any file in `filesToReanalyze` or in the deleted files list
-   - Remove old edges whose `source` or `target` references a removed node
+   - **Prune by source only:** Keep each existing edge iff its `source` node survives. Edges whose `target` was removed are intentionally retained — this preserves inbound edges from unchanged files (`U imports F`, `U calls F`, `U tests F`) that the unchanged U will never regenerate. A naive `source OR target` prune silently erodes inbound edges on every incremental run.
    - Add new nodes and edges from the fresh analysis
    - Deduplicate nodes by ID (keep latest), edges by `source + target + type`
-   - Remove any edge with dangling `source` or `target` references
+   - Remove any edge with dangling `source` or `target` references — this is the safety net that drops inbound function-level edges into since-deleted functions inside changed files
 
 ---
 
diff --git a/understand-anything-plugin/skills/understand/SKILL.md b/understand-anything-plugin/skills/understand/SKILL.md
index 35c0b112..03fb6a3d 100644
--- a/understand-anything-plugin/skills/understand/SKILL.md
+++ b/understand-anything-plugin/skills/understand/SKILL.md
@@ -379,9 +379,10 @@ Then dispatch file-analyzer subagents per the same template as the full path.
 
 After batches complete:
 1. Remove old nodes whose `filePath` matches any changed file from the existing graph
-2. Remove old edges whose `source` or `target` references a removed node
+2. **Prune by source only:** Keep each existing edge iff its `source` node survives the prune in step 1. Edges whose `target` was removed are intentionally retained. This preserves inbound edges from unchanged files — when file F is changed, `U imports F`, `U calls F`, and `U tests F` edges (where U is unchanged) would otherwise be silently dropped because U is never re-analyzed and therefore never regenerates them. A naive `source OR target` prune erodes inbound edges on every incremental run.
+   - Trade-off: an inbound function-level edge into a since-deleted function inside F (e.g. `function:U.ts:caller → function:F.ts:removedFn`) may briefly persist past this step. The merge script's existing dangling-edge sweep (Step 6) drops it once `function:F.ts:removedFn` does not reappear in the fresh batch. Over-keeping is the right trade-off: the dangling sweep cleans up safely, but a deleted inbound edge from an unchanged source can never be recovered until the next full re-analysis.
 3. Write the pruned existing nodes/edges as `batch-existing.json` in the intermediate directory
-4. Run the same merge script — it will combine `batch-existing.json` with the fresh `batch-*.json` files:
+4. Run the same merge script — it will combine `batch-existing.json` with the fresh `batch-*.json` files. The merge's edge dedup `(source, target, type, direction)` absorbs any overlap with regenerated outbound edges, and its dangling-edge drop removes any edges whose target node never reappears:
    ```bash
    python <SKILL_DIR>/merge-batch-graphs.py $PROJECT_ROOT
    ```
diff --git a/understand-anything-plugin/skills/understand/merge-batch-graphs.py b/understand-anything-plugin/skills/understand/merge-batch-graphs.py
index 2021f9ae..8caaac97 100644
--- a/understand-anything-plugin/skills/understand/merge-batch-graphs.py
+++ b/understand-anything-plugin/skills/understand/merge-batch-graphs.py
@@ -719,6 +719,87 @@ def link_tests(
     return added, dropped, tagged, swapped
 
 
+# ── Incremental prune (source-only) ───────────────────────────────────────
+#
+# When Phase 2 runs in `--changed-files` mode, only batches containing changed
+# files are re-analyzed. The existing graph must be pruned of stale nodes
+# belonging to changed files before being merged with the fresh batches.
+#
+# The prune rule is **source-only**: we keep an existing edge iff its
+# `source` node survives the node prune. Edges whose `target` was removed
+# are intentionally retained.
+#
+# Why source-only (not source-OR-target):
+#   When file F is modified, F is re-analyzed and regenerates F's OUTBOUND
+#   edges. But edges INTO F from an unchanged file U (e.g. `U imports F`,
+#   `U calls F`, `U tests F`) are NEVER regenerated because U is not in the
+#   re-analyzed batch set. A naive `source OR target` prune would drop those
+#   inbound edges every incremental run — they would silently erode over the
+#   life of the project until the next full rebuild.
+#
+# Safety net:
+#   Inbound function-level edges into since-deleted functions inside F (e.g.
+#   `function:U.ts:caller → function:F.ts:removedFn`) briefly survive this
+#   prune, but the merge's Step 6 dangling-edge drop removes them once
+#   `function:F.ts:removedFn` does not reappear in the fresh batch. Over-
+#   keeping is the right trade-off: dangling sweep cleans up safely, but a
+#   deleted inbound edge from an unchanged source can never be recovered.
+
+def prune_existing_graph(
+    existing: dict[str, Any],
+    changed_files: set[str],
+) -> dict[str, Any]:
+    """Prune the existing graph for an incremental update.
+
+    Removes nodes whose `filePath` is in `changed_files`, then prunes edges
+    by source-only: keep an edge iff its `source` node survives. Returns a
+    new graph dict (does not mutate `existing`).
+
+    Caller wires the returned graph back into the merge by writing it as
+    `batch-existing.json` in the intermediate directory, where
+    `merge_and_normalize` will combine it with the fresh `batch-*.json`
+    files and handle dedup + dangling-target sweep.
+
+    Edges whose target was a removed node are retained here on purpose —
+    if the target reappears in a fresh batch (file-level node `file:F` or a
+    function that still exists in F), the dedup / dangling-drop in
+    `merge_and_normalize` will resolve it. If it does not reappear (the
+    function was deleted), the dangling sweep drops the edge.
+    """
+    existing_nodes = existing.get("nodes", []) or []
+    existing_edges = existing.get("edges", []) or []
+
+    # Step 1: drop nodes whose filePath matches a changed file. We compare on
+    # `filePath` (not `id`) because function/class nodes share their host
+    # file's filePath but have IDs like `function:src/foo.ts:bar` — we want
+    # to drop those too when src/foo.ts changes.
+    surviving_nodes: list[dict[str, Any]] = []
+    for node in existing_nodes:
+        fp = node.get("filePath")
+        if isinstance(fp, str) and fp in changed_files:
+            continue
+        surviving_nodes.append(node)
+
+    surviving_node_ids: set[str] = {
+        node["id"] for node in surviving_nodes if isinstance(node.get("id"), str)
+    }
+
+    # Step 2: prune edges by source only. Target may reference a removed
+    # node — `merge_and_normalize`'s Step 6 dangling-drop is the safety net.
+    surviving_edges: list[dict[str, Any]] = []
+    for edge in existing_edges:
+        src = edge.get("source")
+        if not isinstance(src, str) or src not in surviving_node_ids:
+            continue
+        surviving_edges.append(edge)
+
+    return {
+        **{k: v for k, v in existing.items() if k not in ("nodes", "edges")},
+        "nodes": surviving_nodes,
+        "edges": surviving_edges,
+    }
+
+
 # ── Main merge + normalize ────────────────────────────────────────────────
 
 def merge_and_normalize(batches: list[dict[str, Any]]) -> tuple[dict[str, Any], list[str]]: