diff --git a/internal/configs/configload/loader_load_test.go b/internal/configs/configload/loader_load_test.go
index ab8dd5dee630..ee2488c792ba 100644
--- a/internal/configs/configload/loader_load_test.go
+++ b/internal/configs/configload/loader_load_test.go
@@ -104,3 +104,77 @@ func TestLoaderLoadConfig_loadDiags(t *testing.T) {
 		t.Fatal("expected config module")
 	}
 }
+
+func TestLoaderLoadConfig_childProviderGrandchildCount(t *testing.T) {
+	// This test is focused on the specific situation where:
+	// - A child module contains a nested provider block, which is no longer
+	//   recommended but supported for backward-compatibility.
+	// - A child of that child does _not_ contain a nested provider block,
+	//   and is called with "count" (would also apply to "for_each" and
+	//   "depends_on").
+	// It isn't valid to use "count" with a module that _itself_ contains
+	// a provider configuration, but it _is_ valid for a module with a
+	// provider configuration to call another module with count. We previously
+	// botched this rule and so this is a regression test to cover the
+	// solution to that mistake:
+	//     https://github.com/hashicorp/terraform/issues/31081
+
+	// Since this test is based on success rather than failure and it's
+	// covering a relatively large set of code where only a small part
+	// contributes to the test, we'll make sure to test both the success and
+	// failure cases here so that we'll have a better chance of noticing if a
+	// future change makes this succeed only because we've reorganized the code
+	// so that the check isn't happening at all anymore.
+	//
+	// If the "not okay" subtest fails, you should also be skeptical about
+	// whether the "okay" subtest is still valid, even if it happens to
+	// still be passing.
+	t.Run("okay", func(t *testing.T) {
+		fixtureDir := filepath.Clean("testdata/child-provider-grandchild-count")
+		loader, err := NewLoader(&Config{
+			ModulesDir: filepath.Join(fixtureDir, ".terraform/modules"),
+		})
+		if err != nil {
+			t.Fatalf("unexpected error from NewLoader: %s", err)
+		}
+
+		cfg, diags := loader.LoadConfig(fixtureDir)
+		assertNoDiagnostics(t, diags)
+		if cfg == nil {
+			t.Fatalf("config is nil; want non-nil")
+		}
+
+		var gotPaths []string
+		cfg.DeepEach(func(c *configs.Config) {
+			gotPaths = append(gotPaths, strings.Join(c.Path, "."))
+		})
+		sort.Strings(gotPaths)
+		wantPaths := []string{
+			"", // root module
+			"child",
+			"child.grandchild",
+		}
+
+		if !reflect.DeepEqual(gotPaths, wantPaths) {
+			t.Fatalf("wrong module paths\ngot: %swant %s", spew.Sdump(gotPaths), spew.Sdump(wantPaths))
+		}
+	})
+	t.Run("not okay", func(t *testing.T) {
+		fixtureDir := filepath.Clean("testdata/child-provider-child-count")
+		loader, err := NewLoader(&Config{
+			ModulesDir: filepath.Join(fixtureDir, ".terraform/modules"),
+		})
+		if err != nil {
+			t.Fatalf("unexpected error from NewLoader: %s", err)
+		}
+
+		_, diags := loader.LoadConfig(fixtureDir)
+		if !diags.HasErrors() {
+			t.Fatalf("loading succeeded; want an error")
+		}
+		if got, want := diags.Error(), "Module is incompatible with count, for_each, and depends_on"; !strings.Contains(got, want) {
+			t.Errorf("missing expected error\nwant substring: %s\ngot: %s", want, got)
+		}
+	})
+
+}
diff --git a/internal/configs/configload/testdata/child-provider-child-count/.terraform/modules/modules.json b/internal/configs/configload/testdata/child-provider-child-count/.terraform/modules/modules.json
new file mode 100644
index 000000000000..a9239e3a8b69
--- /dev/null
+++ b/internal/configs/configload/testdata/child-provider-child-count/.terraform/modules/modules.json
@@ -0,0 +1,19 @@
+{
+    "Modules": [
+        {
+            "Key": "",
+            "Source": "",
+            "Dir": "."
+        },
+        {
+            "Key": "child",
+            "Source": "./child",
+            "Dir": "testdata/child-provider-grandchild-count/child"
+        },
+        {
+            "Key": "child.grandchild",
+            "Source": "../grandchild",
+            "Dir": "testdata/child-provider-grandchild-count/grandchild"
+        }
+    ]
+}
diff --git a/internal/configs/configload/testdata/child-provider-child-count/child-provider-child-count.tf b/internal/configs/configload/testdata/child-provider-child-count/child-provider-child-count.tf
new file mode 100644
index 000000000000..5b39941a03c6
--- /dev/null
+++ b/internal/configs/configload/testdata/child-provider-child-count/child-provider-child-count.tf
@@ -0,0 +1,4 @@
+module "child" {
+  source = "./child"
+  count  = 1
+}
diff --git a/internal/configs/configload/testdata/child-provider-child-count/child/child-provider-child-count-child.tf b/internal/configs/configload/testdata/child-provider-child-count/child/child-provider-child-count-child.tf
new file mode 100644
index 000000000000..8d3fe1023d2d
--- /dev/null
+++ b/internal/configs/configload/testdata/child-provider-child-count/child/child-provider-child-count-child.tf
@@ -0,0 +1,12 @@
+provider "boop" {
+    blah = true
+}
+
+module "grandchild" {
+    source = "../grandchild"
+
+    # grandchild's caller (this file) has a legacy nested provider block, but
+    # grandchild itself does not and so it's valid to use "count" here even
+    # though it wouldn't be valid to call "child" (this file) with "count".
+    count = 2
+}
diff --git a/internal/configs/configload/testdata/child-provider-grandchild-count/.terraform/modules/modules.json b/internal/configs/configload/testdata/child-provider-grandchild-count/.terraform/modules/modules.json
new file mode 100644
index 000000000000..a9239e3a8b69
--- /dev/null
+++ b/internal/configs/configload/testdata/child-provider-grandchild-count/.terraform/modules/modules.json
@@ -0,0 +1,19 @@
+{
+    "Modules": [
+        {
+            "Key": "",
+            "Source": "",
+            "Dir": "."
+        },
+        {
+            "Key": "child",
+            "Source": "./child",
+            "Dir": "testdata/child-provider-grandchild-count/child"
+        },
+        {
+            "Key": "child.grandchild",
+            "Source": "../grandchild",
+            "Dir": "testdata/child-provider-grandchild-count/grandchild"
+        }
+    ]
+}
diff --git a/internal/configs/configload/testdata/child-provider-grandchild-count/child-provider-grandchild-count.tf b/internal/configs/configload/testdata/child-provider-grandchild-count/child-provider-grandchild-count.tf
new file mode 100644
index 000000000000..1f95749fa7ea
--- /dev/null
+++ b/internal/configs/configload/testdata/child-provider-grandchild-count/child-provider-grandchild-count.tf
@@ -0,0 +1,3 @@
+module "child" {
+  source = "./child"
+}
diff --git a/internal/configs/configload/testdata/child-provider-grandchild-count/child/child-provider-grandchild-count-child.tf b/internal/configs/configload/testdata/child-provider-grandchild-count/child/child-provider-grandchild-count-child.tf
new file mode 100644
index 000000000000..8d3fe1023d2d
--- /dev/null
+++ b/internal/configs/configload/testdata/child-provider-grandchild-count/child/child-provider-grandchild-count-child.tf
@@ -0,0 +1,12 @@
+provider "boop" {
+    blah = true
+}
+
+module "grandchild" {
+    source = "../grandchild"
+
+    # grandchild's caller (this file) has a legacy nested provider block, but
+    # grandchild itself does not and so it's valid to use "count" here even
+    # though it wouldn't be valid to call "child" (this file) with "count".
+    count = 2
+}