diff --git a/packages/grafana-prometheus/src/datasource.test.ts b/packages/grafana-prometheus/src/datasource.test.ts
index c5fc15d6a8f..73964477bf3 100644
--- a/packages/grafana-prometheus/src/datasource.test.ts
+++ b/packages/grafana-prometheus/src/datasource.test.ts
@@ -19,6 +19,7 @@ import { config, getBackendSrv, setBackendSrv, TemplateSrv } from '@grafana/runt
 import { extractResourceMatcher, extractRuleMappingFromGroups, PrometheusDatasource } from './datasource';
 import { prometheusRegularEscape, prometheusSpecialRegexEscape } from './escaping';
 import { PrometheusLanguageProviderInterface } from './language_provider';
+import { CacheRequestInfo } from './querycache/QueryCache';
 import {
   createDataRequest,
   createDefaultPromResponse,
@@ -1253,3 +1254,72 @@ describe('modifyQuery', () => {
     });
   });
 });
+
+describe('PrometheusDatasource incremental query logic', () => {
+  let ds: PrometheusDatasource;
+  let mockCache: {
+    requestInfo: jest.MockedFunction<(request: DataQueryRequest<PromQuery>) => CacheRequestInfo<PromQuery>>;
+    procFrames: jest.MockedFunction<(...args: unknown[]) => unknown[]>;
+  };
+
+  beforeEach(() => {
+    jest.clearAllMocks();
+
+    mockCache = {
+      requestInfo: jest.fn().mockReturnValue({
+        requests: [{ targets: [], range: getMockTimeRange() }],
+        targetSignatures: new Map(),
+        shouldCache: true,
+      }),
+      procFrames: jest.fn().mockReturnValue([]),
+    };
+
+    const incrementalInstanceSettings = {
+      url: 'proxied',
+      id: 1,
+      uid: 'ABCDEF',
+      access: 'proxy',
+      user: 'test',
+      password: 'mupp',
+      jsonData: {
+        customQueryParameters: '',
+        cacheLevel: PrometheusCacheLevel.Low,
+        incrementalQuerying: true,
+      } as Partial<PromOptions>,
+    } as unknown as DataSourceInstanceSettings<PromOptions>;
+
+    ds = new PrometheusDatasource(incrementalInstanceSettings, templateSrvStub);
+    ds.cache = mockCache as unknown as typeof ds.cache;
+  });
+
+  afterEach(() => {
+    jest.restoreAllMocks();
+  });
+
+  it('should use incremental query for normal queries when incrementalQuerying is true', async () => {
+    const request = createDataRequest([{ expr: 'up', refId: 'A' }]);
+    await lastValueFrom(ds.query(request));
+    expect(mockCache.requestInfo).toHaveBeenCalled();
+  });
+
+  it('should disable incremental query when query contains $__range', async () => {
+    const request = createDataRequest([{ expr: 'rate(up[$__range])', refId: 'A' }]);
+    await lastValueFrom(ds.query(request));
+    expect(mockCache.requestInfo).not.toHaveBeenCalled();
+  });
+
+  it('should disable incremental query when any target contains $__range', async () => {
+    const request = createDataRequest([
+      { expr: 'up', refId: 'A' },
+      { expr: 'rate(cpu[$__range])', refId: 'B' },
+    ]);
+    await lastValueFrom(ds.query(request));
+    expect(mockCache.requestInfo).not.toHaveBeenCalled();
+  });
+
+  it('should disable incremental query for instant queries', async () => {
+    const request = createDataRequest([{ expr: 'up', refId: 'A', instant: true }]);
+    await lastValueFrom(ds.query(request));
+    expect(mockCache.requestInfo).not.toHaveBeenCalled();
+  });
+});
diff --git a/packages/grafana-prometheus/src/datasource.ts b/packages/grafana-prometheus/src/datasource.ts
index 1cc48500a80..2239b63be54 100644
--- a/packages/grafana-prometheus/src/datasource.ts
+++ b/packages/grafana-prometheus/src/datasource.ts
@@ -492,16 +492,16 @@ export class PrometheusDatasource
       return this.directAccessError();
     }
 
-    let fullOrPartialRequest: DataQueryRequest<PromQuery>;
-    let requestInfo: CacheRequestInfo<PromQuery> | undefined = undefined;
-    const hasInstantQuery = request.targets.some((target) => target.instant);
+    // Use incremental query only if enabled and no instant queries or no $__range variables
+    const shouldUseIncrementalQuery =
+      this.hasIncrementalQuery && !request.targets.some((target) => target.instant || target.expr.includes('$__range'));
 
-    // Don't cache instant queries
-    if (this.hasIncrementalQuery && !hasInstantQuery) {
+    let fullOrPartialRequest: DataQueryRequest<PromQuery> = request;
+    let requestInfo: CacheRequestInfo<PromQuery> | undefined = undefined;
+
+    if (shouldUseIncrementalQuery) {
       requestInfo = this.cache.requestInfo(request);
       fullOrPartialRequest = requestInfo.requests[0];
-    } else {
-      fullOrPartialRequest = request;
     }
 
     const targets = fullOrPartialRequest.targets.map((target) => this.processTargetV2(target, fullOrPartialRequest));