diff --git a/.github/workflows/e2e-test.yml b/.github/workflows/e2e-test.yml
index 9bfd7415fc..c7b094cbae 100644
--- a/.github/workflows/e2e-test.yml
+++ b/.github/workflows/e2e-test.yml
@@ -285,6 +285,10 @@ jobs:
               vp run lint
               vp run test:types
               vp test --project unit
+          - name: vite-plus-jest-dom-repro
+            node-version: 24
+            command: |
+              vp test run
         exclude:
           # frm-stack uses Docker (testcontainers) which doesn't work the same way on Windows
           - os: windows-latest
diff --git a/ecosystem-ci/repo.json b/ecosystem-ci/repo.json
index 796c5658a2..06fcd1088d 100644
--- a/ecosystem-ci/repo.json
+++ b/ecosystem-ci/repo.json
@@ -91,5 +91,11 @@
     "branch": "main",
     "hash": "230b7c7ddb6bb8551ce797144f0ce0f047ff8d7d",
     "forceFreshMigration": true
+  },
+  "vite-plus-jest-dom-repro": {
+    "repository": "https://github.com/why-reproductions-are-required/vite-plus-jest-dom-repro.git",
+    "branch": "master",
+    "hash": "01bd9ce1ac66ee3c21ed8a7f14311317d87fb999",
+    "forceFreshMigration": true
   }
 }
diff --git a/packages/test/__tests__/build-artifacts.spec.ts b/packages/test/__tests__/build-artifacts.spec.ts
index 21d963dd17..0767207323 100644
--- a/packages/test/__tests__/build-artifacts.spec.ts
+++ b/packages/test/__tests__/build-artifacts.spec.ts
@@ -3,9 +3,8 @@
  * contains the expected files and that patches applied during the build
  * (in build.ts) produce correct artifacts.
  *
- * This is important because vite-plus re-packages vitest with custom
- * patches, and missing exports or incorrect patches can break
- * third-party integrations (e.g., @storybook/addon-vitest, #1086).
+ * These tests run against the already-built dist/ directory, ensuring
+ * that re-packaging patches produce correct artifacts.
  */
 import fs from 'node:fs';
 import path from 'node:path';
@@ -16,6 +15,16 @@ import { describe, expect, it } from 'vitest';
 const testPkgDir = path.resolve(path.dirname(url.fileURLToPath(import.meta.url)), '..');
 const distDir = path.join(testPkgDir, 'dist');
 
+function findCliApiChunk(): string {
+  const chunksDir = path.join(distDir, 'chunks');
+  const files = fs.readdirSync(chunksDir);
+  const chunk = files.find((f) => f.startsWith('cli-api.') && f.endsWith('.js'));
+  if (!chunk) {
+    throw new Error('cli-api chunk not found in dist/chunks/');
+  }
+  return path.join(chunksDir, chunk);
+}
+
 describe('build artifacts', () => {
   describe('@vitest/browser/context.js', () => {
     const contextPath = path.join(distDir, '@vitest/browser/context.js');
@@ -55,4 +64,31 @@ describe('build artifacts', () => {
       expect(vendorMapContent).not.toContain("'@vitest/browser/context'");
     });
   });
+
+  /**
+   * Third-party packages that call `expect.extend()` internally
+   * (e.g., @testing-library/jest-dom) break under npm override because
+   * the vitest module instance is split, causing matchers to be registered
+   * on a different `chai` instance than the test runner uses.
+   *
+   * The build patches vitest's ModuleRunnerTransform plugin to auto-add
+   * these packages to `server.deps.inline`, so they are processed through
+   * Vite's transform pipeline and share the same module instance.
+   *
+   * See: https://github.com/voidzero-dev/vite-plus/issues/897
+   */
+  describe('server.deps.inline auto-inline (regression test for #897)', () => {
+    it('should contain the expected auto-inline packages', () => {
+      const content = fs.readFileSync(findCliApiChunk(), 'utf-8');
+      expect(content).toContain('Auto-inline packages');
+      expect(content).toContain('"@testing-library/jest-dom"');
+      expect(content).toContain('"@storybook/test"');
+      expect(content).toContain('"jest-extended"');
+    });
+
+    it('should not override user inline config when set to true', () => {
+      const content = fs.readFileSync(findCliApiChunk(), 'utf-8');
+      expect(content).toContain('server.deps.inline !== true');
+    });
+  });
 });
diff --git a/packages/test/build.ts b/packages/test/build.ts
index f4276d0de5..f96cd14f33 100644
--- a/packages/test/build.ts
+++ b/packages/test/build.ts
@@ -224,6 +224,7 @@ await createBrowserEntryFiles();
 await patchModuleAugmentations();
 await patchChaiTypeReference();
 await patchMockerHoistedModule();
+await patchServerDepsInline();
 const pluginExports = await createPluginExports();
 await mergePackageJson(pluginExports);
 generateLicenseFile({
@@ -2360,6 +2361,83 @@ async function patchMockerHoistedModule() {
   }
 }
 
+/**
+ * Patch vitest's ModuleRunnerTransform plugin to automatically add known
+ * packages that use `expect.extend()` internally to `server.deps.inline`.
+ *
+ * When third-party libraries (e.g., @testing-library/jest-dom) call
+ * `require('vitest').expect.extend(matchers)`, the npm override causes
+ * a separate module instance to be created, so matchers are registered
+ * on a different `chai` instance than the one used by the test runner.
+ *
+ * By inlining these packages via `server.deps.inline`, the Vite module
+ * runner processes them through its transform pipeline, ensuring they
+ * share the same module instance as the test runner.
+ *
+ * See: https://github.com/voidzero-dev/vite-plus/issues/897
+ */
+async function patchServerDepsInline() {
+  console.log('\nPatching server.deps.inline for expect.extend compatibility...');
+
+  let cliApiChunk: string | undefined;
+  for await (const chunk of fsGlob(join(distDir, 'chunks/cli-api.*.js'))) {
+    cliApiChunk = chunk;
+    break;
+  }
+
+  if (!cliApiChunk) {
+    throw new Error('cli-api chunk not found for patchServerDepsInline');
+  }
+
+  let content = await readFile(cliApiChunk, 'utf-8');
+
+  // Packages that internally call expect.extend() and break under npm override.
+  // These must be inlined so they share the same vitest module instance.
+  const inlinePackages = ['@testing-library/jest-dom', '@storybook/test', 'jest-extended'];
+
+  // Find the configResolved handler in ModuleRunnerTransform (vitest:environments-module-runner)
+  // and inject our inline packages after the existing server.deps.inline logic.
+  const original = `if (external.length) {
+          testConfig.server.deps.external ??= [];
+          testConfig.server.deps.external.push(...external);
+        }`;
+
+  const patched = `if (external.length) {
+          testConfig.server.deps.external ??= [];
+          testConfig.server.deps.external.push(...external);
+        }
+        // Auto-inline packages that use expect.extend() internally (#897)
+        // Only inline packages that are actually installed in the project.
+        if (testConfig.server.deps.inline !== true) {
+          testConfig.server.deps.inline ??= [];
+          if (Array.isArray(testConfig.server.deps.inline)) {
+            const _require = createRequire(config.root + "/package.json");
+            const autoInline = ${JSON.stringify(inlinePackages)};
+            for (const pkg of autoInline) {
+              if (testConfig.server.deps.inline.includes(pkg)) continue;
+              try {
+                _require.resolve(pkg);
+                testConfig.server.deps.inline.push(pkg);
+              } catch {
+                // Package not installed in the project — skip silently
+              }
+            }
+          }
+        }`;
+
+  if (!content.includes(original)) {
+    throw new Error(
+      'Could not find server.deps.external pattern in ' +
+        cliApiChunk +
+        '. This likely means vitest code has changed and the patch needs to be updated.',
+    );
+  }
+
+  content = content.replace(original, patched);
+  await writeFile(cliApiChunk, content, 'utf-8');
+  console.log(`  Added auto-inline for: ${inlinePackages.join(', ')}`);
+}
+
 /**
  * Create /plugins/* exports for all copied @vitest/* packages.
  * This allows pnpm overrides to redirect @vitest/* imports to our copied versions.