diff --git a/.changeset/dollar-overrides-deprecation.md b/.changeset/dollar-overrides-deprecation.md
new file mode 100644
index 0000000000..92b8ebd720
--- /dev/null
+++ b/.changeset/dollar-overrides-deprecation.md
@@ -0,0 +1,6 @@
+---
+"@pnpm/config.reader": patch
+"pnpm": patch
+---
+
+Using the `$` version reference syntax in `overrides` (e.g. `"react": "$react"`) now prints a deprecation warning. The syntax still works, but [catalogs](https://pnpm.io/catalogs) are the recommended way to keep an overridden version in sync with the rest of the workspace. Reference a catalog entry with the `catalog:` protocol instead.
diff --git a/config/reader/src/getOptionsFromRootManifest.ts b/config/reader/src/getOptionsFromRootManifest.ts
index dd200c86d4..0c7fe8864a 100644
--- a/config/reader/src/getOptionsFromRootManifest.ts
+++ b/config/reader/src/getOptionsFromRootManifest.ts
@@ -2,6 +2,7 @@ import path from 'node:path'
 
 import { envReplace } from '@pnpm/config.env-replace'
 import { PnpmError } from '@pnpm/error'
+import { globalWarn } from '@pnpm/logger'
 import type {
   AllowedDeprecatedVersions,
   PackageExtension,
@@ -31,8 +32,11 @@ export function getOptionsFromPnpmSettings (manifestDir: string | undefined, pnp
     assertValidOverrides(settings.overrides)
     if (Object.keys(settings.overrides).length === 0) {
       delete settings.overrides
-    } else if (manifest) {
-      settings.overrides = mapValues(createVersionReferencesReplacer(manifest), settings.overrides)
+    } else {
+      warnAboutDeprecatedVersionReferences(settings.overrides)
+      if (manifest) {
+        settings.overrides = mapValues(createVersionReferencesReplacer(manifest), settings.overrides)
+      }
     }
   }
   if (pnpmSettings.patchedDependencies) {
@@ -92,6 +96,16 @@ function replaceEnvInStringValues (value: unknown): unknown {
   return out
 }
 
+function warnAboutDeprecatedVersionReferences (overrides: Record<string, string>): void {
+  const selectors = Object.keys(overrides).filter((selector) => overrides[selector][0] === '$')
+  if (selectors.length === 0) return
+  globalWarn(
+    `The "$" version reference syntax in overrides is deprecated (used by: ${selectors.join(', ')}). ` +
+    'Define the version in a catalog and reference it with the "catalog:" protocol instead. ' +
+    'See https://pnpm.io/catalogs'
+  )
+}
+
 function createVersionReferencesReplacer (manifest: ProjectManifest): (spec: string) => string {
   const allDeps = {
     ...manifest.devDependencies,
diff --git a/config/reader/test/deprecatedVersionReferences.test.ts b/config/reader/test/deprecatedVersionReferences.test.ts
new file mode 100644
index 0000000000..92b1c759bb
--- /dev/null
+++ b/config/reader/test/deprecatedVersionReferences.test.ts
@@ -0,0 +1,44 @@
+import { beforeEach, expect, jest, test } from '@jest/globals'
+
+jest.unstable_mockModule('@pnpm/logger', () => ({
+  globalWarn: jest.fn(),
+}))
+
+const { globalWarn } = await import('@pnpm/logger')
+const { getOptionsFromPnpmSettings } = await import('../lib/getOptionsFromRootManifest.js')
+
+beforeEach(() => {
+  jest.mocked(globalWarn).mockClear()
+})
+
+test('getOptionsFromPnpmSettings() warns about deprecated "$" version references and still resolves them', () => {
+  const options = getOptionsFromPnpmSettings(process.cwd(), {
+    overrides: {
+      foo: '$foo',
+    },
+  }, {
+    dependencies: {
+      foo: '^1.0.0',
+    },
+  })
+  expect(options.overrides).toStrictEqual({ foo: '^1.0.0' })
+  expect(globalWarn).toHaveBeenCalledTimes(1)
+  const warning = jest.mocked(globalWarn).mock.calls[0][0]
+  expect(warning).toContain('deprecated')
+  expect(warning).toContain('foo')
+  expect(warning).toContain('catalog:')
+})
+
+test('getOptionsFromPnpmSettings() does not warn when no "$" version references are used', () => {
+  getOptionsFromPnpmSettings(process.cwd(), {
+    overrides: {
+      foo: '^1.0.0',
+      bar: 'catalog:',
+    },
+  }, {
+    dependencies: {
+      foo: '^1.0.0',
+    },
+  })
+  expect(globalWarn).not.toHaveBeenCalled()
+})