diff --git a/pkg/compose/monitor.go b/pkg/compose/monitor.go
index f405a5d5b4..912f760d56 100644
--- a/pkg/compose/monitor.go
+++ b/pkg/compose/monitor.go
@@ -133,19 +133,40 @@ func (c *monitor) Start(ctx context.Context) error {
 					listener(newContainerEvent(event.TimeNano, ctr, api.ContainerEventRestarted))
 				}
 				logrus.Debugf("container %s restarted", ctr.Name)
+			case events.ActionStop:
+				// a stop event with no following start means the container won't come back:
+				// either it has no restart policy, or an external `stop`/`down` canceled the
+				// restart loop of a container in backoff (https://github.com/docker/compose/issues/13985).
+				// The event alone can't tell us: during a ContainerRestart (watch sync+restart,
+				// https://github.com/docker/compose/issues/13161) the engine also emits `stop`
+				// before `start`.
+				willRestart, err := c.isRestarting(ctx, ctr.ID)
+				if err != nil {
+					return err
+				}
+				if willRestart {
+					logrus.Debugf("container %s stopped, restart in progress", ctr.Name)
+					restarting.Add(ctr.ID)
+				} else {
+					// definitive stop: the exit was already reported to listeners by the
+					// preceding die event, just stop tracking the container
+					logrus.Debugf("container %s stopped", ctr.Name)
+					restarting.Remove(ctr.ID)
+					containers.Remove(ctr.ID)
+				}
+			case events.ActionDestroy:
+				// container removed (e.g. by an external `docker compose down`): terminal
+				// state, there is nothing left to inspect
+				logrus.Debugf("container %s destroyed", ctr.Name)
+				restarting.Remove(ctr.ID)
+				containers.Remove(ctr.ID)
 			case events.ActionDie:
 				logrus.Debugf("container %s exited with code %d", ctr.Name, ctr.ExitCode)
-				inspect, err := c.apiClient.ContainerInspect(ctx, event.Actor.ID, client.ContainerInspectOptions{})
-				if errdefs.IsNotFound(err) {
-					// Source is already removed
-				} else if err != nil {
+				willRestart, err := c.isRestarting(ctx, ctr.ID)
+				if err != nil {
 					return err
 				}
-
-				if inspect.Container.State != nil && (inspect.Container.State.Restarting || inspect.Container.State.Running) {
-					// State.Restarting is set by engine when container is configured to restart on exit
-					// on ContainerRestart it doesn't (see https://github.com/moby/moby/issues/45538)
-					// container state still is reported as "running"
+				if willRestart {
 					logrus.Debugf("container %s is restarting", ctr.Name)
 					restarting.Add(ctr.ID)
 					for _, listener := range c.listeners {
@@ -164,6 +185,23 @@ func (c *monitor) Start(ctx context.Context) error {
 	}
 }
 
+// isRestarting tells whether a container which just stopped is expected to come back.
+// State.Restarting is set by the engine when the container is configured to restart on
+// exit, but not on a ContainerRestart, where state still is reported as "running"
+// (see https://github.com/moby/moby/issues/45538). A container already removed won't
+// come back.
+func (c *monitor) isRestarting(ctx context.Context, containerID string) (bool, error) {
+	inspect, err := c.apiClient.ContainerInspect(ctx, containerID, client.ContainerInspectOptions{})
+	if errdefs.IsNotFound(err) {
+		return false, nil
+	}
+	if err != nil {
+		return false, err
+	}
+	state := inspect.Container.State
+	return state != nil && (state.Restarting || state.Running), nil
+}
+
 func newContainerEvent(timeNano int64, ctr *api.ContainerSummary, eventType int, opts ...func(e *api.ContainerEvent)) api.ContainerEvent {
 	name := ctr.Name
 	defaultName := getDefaultContainerName(ctr.Project, ctr.Labels[api.ServiceLabel], ctr.Labels[api.ContainerNumberLabel])
diff --git a/pkg/compose/monitor_test.go b/pkg/compose/monitor_test.go
new file mode 100644
index 0000000000..b49b404e78
--- /dev/null
+++ b/pkg/compose/monitor_test.go
@@ -0,0 +1,209 @@
+/*
+   Copyright 2026 Docker Compose CLI authors
+
+   Licensed under the Apache License, Version 2.0 (the "License");
+   you may not use this file except in compliance with the License.
+   You may obtain a copy of the License at
+
+       http://www.apache.org/licenses/LICENSE-2.0
+
+   Unless required by applicable law or agreed to in writing, software
+   distributed under the License is distributed on an "AS IS" BASIS,
+   WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+   See the License for the specific language governing permissions and
+   limitations under the License.
+*/
+
+package compose
+
+import (
+	"strconv"
+	"strings"
+	"testing"
+	"time"
+
+	"github.com/containerd/errdefs"
+	"github.com/moby/moby/api/types/container"
+	"github.com/moby/moby/api/types/events"
+	"github.com/moby/moby/client"
+	"go.uber.org/goleak"
+	"go.uber.org/mock/gomock"
+	"gotest.tools/v3/assert"
+
+	"github.com/docker/compose/v5/pkg/api"
+	"github.com/docker/compose/v5/pkg/mocks"
+)
+
+// monitorEvent builds an engine event for container "123"/service1, with the
+// Actor.Attributes shape reported by the engine: compose labels plus the
+// container name.
+func monitorEvent(action events.Action) events.Message {
+	attrs := containerLabels("service1", false)
+	attrs["name"] = "testproject-service1-1"
+	return events.Message{
+		Type:   events.ContainerEventType,
+		Action: action,
+		Actor:  events.Actor{ID: "123", Attributes: attrs},
+	}
+}
+
+// monitorDieEvent builds a die event, which the engine reports with an exit code.
+func monitorDieEvent(exitCode int) events.Message {
+	event := monitorEvent(events.ActionDie)
+	event.Actor.Attributes["exitCode"] = strconv.Itoa(exitCode)
+	return event
+}
+
+// newMonitorTestFixture wires a monitor against a mocked API client, with the
+// goroutine-leak guard and the standard initial ContainerList expectation.
+func newMonitorTestFixture(t *testing.T) (*monitor, *mocks.MockAPIClient) {
+	t.Helper()
+	ignoreExisting := goleak.IgnoreCurrent()
+	t.Cleanup(func() {
+		goleak.VerifyNone(t, ignoreExisting)
+	})
+	mockCtrl := gomock.NewController(t)
+	t.Cleanup(mockCtrl.Finish)
+	apiMock := mocks.NewMockAPIClient(mockCtrl)
+
+	apiMock.EXPECT().ContainerList(gomock.Any(), gomock.Any()).
+		Return(client.ContainerListResult{Items: []container.Summary{testContainer("service1", "123", false)}}, nil)
+
+	m := newMonitor(apiMock, strings.ToLower(testProject))
+	return m, apiMock
+}
+
+// expectEvents makes the mocked engine deliver the given events, in order.
+func expectEvents(apiMock *mocks.MockAPIClient, msgs ...events.Message) {
+	ch := make(chan events.Message, len(msgs))
+	for _, msg := range msgs {
+		ch <- msg
+	}
+	apiMock.EXPECT().Events(gomock.Any(), gomock.Any()).
+		Return(client.EventsResult{Messages: ch, Err: make(chan error)})
+}
+
+// expectInspects makes successive inspections of container "123" report the
+// given states, in order.
+func expectInspects(apiMock *mocks.MockAPIClient, states ...container.State) {
+	calls := make([]any, 0, len(states))
+	for _, state := range states {
+		calls = append(calls, apiMock.EXPECT().
+			ContainerInspect(gomock.Any(), "123", client.ContainerInspectOptions{}).
+			Return(client.ContainerInspectResult{Container: container.InspectResponse{State: &state}}, nil))
+	}
+	gomock.InOrder(calls...)
+}
+
+// runMonitor starts the monitor under test in a goroutine and waits (with a
+// timeout) for it to return, reporting the events it published. It fails the
+// test if the monitor doesn't stop on its own, which is how an un-fixed
+// monitor.Start reacts to stop/destroy events it doesn't know how to process:
+// the tracked containers set never empties, so the loop blocks forever on the
+// events channel.
+func runMonitor(t *testing.T, m *monitor) ([]api.ContainerEvent, error) {
+	t.Helper()
+	var got []api.ContainerEvent
+	m.withListener(func(e api.ContainerEvent) {
+		got = append(got, e)
+	})
+
+	done := make(chan error, 1)
+	go func() {
+		done <- m.Start(t.Context())
+	}()
+	select {
+	case err := <-done:
+		return got, err
+	case <-time.After(10 * time.Second):
+		t.Fatal("monitor did not stop")
+		return nil, nil
+	}
+}
+
+// TestMonitorExitsOnDestroy pins the expectation that a destroy event (e.g. a
+// container removed by `docker rm` or `docker compose rm` outside of a
+// tracked lifecycle transition) drops the container from the tracked set
+// without requiring any inspection, so the monitor loop terminates.
+func TestMonitorExitsOnDestroy(t *testing.T) {
+	m, apiMock := newMonitorTestFixture(t)
+	expectEvents(apiMock, monitorEvent(events.ActionDestroy))
+
+	got, err := runMonitor(t, m)
+	assert.NilError(t, err)
+	assert.Equal(t, len(got), 0)
+}
+
+// TestMonitorExitsWhenRestartingContainerStopped is the #13985 repro: a
+// container configured to restart on failure dies (engine reports it as
+// still "restarting"), then is explicitly stopped (e.g. `docker stop`)
+// before the restart happens. The monitor must inspect on stop, observe the
+// container is no longer restarting/running, and evict it so the loop
+// terminates instead of waiting forever for a start event that never comes.
+func TestMonitorExitsWhenRestartingContainerStopped(t *testing.T) {
+	m, apiMock := newMonitorTestFixture(t)
+	expectEvents(apiMock, monitorDieEvent(1), monitorEvent(events.ActionStop))
+	expectInspects(apiMock,
+		// on die: waiting for the restart policy to kick in
+		container.State{Status: container.StateRestarting, Restarting: true, ExitCode: 1},
+		// on stop: the restart loop got canceled
+		container.State{Status: container.StateExited, ExitCode: 1},
+	)
+
+	got, err := runMonitor(t, m)
+	assert.NilError(t, err)
+	assert.Equal(t, len(got), 1)
+	assert.Equal(t, got[0].Type, api.ContainerEventExited)
+	assert.Equal(t, got[0].Restarting, true)
+	assert.Equal(t, got[0].ExitCode, 1)
+}
+
+// TestMonitorKeepsRunningOnRestart is the #13161 guard: a container that
+// dies and is restarted by the engine (watch/sync workflows trigger this via
+// `docker restart`) must not be evicted by an intervening stop event that is
+// merely part of the moby#45538 restart sequence (State reports
+// Running=true while mid-ContainerRestart). The monitor must keep tracking
+// it and still observe the subsequent start.
+func TestMonitorKeepsRunningOnRestart(t *testing.T) {
+	m, apiMock := newMonitorTestFixture(t)
+	expectEvents(apiMock,
+		monitorDieEvent(0),
+		monitorEvent(events.ActionStop),
+		monitorEvent(events.ActionStart),
+		monitorDieEvent(1),
+	)
+	expectInspects(apiMock,
+		// on die then on stop: mid-ContainerRestart, so still reported as running
+		container.State{Status: container.StateRunning, Running: true},
+		container.State{Status: container.StateRunning, Running: true},
+		// on the final die: really gone
+		container.State{Status: container.StateExited, ExitCode: 1},
+	)
+
+	got, err := runMonitor(t, m)
+	assert.NilError(t, err)
+	assert.Equal(t, len(got), 3)
+	assert.Equal(t, got[0].Type, api.ContainerEventExited)
+	assert.Equal(t, got[0].Restarting, true)
+	assert.Equal(t, got[0].ExitCode, 0)
+	assert.Equal(t, got[1].Type, api.ContainerEventStarted)
+	assert.Equal(t, got[1].Restarting, true)
+	assert.Equal(t, got[2].Type, api.ContainerEventExited)
+	assert.Equal(t, got[2].Restarting, false)
+	assert.Equal(t, got[2].ExitCode, 1)
+}
+
+// TestMonitorStopInspectNotFound covers a stop event racing a container's
+// removal: the inspect on stop returns NotFound, which must be tolerated
+// (not treated as a fatal error) and the container evicted so the monitor
+// terminates.
+func TestMonitorStopInspectNotFound(t *testing.T) {
+	m, apiMock := newMonitorTestFixture(t)
+	expectEvents(apiMock, monitorEvent(events.ActionStop))
+	apiMock.EXPECT().ContainerInspect(gomock.Any(), "123", client.ContainerInspectOptions{}).
+		Return(client.ContainerInspectResult{}, errdefs.ErrNotFound.WithMessage("no such container: 123"))
+
+	got, err := runMonitor(t, m)
+	assert.NilError(t, err)
+	assert.Equal(t, len(got), 0)
+}