diff --git a/internal/mesh/internal/controllers/xds/controller.go b/internal/mesh/internal/controllers/xds/controller.go
index 604181a49e..25bc98378a 100644
--- a/internal/mesh/internal/controllers/xds/controller.go
+++ b/internal/mesh/internal/controllers/xds/controller.go
@@ -397,18 +397,13 @@ func (r *xdsReconciler) cancelWatches(leafResourceRefs []*pbresource.Reference)
 
 // prevWatchesToCancel computes if there are any items in prevWatchedLeafs that are not in currentLeafs, and returns a list of those items.
 func prevWatchesToCancel(prevWatchedLeafs []*pbresource.Reference, currentLeafs []resource.ReferenceOrID) []*pbresource.Reference {
-	var prevWatchedLeafsToCancel []*pbresource.Reference
+	prevWatchedLeafsToCancel := make([]*pbresource.Reference, 0, len(prevWatchedLeafs))
+	newLeafs := make(map[string]struct{})
+	for _, newLeaf := range currentLeafs {
+		newLeafs[keyFromReference(newLeaf)] = struct{}{}
+	}
 	for _, prevLeaf := range prevWatchedLeafs {
-		prevKey := keyFromReference(prevLeaf)
-		found := false
-		for _, newLeaf := range currentLeafs {
-			newKey := keyFromReference(newLeaf)
-			if prevKey == newKey {
-				found = true
-				break
-			}
-		}
-		if !found {
+		if _, ok := newLeafs[keyFromReference(prevLeaf)]; !ok {
 			prevWatchedLeafsToCancel = append(prevWatchedLeafsToCancel, prevLeaf)
 		}
 	}
diff --git a/internal/mesh/internal/controllers/xds/controller_test.go b/internal/mesh/internal/controllers/xds/controller_test.go
index 1394eb8d6f..556ce97d5e 100644
--- a/internal/mesh/internal/controllers/xds/controller_test.go
+++ b/internal/mesh/internal/controllers/xds/controller_test.go
@@ -930,6 +930,68 @@ func (suite *xdsControllerTestSuite) setupFooBarProxyStateTemplateAndEndpoints()
 	suite.expectedBarProxyStateEndpoints = expectedBarProxyStateEndpoints
 }
 
+func (suite *xdsControllerTestSuite) TestReconcile_prevWatchesToCancel() {
+	makeRef := func(names ...string) []*pbresource.Reference {
+		out := make([]*pbresource.Reference, len(names))
+		for i, name := range names {
+			out[i] = &pbresource.Reference{
+				Name: name,
+				Type: &pbresource.Type{
+					Group:        "g",
+					GroupVersion: "v",
+					Kind:         "k",
+				},
+				Tenancy: &pbresource.Tenancy{},
+			}
+		}
+		return out
+	}
+	convert := func(input []*pbresource.Reference) []resource.ReferenceOrID {
+		asInterface := make([]resource.ReferenceOrID, len(input))
+		for i := range input {
+			asInterface[i] = input[i]
+		}
+		return asInterface
+	}
+
+	cases := []struct {
+		old    []*pbresource.Reference
+		new    []*pbresource.Reference
+		expect []*pbresource.Reference
+	}{
+		{
+			old:    makeRef("a", "b", "c"),
+			new:    makeRef("a", "c"),
+			expect: makeRef("b"),
+		},
+		{
+			old:    makeRef("a", "b", "c"),
+			new:    makeRef("a", "b", "c"),
+			expect: makeRef(),
+		},
+		{
+			old:    makeRef(),
+			new:    makeRef("a", "b"),
+			expect: makeRef(),
+		},
+		{
+			old:    makeRef("a", "b"),
+			new:    makeRef(),
+			expect: makeRef("a", "b"),
+		},
+		{
+			old:    makeRef(),
+			new:    makeRef(),
+			expect: makeRef(),
+		},
+	}
+
+	for _, tc := range cases {
+		toCancel := prevWatchesToCancel(tc.old, convert(tc.new))
+		require.ElementsMatch(suite.T(), toCancel, tc.expect)
+	}
+}
+
 func TestXdsController(t *testing.T) {
 	suite.Run(t, new(xdsControllerTestSuite))
 }