diff --git a/packages/fusion/composition/src/compose.ts b/packages/fusion/composition/src/compose.ts
index 70c3cb35c543..c4a06e51f912 100644
--- a/packages/fusion/composition/src/compose.ts
+++ b/packages/fusion/composition/src/compose.ts
@@ -2,7 +2,9 @@ import type {
   GraphQLArgumentConfig,
   GraphQLFieldConfig,
   GraphQLFieldConfigArgumentMap,
+  GraphQLList,
   GraphQLNamedType,
+  GraphQLOutputType,
 } from 'graphql';
 import {
   concatAST,
@@ -24,6 +26,7 @@ import {
   MapperKind,
   mapSchema,
   type Constructor,
+  type DirectableObject,
   type FieldMapper,
 } from '@graphql-tools/utils';
 import type { ServiceDefinition } from '@theguild/federation-composition';
@@ -332,12 +335,46 @@ export function getAnnotatedSubgraphs(
     const fieldMapper: FieldMapper = (fieldConfig, fieldName) => {
       const fieldDirectives = getDirectiveExtensions(fieldConfig);
       const sourceDirectives = fieldDirectives?.source;
+      const typeNameSourceDirectives = getDirectiveExtensions(
+        ((fieldConfig.type as GraphQLList<GraphQLOutputType>).ofType ||
+          fieldConfig.type) as DirectableObject,
+      )?.source;
+      // Find the @source directive that has the type's name by ignoring the one that might be present for type translation.
+      const typeNameSourceDirectiveName = typeNameSourceDirectives?.find(
+        sourceDirective => !sourceDirective.type,
+      )?.name;
+
       if (sourceDirectives?.length) {
-        const filteredSourceDirectives = sourceDirectives.filter(
-          sourceDirective =>
+        const filteredSourceDirectives = sourceDirectives.filter(sourceDirective => {
+          // @source directive is redundant if fieldName and source type are same as in the field definition.
+          return (
             sourceDirective.name !== fieldName ||
-            sourceDirective.type !== fieldConfig.type.toString(),
-        );
+            // If the field name is same as the @source directive name, we need to make sure the type value is mapped to the existing
+            // schema defined name or should map to the type's @source directive name.
+            (sourceDirective.type !== fieldConfig.type.toString() &&
+              sourceDirective.type === typeNameSourceDirectiveName)
+          );
+        });
+
+        // For each type @source directive, make sure the type is mapped to the correct schema type.
+        // If not, set it to a reasonable value.
+        for (const filteredSourceDirective of filteredSourceDirectives) {
+          if (!filteredSourceDirective.type) {
+            continue;
+          }
+          const isTypeMapped =
+            filteredSourceDirective.type === fieldConfig.type?.toString() ||
+            // The type's @source directive name will not have list or non-null representation.
+            filteredSourceDirective.type.search(
+              new RegExp(`^\\[?${typeNameSourceDirectiveName}!?\\]?!?$`),
+            ) > -1;
+
+          if (!isTypeMapped) {
+            filteredSourceDirective.type = fieldConfig.type
+              ?.toString()
+              .replace(/^(\[)?(.*)(!?\]!?|!)$/, `$1${typeNameSourceDirectiveName || '$2'}$3`);
+          }
+        }
         fieldDirectives.source = filteredSourceDirectives;
       }
       if ('args' in fieldConfig) {