diff --git a/Sources/BuildSystemIntegration/BuildServerBuildSystem.swift b/Sources/BuildSystemIntegration/BuildServerBuildSystem.swift
index 67b1f9cd..5fa41cdb 100644
--- a/Sources/BuildSystemIntegration/BuildServerBuildSystem.swift
+++ b/Sources/BuildSystemIntegration/BuildServerBuildSystem.swift
@@ -331,29 +331,6 @@ extension BuildServerBuildSystem: BuiltInBuildSystem {
 
   package func didChangeWatchedFiles(notification: BuildServerProtocol.DidChangeWatchedFilesNotification) {}
 
-  package func fileHandlingCapability(for uri: DocumentURI) -> FileHandlingCapability {
-    guard
-      let fileUrl = uri.fileURL,
-      let path = try? AbsolutePath(validating: fileUrl.path)
-    else {
-      return .unhandled
-    }
-
-    // TODO: We should not make any assumptions about which files the build server can handle.
-    // Instead we should query the build server which files it can handle
-    // (https://github.com/swiftlang/sourcekit-lsp/issues/492).
-
-    if projectRoot.isAncestorOfOrEqual(to: path) {
-      return .handled
-    }
-
-    if let realpath = try? resolveSymlinks(path), realpath != path, projectRoot.isAncestorOfOrEqual(to: realpath) {
-      return .handled
-    }
-
-    return .unhandled
-  }
-
   package func sourceFiles() async -> [SourceFileInfo] {
     // BuildServerBuildSystem does not support syntactic test discovery or background indexing.
     // (https://github.com/swiftlang/sourcekit-lsp/issues/1173).
diff --git a/Sources/BuildSystemIntegration/BuildSystemDelegate.swift b/Sources/BuildSystemIntegration/BuildSystemDelegate.swift
index 87f3d726..eb477ff2 100644
--- a/Sources/BuildSystemIntegration/BuildSystemDelegate.swift
+++ b/Sources/BuildSystemIntegration/BuildSystemDelegate.swift
@@ -22,11 +22,6 @@ package protocol BuildSystemDelegate: AnyObject, Sendable {
   /// The callee should refresh ASTs unless it is able to determine that a
   /// refresh is not necessary.
   func filesDependenciesUpdated(_ changedFiles: Set<DocumentURI>) async
-
-  /// Notify the delegate that the file handling capability of this build system
-  /// for some file has changed. The delegate should discard any cached file
-  /// handling capability.
-  func fileHandlingCapabilityChanged() async
 }
 
 /// Handles build system events, such as file build settings changes.
@@ -42,8 +37,7 @@ package protocol BuildSystemManagerDelegate: AnyObject, Sendable {
   /// refresh is not necessary.
   func filesDependenciesUpdated(_ changedFiles: Set<DocumentURI>) async
 
-  /// Notify the delegate that the file handling capability of this build system
-  /// for some file has changed. The delegate should discard any cached file
-  /// handling capability.
-  func fileHandlingCapabilityChanged() async
+  /// Notify the delegate that some information about the given build targets has changed and that it should recompute
+  /// any information based on top of it.
+  func buildTargetsChanged(_ changes: [BuildTargetEvent]?) async
 }
diff --git a/Sources/BuildSystemIntegration/BuildSystemManager.swift b/Sources/BuildSystemIntegration/BuildSystemManager.swift
index fa996d7c..1b759038 100644
--- a/Sources/BuildSystemIntegration/BuildSystemManager.swift
+++ b/Sources/BuildSystemIntegration/BuildSystemManager.swift
@@ -81,7 +81,7 @@ package actor BuildSystemManager: BuiltInBuildSystemAdapterDelegate {
 
   /// The fallback build system. If present, used when the `buildSystem` is not
   /// set or cannot provide settings.
-  let fallbackBuildSystem: FallbackBuildSystem?
+  let fallbackBuildSystem: FallbackBuildSystem
 
   /// Provider of file to main file mappings.
   var mainFilesProvider: MainFilesProvider?
@@ -101,11 +101,7 @@ package actor BuildSystemManager: BuiltInBuildSystemAdapterDelegate {
   /// The root of the project that this build system manages. For example, for SwiftPM packages, this is the folder
   /// containing Package.swift. For compilation databases it is the root folder based on which the compilation database
   /// was found.
-  package var projectRoot: AbsolutePath? {
-    get async {
-      return await buildSystem?.underlyingBuildSystem.projectRoot
-    }
-  }
+  package let projectRoot: AbsolutePath?
 
   package var supportsPreparation: Bool {
     get async {
@@ -122,6 +118,7 @@ package actor BuildSystemManager: BuiltInBuildSystemAdapterDelegate {
   ) async {
     self.fallbackBuildSystem = FallbackBuildSystem(options: options.fallbackBuildSystemOrDefault)
     self.toolchainRegistry = toolchainRegistry
+    self.projectRoot = buildSystemKind?.projectRoot
     self.buildSystem = await BuiltInBuildSystemAdapter(
       buildSystemKind: buildSystemKind,
       toolchainRegistry: toolchainRegistry,
@@ -315,7 +312,7 @@ package actor BuildSystemManager: BuiltInBuildSystemAdapterDelegate {
       logger.error("Getting build settings failed: \(error.forLogging)")
     }
 
-    guard var settings = await fallbackBuildSystem?.buildSettings(for: document, language: language) else {
+    guard var settings = await fallbackBuildSystem.buildSettings(for: document, language: language) else {
       return nil
     }
     if buildSystem == nil {
@@ -401,13 +398,6 @@ package actor BuildSystemManager: BuiltInBuildSystemAdapterDelegate {
     }
   }
 
-  package func fileHandlingCapability(for uri: DocumentURI) async -> FileHandlingCapability {
-    return max(
-      await buildSystem?.underlyingBuildSystem.fileHandlingCapability(for: uri) ?? .unhandled,
-      fallbackBuildSystem != nil ? .fallback : .unhandled
-    )
-  }
-
   package func sourceFiles() async -> [SourceFileInfo] {
     return await buildSystem?.underlyingBuildSystem.sourceFiles() ?? []
   }
@@ -451,12 +441,6 @@ extension BuildSystemManager: BuildSystemDelegate {
     }
   }
 
-  package func fileHandlingCapabilityChanged() async {
-    if let delegate = self.delegate {
-      await delegate.fileHandlingCapabilityChanged()
-    }
-  }
-
   private func didChangeBuildTarget(notification: DidChangeBuildTargetNotification) async {
     // Every `DidChangeBuildTargetNotification` notification needs to invalidate the cache since the changed target
     // might gained a source file.
@@ -476,6 +460,7 @@ extension BuildSystemManager: BuildSystemDelegate {
       return updatedTargets.contains(cacheKey.target)
     }
 
+    await delegate?.buildTargetsChanged(notification.changes)
     // FIXME: (BSP Migration) Communicate that the build target has changed to the `BuildSystemManagerDelegate` and make
     // it responsible for figuring out which files are affected.
     await delegate?.fileBuildSettingsChanged(Set(watchedFiles.keys))
diff --git a/Sources/BuildSystemIntegration/BuiltInBuildSystem.swift b/Sources/BuildSystemIntegration/BuiltInBuildSystem.swift
index c37d99c7..14cf0439 100644
--- a/Sources/BuildSystemIntegration/BuiltInBuildSystem.swift
+++ b/Sources/BuildSystemIntegration/BuiltInBuildSystem.swift
@@ -19,18 +19,6 @@ import ToolchainRegistry
 import struct TSCBasic.AbsolutePath
 import struct TSCBasic.RelativePath
 
-/// Defines how well a `BuildSystem` can handle a file with a given URI.
-package enum FileHandlingCapability: Comparable, Sendable {
-  /// The build system can't handle the file at all
-  case unhandled
-
-  /// The build system has fallback build settings for the file
-  case fallback
-
-  /// The build system knows how to handle the file
-  case handled
-}
-
 package struct SourceFileInfo: Sendable {
   /// The URI of the source file.
   package let uri: DocumentURI
@@ -172,8 +160,6 @@ package protocol BuiltInBuildSystem: AnyObject, Sendable {
   /// Called when files in the project change.
   func didChangeWatchedFiles(notification: BuildServerProtocol.DidChangeWatchedFilesNotification) async
 
-  func fileHandlingCapability(for uri: DocumentURI) async -> FileHandlingCapability
-
   /// Returns the list of source files in the project.
   ///
   /// Header files should not be considered as source files because they cannot be compiled.
diff --git a/Sources/BuildSystemIntegration/CompilationDatabaseBuildSystem.swift b/Sources/BuildSystemIntegration/CompilationDatabaseBuildSystem.swift
index 134710df..ef2136ee 100644
--- a/Sources/BuildSystemIntegration/CompilationDatabaseBuildSystem.swift
+++ b/Sources/BuildSystemIntegration/CompilationDatabaseBuildSystem.swift
@@ -210,14 +210,6 @@ extension CompilationDatabaseBuildSystem: BuiltInBuildSystem {
     }
   }
 
-  package func fileHandlingCapability(for uri: DocumentURI) -> FileHandlingCapability {
-    if database(for: uri) != nil {
-      return .handled
-    } else {
-      return .unhandled
-    }
-  }
-
   package func sourceFiles() async -> [SourceFileInfo] {
     guard let compdb else {
       return []
diff --git a/Sources/BuildSystemIntegration/SwiftPMBuildSystem.swift b/Sources/BuildSystemIntegration/SwiftPMBuildSystem.swift
index cd15d522..650447e0 100644
--- a/Sources/BuildSystemIntegration/SwiftPMBuildSystem.swift
+++ b/Sources/BuildSystemIntegration/SwiftPMBuildSystem.swift
@@ -489,10 +489,7 @@ extension SwiftPMBuildSystem {
       targets[targetIdentifier] = (buildTarget, depth)
     }
 
-    if let delegate = self.delegate {
-      await delegate.fileHandlingCapabilityChanged()
-      await messageHandler?.sendNotificationToSourceKitLSP(DidChangeBuildTargetNotification(changes: nil))
-    }
+    await messageHandler?.sendNotificationToSourceKitLSP(DidChangeBuildTargetNotification(changes: nil))
     for testFilesDidChangeCallback in testFilesDidChangeCallbacks {
       await testFilesDidChangeCallback()
     }
@@ -851,13 +848,6 @@ extension SwiftPMBuildSystem: BuildSystemIntegration.BuiltInBuildSystem {
     await self.fileDependenciesUpdatedDebouncer.scheduleCall(filesWithUpdatedDependencies)
   }
 
-  package func fileHandlingCapability(for uri: DocumentURI) -> FileHandlingCapability {
-    if targets(for: uri).isEmpty {
-      return .unhandled
-    }
-    return .handled
-  }
-
   package func sourceFiles() -> [SourceFileInfo] {
     var sourceFiles: [DocumentURI: SourceFileInfo] = [:]
     for (buildTarget, depth) in self.targets.values {
diff --git a/Sources/BuildSystemIntegration/TestBuildSystem.swift b/Sources/BuildSystemIntegration/TestBuildSystem.swift
index eef17266..2d8b95a4 100644
--- a/Sources/BuildSystemIntegration/TestBuildSystem.swift
+++ b/Sources/BuildSystemIntegration/TestBuildSystem.swift
@@ -102,14 +102,6 @@ package actor TestBuildSystem: BuiltInBuildSystem {
 
   package func didChangeWatchedFiles(notification: BuildServerProtocol.DidChangeWatchedFilesNotification) async {}
 
-  package func fileHandlingCapability(for uri: DocumentURI) -> FileHandlingCapability {
-    if buildSettingsByFile[uri] != nil {
-      return .handled
-    } else {
-      return .unhandled
-    }
-  }
-
   package func sourceFiles() async -> [SourceFileInfo] {
     return []
   }
diff --git a/Sources/SourceKitLSP/SourceKitLSPServer.swift b/Sources/SourceKitLSP/SourceKitLSPServer.swift
index 0d4945de..078f74d8 100644
--- a/Sources/SourceKitLSP/SourceKitLSPServer.swift
+++ b/Sources/SourceKitLSP/SourceKitLSPServer.swift
@@ -327,32 +327,21 @@ package actor SourceKitLSPServer {
   private func computeWorkspaceForDocument(uri: DocumentURI) async -> Workspace? {
     // Pick the workspace with the best FileHandlingCapability for this file.
     // If there is a tie, use the workspace that occurred first in the list.
-    var bestWorkspace: (workspace: Workspace?, fileHandlingCapability: FileHandlingCapability) = (nil, .unhandled)
-    for workspace in self.workspaces {
-      let fileHandlingCapability = await workspace.buildSystemManager.fileHandlingCapability(for: uri)
-      if fileHandlingCapability > bestWorkspace.fileHandlingCapability {
-        bestWorkspace = (workspace, fileHandlingCapability)
-      }
+    var bestWorkspace = await self.workspaces.asyncFirst {
+      await !$0.buildSystemManager.targets(for: uri).isEmpty
     }
-    if bestWorkspace.fileHandlingCapability < .handled {
+    if bestWorkspace == nil {
       // We weren't able to handle the document with any of the known workspaces. See if any of the document's parent
       // directories contain a workspace that might be able to handle the document
       if let workspace = await self.findImplicitWorkspace(for: uri) {
         logger.log("Opening implicit workspace at \(workspace.rootUri.forLogging) to handle \(uri.forLogging)")
         self.workspacesAndIsImplicit.append((workspace: workspace, isImplicit: true))
-        bestWorkspace = (workspace, .handled)
+        bestWorkspace = workspace
       }
     }
-    self.workspaceForUri[uri] = WeakWorkspace(bestWorkspace.workspace)
-    if let workspace = bestWorkspace.workspace {
-      return workspace
-    }
-    if let workspace = self.workspaces.only {
-      // Special handling: If there is only one workspace, open all files in it, even it it cannot handle the document.
-      // This retains the behavior of SourceKit-LSP before it supported multiple workspaces.
-      return workspace
-    }
-    return nil
+    let workspace = bestWorkspace ?? self.workspaces.first
+    self.workspaceForUri[uri] = WeakWorkspace(workspace)
+    return workspace
   }
 
   /// Check that the entries in `workspaceForUri` are still up-to-date after workspaces might have changed.
diff --git a/Sources/SourceKitLSP/Workspace.swift b/Sources/SourceKitLSP/Workspace.swift
index f52ea5bb..2202ae19 100644
--- a/Sources/SourceKitLSP/Workspace.swift
+++ b/Sources/SourceKitLSP/Workspace.swift
@@ -10,6 +10,7 @@
 //
 //===----------------------------------------------------------------------===//
 
+import BuildServerProtocol
 import BuildSystemIntegration
 import IndexStoreDB
 import LanguageServerProtocol
@@ -82,7 +83,8 @@ package final class Workspace: Sendable, BuildSystemManagerDelegate {
   /// `nil` if background indexing is not enabled.
   let semanticIndexManager: SemanticIndexManager?
 
-  /// A callback that should be called when the file handling capability of this workspace changes.
+  /// A callback that should be called when the file handling capability (ie. the presence of a target for a source
+  /// files) of this workspace changes.
   private let fileHandlingCapabilityChangedCallback: @Sendable () async -> Void
 
   private init(
@@ -316,7 +318,7 @@ package final class Workspace: Sendable, BuildSystemManagerDelegate {
     }
   }
 
-  package func fileHandlingCapabilityChanged() async {
+  package func buildTargetsChanged(_ changes: [BuildTargetEvent]?) async {
     await self.fileHandlingCapabilityChangedCallback()
   }
 }
diff --git a/Sources/SwiftExtensions/Sequence+AsyncMap.swift b/Sources/SwiftExtensions/Sequence+AsyncMap.swift
index 3e7e1dee..a2d27654 100644
--- a/Sources/SwiftExtensions/Sequence+AsyncMap.swift
+++ b/Sources/SwiftExtensions/Sequence+AsyncMap.swift
@@ -68,4 +68,17 @@ extension Sequence {
 
     return result
   }
+
+  /// Just like `Sequence.first` but allows an `async` predicate function.
+  package func asyncFirst(
+    @_inheritActorContext _ predicate: @Sendable (Element) async throws -> Bool
+  ) async rethrows -> Element? {
+    for element in self {
+      if try await predicate(element) {
+        return element
+      }
+    }
+
+    return nil
+  }
 }
diff --git a/Tests/BuildSystemIntegrationTests/BuildServerBuildSystemTests.swift b/Tests/BuildSystemIntegrationTests/BuildServerBuildSystemTests.swift
index aeb860d7..22edcb99 100644
--- a/Tests/BuildSystemIntegrationTests/BuildServerBuildSystemTests.swift
+++ b/Tests/BuildSystemIntegrationTests/BuildServerBuildSystemTests.swift
@@ -134,8 +134,6 @@ final class TestDelegate: BuildSystemDelegate, BuiltInBuildSystemMessageHandler
     }
   }
 
-  func fileHandlingCapabilityChanged() {}
-
   func sendRequestToSourceKitLSP<R: RequestType>(_ request: R) async throws -> R.Response {
     throw ResponseError.methodNotFound(R.method)
   }
diff --git a/Tests/BuildSystemIntegrationTests/BuildSystemManagerTests.swift b/Tests/BuildSystemIntegrationTests/BuildSystemManagerTests.swift
index f9372412..1da74e4d 100644
--- a/Tests/BuildSystemIntegrationTests/BuildSystemManagerTests.swift
+++ b/Tests/BuildSystemIntegrationTests/BuildSystemManagerTests.swift
@@ -449,5 +449,5 @@ private actor BSMDelegate: BuildSystemManagerDelegate {
     }
   }
 
-  func fileHandlingCapabilityChanged() {}
+  func buildTargetsChanged(_ changes: [BuildTargetEvent]?) async {}
 }