diff --git a/ChangeLog.md b/ChangeLog.md
--- a/ChangeLog.md
+++ b/ChangeLog.md
@@ -1,7 +1,8 @@
 # ChangeLog hie-bios
 
-* Rename `findFileUpwards` as `findFileUpwardsPredicate` and implement
-  `findFileUpward` which does have better performance guarantees.
+## 2025-08-07 - 0.17.0
+
+* Add support for cabal 3.16.1.0 [#470](https://github.com/haskell/hie-bios/pull/470)
 
 ## 2025-07-09 - 0.16.0
 
diff --git a/hie-bios.cabal b/hie-bios.cabal
--- a/hie-bios.cabal
+++ b/hie-bios.cabal
@@ -1,6 +1,6 @@
 Cabal-Version:          2.2
 Name:                   hie-bios
-Version:                0.16.0
+Version:                0.17.0
 Author:                 Matthew Pickering <matthewtpickering@gmail.com>
 Maintainer:             Matthew Pickering <matthewtpickering@gmail.com>
 License:                BSD-3-Clause
diff --git a/src/HIE/Bios/Cradle/Cabal.hs b/src/HIE/Bios/Cradle/Cabal.hs
--- a/src/HIE/Bios/Cradle/Cabal.hs
+++ b/src/HIE/Bios/Cradle/Cabal.hs
@@ -194,9 +194,10 @@
             }
         Just (componentDir, ghc_args) -> do
           deps <- liftIO $ cabalCradleDependencies projectFile workDir componentDir
-          final_args <- case cabalFeatures of
-            CabalWithRepl -> liftIO $ expandGhcOptionResponseFile ghc_args
-            CabalWithGhcShimWrapper -> pure ghc_args
+          usesResponseFiles <- usesResponseFilesForAllGhcOptions progVersions
+          final_args <- case usesResponseFiles of
+            True -> liftIO $ expandGhcOptionResponseFile ghc_args
+            False -> pure ghc_args
           CradleLoadResultT $ pure $ CradleSuccess
             ComponentOptions
               { componentOptions = final_args
@@ -594,6 +595,37 @@
       | ver >= makeVersion [3, 15] -> pure CabalWithRepl
       | otherwise -> pure CabalWithGhcShimWrapper
     _ -> pure CabalWithGhcShimWrapper
+
+-- | As `cabal repl` started to hit maximum cli invocation length, we changed how repl arguments are
+-- passed to GHC. In `cabal 3.15`, `cabal 3.16.0.0`, `cabal 3.17` and onwards, ghc options are
+-- passed to GHC via response files.
+--
+-- This breaks HLS release binary distributions before 2.12, as neither HLS nor hie-bios are capable of handling
+-- response files at the top-level.
+--
+-- In particular, `cabal 3.16.0.0` was released with this change and no HLS bindist before 2.12 works
+-- with `cabal 3.16.0.0`.
+-- To make `cabal 3.16.*` series compatible with released HLS binaries, we reverted the response file
+-- change for the ghc options. This change will apply once `cabal 3.16.1.*` is released.
+-- Note, in `cabal 3.17`, i.e. cabal HEAD, we still pass the arguments via response files and will do that for the
+-- `cabal 3.18` release.
+--
+-- So, we have a weird matrix now, between some commit in `cabal 3.15` and `cabal 3.16`, ghc arguments
+-- are supplied encoded in a response file, while in `>= cabal 3.16.1`, the arguments are passed verbatim.
+-- Then, later on in `cabal-3.17`, we use response files again.
+--
+-- 'usesResponseFilesForAllGhcOptions' encodes all of this history.
+usesResponseFilesForAllGhcOptions :: MonadIO m => ProgramVersions -> m Bool
+usesResponseFilesForAllGhcOptions vs = do
+  cabal_version <- liftIO $ runCachedIO $ cabalVersion vs
+  -- determine which load style is supported by this cabal cradle.
+  case cabal_version of
+    Just ver
+      | ver >= makeVersion [3, 15] && ver <= makeVersion [3, 16, 0, 0] -> pure True
+      | ver >= makeVersion [3, 17] -> pure True
+      | otherwise -> pure False
+    _ -> pure False
+
 
 -- | When @cabal repl --with-repl@ is called in a project with a custom setup which forces
 -- an older @lib:Cabal@ version, then the error message looks roughly like:
diff --git a/tests/BiosTests.hs b/tests/BiosTests.hs
--- a/tests/BiosTests.hs
+++ b/tests/BiosTests.hs
@@ -407,12 +407,14 @@
 
 stackYamlResolver :: String
 stackYamlResolver =
-#if (defined(MIN_VERSION_GLASGOW_HASKELL) && (MIN_VERSION_GLASGOW_HASKELL(9,10,0,0)))
-  "nightly-2025-04-24" -- GHC 9.10.1
+#if (defined(MIN_VERSION_GLASGOW_HASKELL) && (MIN_VERSION_GLASGOW_HASKELL(9,12,0,0)))
+  "nightly-2025-08-07" -- GHC 9.12.2
+#elif (defined(MIN_VERSION_GLASGOW_HASKELL) && (MIN_VERSION_GLASGOW_HASKELL(9,10,0,0)))
+  "lts-24.3" -- GHC 9.10.2
 #elif (defined(MIN_VERSION_GLASGOW_HASKELL) && (MIN_VERSION_GLASGOW_HASKELL(9,8,0,0)))
   "lts-23.19" -- GHC 9.8.4
 #elif (defined(MIN_VERSION_GLASGOW_HASKELL) && (MIN_VERSION_GLASGOW_HASKELL(9,6,0,0)))
-  "lts-22.43" -- GHC 9.6.6
+  "lts-22.44" -- GHC 9.6.7
 #elif (defined(MIN_VERSION_GLASGOW_HASKELL) && (MIN_VERSION_GLASGOW_HASKELL(9,4,0,0)))
   "lts-21.25" -- GHC 9.4.8
 #elif (defined(MIN_VERSION_GLASGOW_HASKELL) && (MIN_VERSION_GLASGOW_HASKELL(9,2,0,0)))
@@ -491,13 +493,11 @@
   \_opts _tree -> Nothing
 
 -- ------------------------------------------------------------------
--- Ignore test group if built with GHC 9.6.7 and GHC 9.12.2
+-- Ignore test group if not supported by any stackage snapshot
 -- ------------------------------------------------------------------
 
 ignoreOnUnsupportedGhc :: TestTree -> TestTree
 ignoreOnUnsupportedGhc tt =
-#if (defined(MIN_VERSION_GLASGOW_HASKELL) && (MIN_VERSION_GLASGOW_HASKELL(9,6,7,0) && !MIN_VERSION_GLASGOW_HASKELL(9,6,8,0)) || (MIN_VERSION_GLASGOW_HASKELL(9,12,2,0) && !MIN_VERSION_GLASGOW_HASKELL(9,12,3,0)))
-  ignoreTestBecause "Not supported on 9.6.7 and 9.12.2"
-#endif
+  -- Currently, all GHC versions are supported! Yay!
   tt