diff --git a/libs/core/langchain_core/callbacks/base.py b/libs/core/langchain_core/callbacks/base.py
index f8877360571b3..e11713b0af7f9 100644
--- a/libs/core/langchain_core/callbacks/base.py
+++ b/libs/core/langchain_core/callbacks/base.py
@@ -965,28 +965,29 @@ def merge(self, other: BaseCallbackManager) -> Self:
                 #    ['tag2', 'tag1']
             ```
         """  # noqa: E501
-        manager = self.__class__(
+        # Combine handlers and inheritable_handlers separately, using sets
+        # to deduplicate (order not preserved)
+        combined_handlers = list(set(self.handlers) | set(other.handlers))
+        combined_inheritable = list(
+            set(self.inheritable_handlers) | set(other.inheritable_handlers)
+        )
+
+        return self.__class__(
             parent_run_id=self.parent_run_id or other.parent_run_id,
-            handlers=[],
-            inheritable_handlers=[],
+            handlers=combined_handlers,
+            inheritable_handlers=combined_inheritable,
             tags=list(set(self.tags + other.tags)),
             inheritable_tags=list(set(self.inheritable_tags + other.inheritable_tags)),
             metadata={
                 **self.metadata,
                 **other.metadata,
             },
+            inheritable_metadata={
+                **self.inheritable_metadata,
+                **other.inheritable_metadata,
+            },
         )
 
-        handlers = self.handlers + other.handlers
-        inheritable_handlers = self.inheritable_handlers + other.inheritable_handlers
-
-        for handler in handlers:
-            manager.add_handler(handler)
-
-        for handler in inheritable_handlers:
-            manager.add_handler(handler, inherit=True)
-        return manager
-
     @property
     def is_async(self) -> bool:
         """Whether the callback manager is async."""
diff --git a/libs/core/tests/unit_tests/callbacks/test_sync_callback_manager.py b/libs/core/tests/unit_tests/callbacks/test_sync_callback_manager.py
index 0cdabea9cc410..3c880ff666b33 100644
--- a/libs/core/tests/unit_tests/callbacks/test_sync_callback_manager.py
+++ b/libs/core/tests/unit_tests/callbacks/test_sync_callback_manager.py
@@ -1,5 +1,3 @@
-import pytest
-
 from langchain_core.callbacks.base import BaseCallbackHandler, BaseCallbackManager
 
 
@@ -17,9 +15,6 @@ def test_remove_handler() -> None:
     manager.remove_handler(handler2)
 
 
-@pytest.mark.xfail(
-    reason="TODO: #32028 merge() incorrectly mixes handlers and inheritable_handlers"
-)
 def test_merge_preserves_handler_distinction() -> None:
     """Test that merging managers preserves the distinction between handlers.