diff --git a/hydra/_internal/instantiate/_instantiate2.py b/hydra/_internal/instantiate/_instantiate2.py
index c42b9d67c4..c5adb7e110 100644
--- a/hydra/_internal/instantiate/_instantiate2.py
+++ b/hydra/_internal/instantiate/_instantiate2.py
@@ -163,7 +163,12 @@ def _deep_copy_full_config(subconfig: Any) -> Any:
         return copy.deepcopy(subconfig)
 
 
-def instantiate(config: Any, *args: Any, **kwargs: Any) -> Any:
+def instantiate(
+    config: Any,
+    *args: Any,
+    _skip_instantiate_full_deepcopy_: bool = False,
+    **kwargs: Any,
+) -> Any:
     """
     :param config: An config object describing what to call and what params to use.
                    In addition to the parameters, the config must contain:
@@ -186,6 +191,10 @@ def instantiate(config: Any, *args: Any, **kwargs: Any) -> Any:
                                   are converted to dicts / lists too.
                    _partial_: If True, return functools.partial wrapped method or object
                               False by default. Configure per target.
+    :param _skip_instantiate_full_deepcopy_: If True, deep copy just the input config instead
+                    of full config before resolving omegaconf interpolations, which may
+                    potentially modify the config's parent/sibling configs in place.
+                    False by default.
     :param args: Optional positional parameters pass-through
     :param kwargs: Optional named parameters to override
                    parameters in the config object. Parameters not present
@@ -225,8 +234,12 @@ def instantiate(config: Any, *args: Any, **kwargs: Any) -> Any:
 
     if OmegaConf.is_dict(config):
         # Finalize config (convert targets to strings, merge with kwargs)
-        # Create full copy to avoid mutating original
-        config_copy = _deep_copy_full_config(config)
+        # Create copy to avoid mutating original
+        if _skip_instantiate_full_deepcopy_:
+            config_copy = copy.deepcopy(config)
+            config_copy._set_parent(config._get_parent())
+        else:
+            config_copy = _deep_copy_full_config(config)
         config_copy._set_flag(
             flags=["allow_objects", "struct", "readonly"], values=[True, False, False]
         )
@@ -246,8 +259,12 @@ def instantiate(config: Any, *args: Any, **kwargs: Any) -> Any:
         )
     elif OmegaConf.is_list(config):
         # Finalize config (convert targets to strings, merge with kwargs)
-        # Create full copy to avoid mutating original
-        config_copy = _deep_copy_full_config(config)
+        # Create copy to avoid mutating original
+        if _skip_instantiate_full_deepcopy_:
+            config_copy = copy.deepcopy(config)
+            config_copy._set_parent(config._get_parent())
+        else:
+            config_copy = _deep_copy_full_config(config)
         config_copy._set_flag(
             flags=["allow_objects", "struct", "readonly"], values=[True, False, False]
         )
diff --git a/tests/instantiate/test_instantiate.py b/tests/instantiate/test_instantiate.py
index c022ccb72b..10a67b1c14 100644
--- a/tests/instantiate/test_instantiate.py
+++ b/tests/instantiate/test_instantiate.py
@@ -485,6 +485,7 @@ def test_none_cases(
     assert str(cfg) == original_config_str
 
 
+@mark.parametrize("skip_deepcopy", [True, False])
 @mark.parametrize("convert_to_list", [True, False])
 @mark.parametrize(
     "input_conf, passthrough, expected",
@@ -578,6 +579,7 @@ def test_interpolation_accessing_parent(
     passthrough: Dict[str, Any],
     expected: Any,
     convert_to_list: bool,
+    skip_deepcopy: bool,
 ) -> Any:
     if convert_to_list:
         input_conf = copy.deepcopy(input_conf)
@@ -586,15 +588,24 @@ def test_interpolation_accessing_parent(
     input_conf = OmegaConf.create(input_conf)
     original_config_str = str(input_conf)
     if convert_to_list:
-        obj = instantiate_func(input_conf.node[0], **passthrough)
+        obj = instantiate_func(
+            input_conf.node[0],
+            _skip_instantiate_full_deepcopy_=skip_deepcopy,
+            **passthrough,
+        )
     else:
-        obj = instantiate_func(input_conf.node, **passthrough)
+        obj = instantiate_func(
+            input_conf.node,
+            _skip_instantiate_full_deepcopy_=skip_deepcopy,
+            **passthrough,
+        )
     if isinstance(expected, partial):
         assert partial_equal(obj, expected)
     else:
         assert obj == expected
     assert input_conf == cfg_copy
-    assert str(input_conf) == original_config_str
+    if not skip_deepcopy:
+        assert str(input_conf) == original_config_str
 
 
 @mark.parametrize(