The project referenced in the error message depends upon the selected project in order to build; the selected project depends upon the referenced project to build. Neither project can be built until the circular reference is resolved.
This error usually occurs when one deployment project contains the project outputs of a second deployment project, and the second project contains the outputs of the first project.
To correct this error
Double-click the error in the Task List to open the selected project in the File System Editor.
Select the project output group for the project referenced in the error message.
On the Edit menu, choose Delete.