diff --git a/onnxruntime/core/optimizer/transpose_optimizer/transpose_optimizer.cc b/onnxruntime/core/optimizer/transpose_optimizer/transpose_optimizer.cc
index 9e552a41c3..81adcee7cb 100644
--- a/onnxruntime/core/optimizer/transpose_optimizer/transpose_optimizer.cc
+++ b/onnxruntime/core/optimizer/transpose_optimizer/transpose_optimizer.cc
@@ -1997,7 +1997,9 @@ OptimizeResult OptimizeImpl(OptimizerCtx& ctx) {
         continue;
       }
 
-      if (!HandleQuantizeDequantizeScale(ctx.graph, *perm, *dq_node, ctx.opset)) {
+      // we're moving the Transpose to before the DQ, so we need to use the inverse permutations to update the axis
+      // attribute correctly when doing per-axis dequantization
+      if (!HandleQuantizeDequantizeScale(ctx.graph, InvertPerm(*perm), *dq_node, ctx.opset)) {
         continue;
       }
 
diff --git a/onnxruntime/test/optimizer/transpose_optimizer_test.cc b/onnxruntime/test/optimizer/transpose_optimizer_test.cc
index 68e2be1b34..cfeb9a2202 100644
--- a/onnxruntime/test/optimizer/transpose_optimizer_test.cc
+++ b/onnxruntime/test/optimizer/transpose_optimizer_test.cc
@@ -5,6 +5,8 @@
 #include <vector>
 
 #include "gtest/gtest.h"
+#include "gmock/gmock.h"
+
 #include "graph_transform_test_builder.h"
 
 #include "core/graph/graph.h"
@@ -3620,7 +3622,6 @@ TEST(TransposeOptimizerTests, TestDequantizeLinearTransposePropagation) {
     EXPECT_EQ(op_types_in_order, expected_op_types_in_order);
   };
 
-
   TransformerTester(build_test_case_1,
                     check_graph,
                     TransformerLevel::Default,
@@ -4047,5 +4048,41 @@ TEST(TransposeOptimizerTests, RegressionTest_GitHubIssue10305) {
   ASSERT_STATUS_OK(session_object.Load(model_uri));
   ASSERT_STATUS_OK(session_object.Initialize());  // optimizers run during initialization
 }
+
+// regression test for a model with DQ node with per-axis dequantization followed by a Transpose.
+// the second phase can swap those around, but needs to use the correct perms for updating the 'axis'
+// attribute in the DQ node.
+// see https://github.com/microsoft/onnxruntime/issues/12151 for more details.
+TEST(TransposeOptimizerTests, RegressionTest_GitHubIssue12151) {
+  Status status;
+  auto model_uri = ORT_TSTR("testdata/ort_github_issue_12151.onnx");
+
+  NameMLValMap feeds;  // no inputs for this model
+  std::vector<std::string> output_names{"Z"};
+  std::vector<OrtValue> fetches_orig;
+  std::vector<OrtValue> fetches;
+
+  SessionOptions so;
+  so.session_logid = "TransposeOptimizerTests.RegressionTest_GitHubIssue12151";
+
+  {
+    so.graph_optimization_level = TransformerLevel::Default;  // off
+    InferenceSession session_object{so, GetEnvironment()};
+    ASSERT_STATUS_OK(session_object.Load(model_uri));
+    ASSERT_STATUS_OK(session_object.Initialize());
+    ASSERT_STATUS_OK(session_object.Run(feeds, output_names, &fetches_orig));
+  }
+
+  {
+    so.graph_optimization_level = TransformerLevel::Level1;  // enable transpose optimizer
+    InferenceSession session_object{so, GetEnvironment()};
+    ASSERT_STATUS_OK(session_object.Load(model_uri));
+    ASSERT_STATUS_OK(session_object.Initialize());
+    ASSERT_STATUS_OK(session_object.Run(feeds, output_names, &fetches));
+  }
+
+  ASSERT_THAT(fetches_orig[0].Get<Tensor>().DataAsSpan<float>(),
+              testing::ContainerEq(fetches[0].Get<Tensor>().DataAsSpan<float>()));
+}
 }  // namespace test
 }  // namespace onnxruntime
diff --git a/onnxruntime/test/testdata/ort_github_issue_12151.onnx b/onnxruntime/test/testdata/ort_github_issue_12151.onnx
new file mode 100644
index 0000000000..f796b46f1b
Binary files /dev/null and b/onnxruntime/test/testdata/ort_github_issue_12151.onnx differ