diff --git a/changelogs/fragments/6303-pipx-fix-state-latest-and-add-system-site-packages.yml b/changelogs/fragments/6303-pipx-fix-state-latest-and-add-system-site-packages.yml
new file mode 100644
index 0000000000..1600c8252c
--- /dev/null
+++ b/changelogs/fragments/6303-pipx-fix-state-latest-and-add-system-site-packages.yml
@@ -0,0 +1,2 @@
+bugfixes:
+  - pipx - fixed handling of ``install_deps=true`` with ``state=latest`` and ``state=upgrade`` (https://github.com/ansible-collections/community.general/pull/6303).
diff --git a/plugins/modules/pipx.py b/plugins/modules/pipx.py
index 9c1c74470d..dfa2f4300f 100644
--- a/plugins/modules/pipx.py
+++ b/plugins/modules/pipx.py
@@ -57,7 +57,7 @@ options:
     install_deps:
         description:
             - Include applications of dependent packages.
-            - Only used when I(state=install), I(state=latest), I(state=upgrade), or I(state=inject).
+            - Only used when I(state=install), I(state=latest), or I(state=inject).
         type: bool
         default: false
     inject_packages:
@@ -120,6 +120,7 @@ notes:
     - >
       This module will honor C(pipx) environment variables such as but not limited to C(PIPX_HOME) and C(PIPX_BIN_DIR)
       passed using the R(environment Ansible keyword, playbooks_environment).
+    - This module requires C(pipx) version 0.16.2.1 or above.
     - Please note that C(pipx) requires Python 3.6 or above.
     - >
       This first implementation does not verify whether a specified version constraint has been installed or not.
@@ -263,7 +264,7 @@ class PipX(StateModuleHelper):
         if self.vars.force:
             self.changed = True
 
-        with self.runner('state include_injected index_url install_deps force editable pip_args name', check_mode_skip=True) as ctx:
+        with self.runner('state include_injected index_url force editable pip_args name', check_mode_skip=True) as ctx:
             ctx.run()
             self._capture_results(ctx)
 
@@ -316,7 +317,7 @@ class PipX(StateModuleHelper):
                 ctx.run(state='install', name_source=[self.vars.name, self.vars.source])
                 self._capture_results(ctx)
 
-        with self.runner('state include_injected index_url install_deps force editable pip_args name', check_mode_skip=True) as ctx:
+        with self.runner('state include_injected index_url force editable pip_args name', check_mode_skip=True) as ctx:
             ctx.run(state='upgrade')
             self._capture_results(ctx)
 
diff --git a/plugins/modules/pipx_info.py b/plugins/modules/pipx_info.py
index 4487cdab5a..e2bb7fdaef 100644
--- a/plugins/modules/pipx_info.py
+++ b/plugins/modules/pipx_info.py
@@ -53,6 +53,7 @@ notes:
     - >
       This module will honor C(pipx) environment variables such as but not limited to C(PIPX_HOME) and C(PIPX_BIN_DIR)
       passed using the R(environment Ansible keyword, playbooks_environment).
+    - This module requires C(pipx) version 0.16.2.1 or above.
     - Please note that C(pipx) requires Python 3.6 or above.
     - See also the C(pipx) documentation at U(https://pypa.github.io/pipx/).
 author:
diff --git a/tests/integration/targets/pipx/tasks/main.yml b/tests/integration/targets/pipx/tasks/main.yml
index cb74d47ac2..567405ec49 100644
--- a/tests/integration/targets/pipx/tasks/main.yml
+++ b/tests/integration/targets/pipx/tasks/main.yml
@@ -184,6 +184,19 @@
     name: tox
   register: uninstall_tox_latest_again
 
+- name: install application tox with deps
+  community.general.pipx:
+    state: latest
+    name: tox
+    install_deps: true
+  register: install_tox_with_deps
+
+- name: cleanup tox latest yet again
+  community.general.pipx:
+    state: absent
+    name: tox
+  register: uninstall_tox_again
+
 - name: check assertions tox latest
   assert:
     that:
@@ -198,6 +211,10 @@
       - install_tox_latest_with_preinstall_again_force is changed
       - install_tox_latest_with_preinstall_again_force.application.tox.version == latest_tox_version
       - uninstall_tox_latest_again is changed
+      - install_tox_with_deps is changed
+      - install_tox_with_deps.application.tox.version == latest_tox_version
+      - uninstall_tox_again is changed
+      - "'tox' not in uninstall_tox_again.application"
 
 ##############################################################################
 - name: ensure application ansible-lint is uninstalled