Large Language Models (LLMs), despite their remarkable capabilities, are hampered by hallucinations. A particularly challenging variant, knowledge overshadowing, occurs when one piece of activated knowledge inadvertently masks another relevant piece, leading to erroneous outputs even with high-quality training data. Current understanding of overshadowing is largely confined to inference-time observations, lacking deep insights into its origins and internal mechanisms during model training. Therefore, we introduce **PhantomCircuit, a novel framework designed to comprehensively analyze and detect knowledge overshadowing.** By innovatively employing knowledge circuit analysis, PhantomCircuit dissects the function of key components in the circuit and how the attention pattern dynamics contribute to the overshadowing phenomenon and its evolution throughout the training process. Extensive experiments demonstrate PhantomCircuit’s effectiveness in identifying such instances, offering novel insights into this elusive hallucination and providing the research community with a new methodological lens for its potential mitigation. Our code can be found in https://github.com/halfmorepiece/PhantomCircuit.