diff --git a/lib/rules/no-template-shadow.js b/lib/rules/no-template-shadow.js
index 44f26cf57..f66f8a701 100644
--- a/lib/rules/no-template-shadow.js
+++ b/lib/rules/no-template-shadow.js
@@ -19,7 +19,7 @@ const utils = require('../utils')
 // ------------------------------------------------------------------------------
 
 /** @type {GroupName[]} */
-const GROUP_NAMES = ['props', 'computed', 'data', 'methods']
+const GROUP_NAMES = ['props', 'computed', 'data', 'methods', 'setup']
 
 module.exports = {
   meta: {
@@ -50,44 +50,43 @@ module.exports = {
     // Public
     // ----------------------------------------------------------------------
 
-    return utils.defineTemplateBodyVisitor(
-      context,
-      {
-        /** @param {VElement} node */
-        VElement(node) {
-          scopeStack = {
-            parent: scopeStack,
-            nodes: scopeStack
-              ? scopeStack.nodes.slice() // make copy
-              : []
-          }
-          if (node.variables) {
-            for (const variable of node.variables) {
-              const varNode = variable.id
-              const name = varNode.name
-              if (
-                scopeStack.nodes.some((node) => node.name === name) ||
-                jsVars.has(name)
-              ) {
-                context.report({
-                  node: varNode,
-                  loc: varNode.loc,
-                  message:
-                    "Variable '{{name}}' is already declared in the upper scope.",
-                  data: {
-                    name
-                  }
-                })
-              } else {
-                scopeStack.nodes.push(varNode)
+    return utils.compositingVisitors(
+      utils.isScriptSetup(context)
+        ? {
+            Program() {
+              const globalScope =
+                context.getSourceCode().scopeManager.globalScope
+              if (!globalScope) {
+                return
+              }
+              for (const variable of globalScope.variables) {
+                if (variable.defs.length > 0) {
+                  jsVars.add(variable.name)
+                }
+              }
+              const moduleScope = globalScope.childScopes.find(
+                (scope) => scope.type === 'module'
+              )
+              if (!moduleScope) {
+                return
+              }
+              for (const variable of moduleScope.variables) {
+                if (variable.defs.length > 0) {
+                  jsVars.add(variable.name)
+                }
               }
             }
           }
-        },
-        'VElement:exit'() {
-          scopeStack = scopeStack && scopeStack.parent
+        : {},
+      utils.defineScriptSetupVisitor(context, {
+        onDefinePropsEnter(_node, props) {
+          for (const prop of props) {
+            if (prop.propName) {
+              jsVars.add(prop.propName)
+            }
+          }
         }
-      },
+      }),
       utils.executeOnVue(context, (obj) => {
         const properties = Array.from(
           utils.iterateProperties(obj, new Set(GROUP_NAMES))
@@ -95,6 +94,38 @@ module.exports = {
         for (const node of properties) {
           jsVars.add(node.name)
         }
+      }),
+      utils.defineTemplateBodyVisitor(context, {
+        /** @param {VElement} node */
+        VElement(node) {
+          scopeStack = {
+            parent: scopeStack,
+            nodes: scopeStack ? [...scopeStack.nodes] : []
+          }
+          for (const variable of node.variables) {
+            const varNode = variable.id
+            const name = varNode.name
+            if (
+              scopeStack.nodes.some((node) => node.name === name) ||
+              jsVars.has(name)
+            ) {
+              context.report({
+                node: varNode,
+                loc: varNode.loc,
+                message:
+                  "Variable '{{name}}' is already declared in the upper scope.",
+                data: {
+                  name
+                }
+              })
+            } else {
+              scopeStack.nodes.push(varNode)
+            }
+          }
+        },
+        'VElement:exit'() {
+          scopeStack = scopeStack && scopeStack.parent
+        }
       })
     )
   }
diff --git a/tests/lib/rules/no-template-shadow.js b/tests/lib/rules/no-template-shadow.js
index 872dffcf1..1f1daa184 100644
--- a/tests/lib/rules/no-template-shadow.js
+++ b/tests/lib/rules/no-template-shadow.js
@@ -115,6 +115,54 @@ ruleTester.run('no-template-shadow', rule, {
           }
         }
       </script>`
+    },
+    {
+      filename: 'test.vue',
+      code: `
+      <template>
+        <div v-for="i in 5">
+          <div v-for="j in 5">
+          </div>
+        </div>
+      </template>
+      <script>
+        export default {
+          setup() {
+            return {
+              k: 42
+            }
+          }
+        }
+      </script>
+      `
+    },
+    {
+      filename: 'test.vue',
+      code: `
+      <template>
+        <div v-for="i in 5">
+          <div v-for="j in 5">
+          </div>
+        </div>
+      </template>
+      <script setup>
+      let k = 42
+      </script>
+      `
+    },
+    {
+      filename: 'test.vue',
+      code: `
+      <template>
+        <div v-for="i in 5">
+          <div v-for="j in 5">
+          </div>
+        </div>
+      </template>
+      <script setup>
+      defineProps({k:Number})
+      </script>
+      `
     }
   ],
 
@@ -345,6 +393,72 @@ ruleTester.run('no-template-shadow', rule, {
           line: 7
         }
       ]
+    },
+    {
+      filename: 'test.vue',
+      code: `
+      <template>
+        <div v-for="i in 5">
+          <div v-for="j in 5">
+          </div>
+        </div>
+      </template>
+      <script>
+        export default {
+          setup() {
+            return {
+              j: 42
+            }
+          }
+        }
+      </script>
+      `,
+      errors: [
+        {
+          message: "Variable 'j' is already declared in the upper scope.",
+          line: 4
+        }
+      ]
+    },
+    {
+      filename: 'test.vue',
+      code: `
+      <template>
+        <div v-for="i in 5">
+          <div v-for="j in 5">
+          </div>
+        </div>
+      </template>
+      <script setup>
+      let j = 42
+      </script>
+      `,
+      errors: [
+        {
+          message: "Variable 'j' is already declared in the upper scope.",
+          line: 4
+        }
+      ]
+    },
+    {
+      filename: 'test.vue',
+      code: `
+      <template>
+        <div v-for="i in 5">
+          <div v-for="j in 5">
+          </div>
+        </div>
+      </template>
+      <script setup>
+      defineProps({j:Number})
+      </script>
+      `,
+      errors: [
+        {
+          message: "Variable 'j' is already declared in the upper scope.",
+          line: 4
+        }
+      ]
     }
   ]
 })