diff --git a/packages/core/useTitle/index.md b/packages/core/useTitle/index.md
index 23d71e40555..f124188852b 100644
--- a/packages/core/useTitle/index.md
+++ b/packages/core/useTitle/index.md
@@ -7,7 +7,8 @@ category: Browser
 Reactive document title.
 
 ::: tip
-When using with Nuxt 3, this functions will **NOT** be auto imported in favor of Nuxt's built-in `useTitle()`. Use explicit import if you want to use the function from VueUse.
+When using with Nuxt 3, this functions will **NOT** be auto imported in favor of Nuxt's built-in `useTitle()`.
+Use explicit import if you want to use the function from VueUse.
 :::
 
 ## Usage
@@ -20,13 +21,13 @@ console.log(title.value) // print current title
 title.value = 'Hello' // change current title
 ```
 
-Set initial title immediately
+Set initial title immediately:
 
 ```js
 const title = useTitle('New Title')
 ```
 
-Pass a `ref` and the title will be updated when the source ref changes
+Pass a `ref` and the title will be updated when the source ref changes:
 
 ```js
 import { useTitle } from '@vueuse/core'
@@ -40,9 +41,13 @@ const title = computed(() => {
 useTitle(title) // document title will match with the ref "title"
 ```
 
-Pass an optional template tag [Vue Meta Title Template](https://vue-meta.nuxtjs.org/guide/metainfo.html) 
-to update the title to be injected into this template:
+Pass an optional template tag [Vue Meta Title Template](https://vue-meta.nuxtjs.org/guide/metainfo.html) to update the title to be injected into this template:
 
 ```js
 const title = useTitle('New Title', { titleTemplate: '%s | My Awesome Website' })
 ```
+
+::: warning
+`observe` is incompatible with `titleTemplate`.
+:::
+
diff --git a/packages/core/useTitle/index.test.ts b/packages/core/useTitle/index.test.ts
new file mode 100644
index 00000000000..e5d5acae5e5
--- /dev/null
+++ b/packages/core/useTitle/index.test.ts
@@ -0,0 +1,87 @@
+import { computed, ref } from 'vue-demi'
+import { useTitle } from '.'
+
+describe('useTitle', () => {
+  it('without param', () => {
+    const title = useTitle()
+    expect(title.value).toEqual('')
+    title.value = 'new title'
+    expect(title.value).toEqual('new title')
+  })
+
+  describe('with writable param', () => {
+    it('string', () => {
+      const title = useTitle('old title')
+      expect(title.value).toEqual('old title')
+      title.value = 'new title'
+      expect(title.value).toEqual('new title')
+    })
+
+    it('null', () => {
+      const title = useTitle(null)
+      expect(title.value).toEqual('')
+      title.value = 'new title'
+      expect(title.value).toEqual('new title')
+    })
+
+    it('undefined', () => {
+      const title = useTitle(undefined)
+      expect(title.value).toEqual('')
+      title.value = 'new title'
+      expect(title.value).toEqual('new title')
+    })
+
+    describe('ref param', () => {
+      it('string', () => {
+        const targetRef = ref('old title')
+        const title = useTitle(targetRef)
+        expect(title.value).toEqual('old title')
+        targetRef.value = 'new title'
+        expect(title.value).toEqual('new title')
+        title.value = 'latest title'
+        expect(title.value).toEqual('latest title')
+      })
+
+      it('null', () => {
+        const targetRef = ref<null | string>(null)
+        const title = useTitle(targetRef)
+        expect(title.value).toEqual(null)
+        targetRef.value = 'new title'
+        expect(title.value).toEqual('new title')
+        title.value = 'latest title'
+        expect(title.value).toEqual('latest title')
+      })
+
+      it('undefined', () => {
+        const targetRef = ref<undefined | string>(undefined)
+        const title = useTitle(targetRef)
+        expect(title.value).toEqual(undefined)
+        targetRef.value = 'new title'
+        expect(title.value).toEqual('new title')
+        title.value = 'latest title'
+        expect(title.value).toEqual('latest title')
+      })
+    })
+  })
+
+  describe('with readonly param', () => {
+    it('computed', () => {
+      const condition = ref(false)
+      const target = computed(() => condition.value ? 'new title' : 'old title')
+      const title = useTitle(target)
+      expect(title.value).toEqual('old title')
+      condition.value = true
+      expect(title.value).toEqual('new title')
+      // @ts-expect-error readonly
+      title.value = ''
+    })
+
+    it('function', () => {
+      const target = () => 'new title'
+      const title = useTitle(target)
+      expect(title.value).toEqual('new title')
+      // @ts-expect-error readonly
+      title.value = ''
+    })
+  })
+})
diff --git a/packages/core/useTitle/index.ts b/packages/core/useTitle/index.ts
index bc9c7f16519..4eefd27d90e 100644
--- a/packages/core/useTitle/index.ts
+++ b/packages/core/useTitle/index.ts
@@ -1,35 +1,42 @@
-import type { MaybeComputedRef, MaybeRef } from '@vueuse/shared'
+import type { MaybeComputedRef, MaybeReadonlyRef, MaybeRef } from '@vueuse/shared'
 import { isFunction, isString, resolveRef } from '@vueuse/shared'
-import type { ComputedRef, Ref } from 'vue-demi'
+import type { ComputedRef, Ref, WritableComputedRef } from 'vue-demi'
 import { unref, watch } from 'vue-demi'
+import { useMutationObserver } from '../useMutationObserver'
 import type { ConfigurableDocument } from '../_configurable'
 import { defaultDocument } from '../_configurable'
-import { useMutationObserver } from '../useMutationObserver'
 
-export interface UseTitleOptions extends ConfigurableDocument {
+export type UseTitleOptionsBase =
+{
   /**
    * Observe `document.title` changes using MutationObserve
+   * Cannot be used together with `titleTemplate` option.
    *
    * @default false
    */
   observe?: boolean
+}
+| {
   /**
    * The template string to parse the title (e.g., '%s | My Website')
+   * Cannot be used together with `observe` option.
    *
    * @default '%s'
    */
   titleTemplate?: MaybeRef<string> | ((title: string) => string)
 }
 
+export type UseTitleOptions = ConfigurableDocument & UseTitleOptionsBase
+
 export function useTitle(
-  newTitle?: MaybeRef<string | null | undefined>,
+  newTitle: MaybeReadonlyRef<string | null | undefined>,
   options?: UseTitleOptions,
-): Ref<string>
+): ComputedRef<string | null | undefined>
 
 export function useTitle(
-  newTitle?: MaybeComputedRef<string | null | undefined>,
+  newTitle?: MaybeRef<string | null | undefined>,
   options?: UseTitleOptions,
-): ComputedRef<string>
+): Ref<string | null | undefined>
 
 /**
  * Reactive document title.
@@ -42,31 +49,37 @@ export function useTitle(
   newTitle: MaybeComputedRef<string | null | undefined> = null,
   options: UseTitleOptions = {},
 ) {
+  /*
+    `titleTemplate` that returns the modified input string will make
+    the `document.title` to be different from the `title.value`,
+    causing the title to update infinitely if `observe` is set to `true`.
+  */
   const {
     document = defaultDocument,
-    observe = false,
-    titleTemplate = '%s',
   } = options
 
-  const title = resolveRef(newTitle ?? document?.title ?? null) as Ref<string>
+  const title: WritableComputedRef<string | null | undefined> = resolveRef(newTitle ?? document?.title ?? null)
   const isReadonly = newTitle && isFunction(newTitle)
 
   function format(t: string) {
-    return isFunction(titleTemplate)
-      ? titleTemplate(t)
-      : unref(titleTemplate).replace('%s', t)
+    if (!('titleTemplate' in options))
+      return t
+    const template = options.titleTemplate || '%s'
+    return isFunction(template)
+      ? template(t)
+      : unref(template).replace(/%s/g, t)
   }
 
   watch(
     title,
     (t, o) => {
-      if (isString(t) && t !== o && document)
-        document.title = format(t)
+      if (t !== o && document)
+        document.title = format(isString(t) ? t : '')
     },
     { immediate: true },
   )
 
-  if (observe && document && !isReadonly) {
+  if ((options as any).observe && !(options as any).titleTemplate && document && !isReadonly) {
     useMutationObserver(
       document.head?.querySelector('title'),
       () => {