diff --git a/CHANGELOG.md b/CHANGELOG.md
index 7c2f84f83a..3ae28a9678 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -77,6 +77,8 @@ Unreleased changes template.
   are now printing more details and include the currently active flag
   values. Fixes [#2466](https://github.com/bazelbuild/rules_python/issues/2466).
 * (py_proto_library) Fix import paths in Bazel 8.
++ (gazelle) Gazelle no longer ignores `setup.py` files by default. To restore
+  this behavior, apply the `# gazelle:python_ignore_files setup.py` directive.
 
 [pep-695]: https://peps.python.org/pep-0695/
 
diff --git a/gazelle/python/testdata/dont_ignore_setup/BUILD.in b/gazelle/python/testdata/dont_ignore_setup/BUILD.in
new file mode 100644
index 0000000000..af2c2cea4b
--- /dev/null
+++ b/gazelle/python/testdata/dont_ignore_setup/BUILD.in
@@ -0,0 +1 @@
+# gazelle:python_generation_mode file
diff --git a/gazelle/python/testdata/dont_ignore_setup/BUILD.out b/gazelle/python/testdata/dont_ignore_setup/BUILD.out
new file mode 100644
index 0000000000..acf9324d3d
--- /dev/null
+++ b/gazelle/python/testdata/dont_ignore_setup/BUILD.out
@@ -0,0 +1,9 @@
+load("@rules_python//python:defs.bzl", "py_library")
+
+# gazelle:python_generation_mode file
+
+py_library(
+    name = "setup",
+    srcs = ["setup.py"],
+    visibility = ["//:__subpackages__"],
+)
diff --git a/gazelle/python/testdata/dont_ignore_setup/README.md b/gazelle/python/testdata/dont_ignore_setup/README.md
new file mode 100644
index 0000000000..d170364cb2
--- /dev/null
+++ b/gazelle/python/testdata/dont_ignore_setup/README.md
@@ -0,0 +1,8 @@
+# Don't ignore setup.py files
+
+Make sure that files named `setup.py` are processed by Gazelle.
+
+It's believed that `setup.py` was originally ignored because it, when found
+in the repository root directory, is part of the `setuptools` build system
+and could cause some issues for Gazelle. However, files within source code can
+also be called `setup.py` and thus should be processed by Gazelle.
diff --git a/gazelle/python/testdata/dont_ignore_setup/WORKSPACE b/gazelle/python/testdata/dont_ignore_setup/WORKSPACE
new file mode 100644
index 0000000000..e69de29bb2
diff --git a/gazelle/python/testdata/dont_ignore_setup/setup.py b/gazelle/python/testdata/dont_ignore_setup/setup.py
new file mode 100644
index 0000000000..e69de29bb2
diff --git a/gazelle/python/testdata/dont_ignore_setup/test.yaml b/gazelle/python/testdata/dont_ignore_setup/test.yaml
new file mode 100644
index 0000000000..c27e6c854b
--- /dev/null
+++ b/gazelle/python/testdata/dont_ignore_setup/test.yaml
@@ -0,0 +1,15 @@
+# Copyright 2024 The Bazel Authors. All rights reserved.
+#
+# Licensed under the Apache License, Version 2.0 (the "License");
+# you may not use this file except in compliance with the License.
+# You may obtain a copy of the License at
+#
+#     http://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the License is distributed on an "AS IS" BASIS,
+# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+# See the License for the specific language governing permissions and
+# limitations under the License.
+
+---
diff --git a/gazelle/python/testdata/python_ignore_files_directive/BUILD.out b/gazelle/python/testdata/python_ignore_files_directive/BUILD.out
index 1fe6030053..234ff71b13 100644
--- a/gazelle/python/testdata/python_ignore_files_directive/BUILD.out
+++ b/gazelle/python/testdata/python_ignore_files_directive/BUILD.out
@@ -4,6 +4,9 @@ load("@rules_python//python:defs.bzl", "py_library")
 
 py_library(
     name = "python_ignore_files_directive",
-    srcs = ["__init__.py"],
+    srcs = [
+        "__init__.py",
+        "setup.py",
+    ],
     visibility = ["//:__subpackages__"],
 )
diff --git a/gazelle/pythonconfig/pythonconfig.go b/gazelle/pythonconfig/pythonconfig.go
index 55121381dd..fde0a98da2 100644
--- a/gazelle/pythonconfig/pythonconfig.go
+++ b/gazelle/pythonconfig/pythonconfig.go
@@ -126,7 +126,6 @@ const (
 // defaultIgnoreFiles is the list of default values used in the
 // python_ignore_files option.
 var defaultIgnoreFiles = map[string]struct{}{
-	"setup.py": {},
 }
 
 // Configs is an extension of map[string]*Config. It provides finding methods