diff --git a/src/ophyd_async/core/_signal.py b/src/ophyd_async/core/_signal.py
index 8cf282f463..ea42e98f1b 100644
--- a/src/ophyd_async/core/_signal.py
+++ b/src/ophyd_async/core/_signal.py
@@ -442,7 +442,7 @@ async def observe_value(
         If this status is complete, stop observing and make the iterator return.
         If it raises an exception then this exception will be raised by the iterator.
     except_after_time:
-        If given, the maximum time to watch a value in seconds. If the loop is still
+        If given, the maximum time to watch a signal, in seconds. If the loop is still
         being watched after this length, raise asyncio.TimeoutError. This should be used
         instead of on an 'asyncio.wait_for' timeout
 
@@ -470,7 +470,6 @@ async def observe_value(
 def _get_iteration_timeout(
     timeout: float | None, overall_deadline: float | None
 ) -> float | None:
-    # Test this works if overall timeout <=0
     overall_deadline = overall_deadline - time.monotonic() if overall_deadline else None
     return min([x for x in [overall_deadline, timeout] if x is not None], default=None)
 
@@ -495,7 +494,7 @@ async def observe_signals_value(
         If this status is complete, stop observing and make the iterator return.
         If it raises an exception then this exception will be raised by the iterator.
     except_after_time:
-        If given, the maximum time to watch a value in seconds. If the loop is still
+        If given, the maximum time to watch a signal, in seconds. If the loop is still
         being watched after this length, raise asyncio.TimeoutError. This should be used
         instead of on an 'asyncio.wait_for' timeout
 
diff --git a/tests/core/test_observe.py b/tests/core/test_observe.py
index 8cd576034c..c38c85cfdf 100644
--- a/tests/core/test_observe.py
+++ b/tests/core/test_observe.py
@@ -60,14 +60,14 @@ async def tick():
     recv = []
 
     async def watch():
-        async for val in observe_value(sig):
+        async for val in observe_value(sig, except_after_time=0.2):
             recv.append(val)
 
     t = asyncio.create_task(tick())
     start = time.time()
     try:
         with pytest.raises(asyncio.TimeoutError):
-            await asyncio.wait_for(watch(), timeout=0.2)
+            await watch()
         assert recv == [0, 1]
         assert time.time() - start == pytest.approx(0.2, abs=0.05)
     finally:
@@ -85,7 +85,7 @@ async def tick():
     recv = []
 
     async def watch():
-        async for val in observe_value(sig):
+        async for val in observe_value(sig, except_after_time=0.2):
             time.sleep(0.15)
             recv.append(val)
 
@@ -93,7 +93,7 @@ async def watch():
     start = time.time()
     try:
         with pytest.raises(asyncio.TimeoutError):
-            await asyncio.wait_for(watch(), timeout=0.2)
+            await watch()
         assert recv == [0, 1]
         assert time.time() - start == pytest.approx(0.3, abs=0.05)
     finally:
@@ -115,3 +115,16 @@ async def watch(except_after_time):
         await watch(except_after_time=0.1)
     assert recv
     assert time.time() - start == pytest.approx(0.1, abs=0.05)
+
+
+async def test_observe_value_uses_correct_timeout():
+    sig, _ = soft_signal_r_and_setter(float)
+
+    async def watch(timeout, except_after_time):
+        async for _ in observe_value(sig, timeout, except_after_time=except_after_time):
+            ...
+
+    start = time.time()
+    with pytest.raises(asyncio.TimeoutError):
+        await watch(timeout=0.3, except_after_time=0.15)
+    assert time.time() - start == pytest.approx(0.15, abs=0.05)