diff --git a/docs/changelog/134091.yaml b/docs/changelog/134091.yaml
new file mode 100644
index 0000000000000..d6678c895fe41
--- /dev/null
+++ b/docs/changelog/134091.yaml
@@ -0,0 +1,6 @@
+pr: 134091
+summary: Use latest setting value when initializing setting watch
+area: Infra/Settings
+type: bug
+issues:
+ - 133701
diff --git a/server/src/main/java/org/elasticsearch/common/settings/AbstractScopedSettings.java b/server/src/main/java/org/elasticsearch/common/settings/AbstractScopedSettings.java
index c65f75df663d2..604f281a82310 100644
--- a/server/src/main/java/org/elasticsearch/common/settings/AbstractScopedSettings.java
+++ b/server/src/main/java/org/elasticsearch/common/settings/AbstractScopedSettings.java
@@ -433,7 +433,11 @@ public synchronized <T> void initializeAndWatch(Setting<T> setting, Consumer<T>
         assert setting.getProperties().contains(Setting.Property.Dynamic)
             || setting.getProperties().contains(Setting.Property.OperatorDynamic) : "Can only watch dynamic settings";
         assert setting.getProperties().contains(Setting.Property.NodeScope) : "Can only watch node settings";
-        consumer.accept(setting.get(settings));
+
+        // this mimics the combined settings of last applied and node settings, without building a new settings object
+        Settings settingsWithValue = setting.exists(lastSettingsApplied) ? lastSettingsApplied : settings;
+
+        consumer.accept(setting.get(settingsWithValue));
         addSettingsUpdateConsumer(setting, consumer);
     }
 
diff --git a/server/src/test/java/org/elasticsearch/action/admin/cluster/settings/ClusterSettingsTests.java b/server/src/test/java/org/elasticsearch/action/admin/cluster/settings/ClusterSettingsTests.java
new file mode 100644
index 0000000000000..7c1c1faadbe8f
--- /dev/null
+++ b/server/src/test/java/org/elasticsearch/action/admin/cluster/settings/ClusterSettingsTests.java
@@ -0,0 +1,34 @@
+/*
+ * Copyright Elasticsearch B.V. and/or licensed to Elasticsearch B.V. under one
+ * or more contributor license agreements. Licensed under the "Elastic License
+ * 2.0", the "GNU Affero General Public License v3.0 only", and the "Server Side
+ * Public License v 1"; you may not use this file except in compliance with, at
+ * your election, the "Elastic License 2.0", the "GNU Affero General Public
+ * License v3.0 only", or the "Server Side Public License, v 1".
+ */
+
+package org.elasticsearch.action.admin.cluster.settings;
+
+import org.elasticsearch.common.settings.ClusterSettings;
+import org.elasticsearch.common.settings.Setting;
+import org.elasticsearch.common.settings.Settings;
+import org.elasticsearch.test.ESTestCase;
+
+import java.util.Set;
+
+import static org.hamcrest.Matchers.equalTo;
+
+public class ClusterSettingsTests extends ESTestCase {
+
+    public void testWatchAfterApply() {
+        Setting<String> clusterSetting = Setting.simpleString("cluster.setting", Setting.Property.NodeScope, Setting.Property.Dynamic);
+        Settings nodeSettings = Settings.builder().put("cluster.setting", "initial_value").build();
+
+        ClusterSettings clusterSettings = new ClusterSettings(nodeSettings, Set.of(clusterSetting));
+        Settings newSettings = Settings.builder().put("cluster.setting", "updated_value").build();
+        clusterSettings.applySettings(newSettings);
+
+        // the value should be current when initializing the consumer
+        clusterSettings.initializeAndWatch(clusterSetting, value -> { assertThat(value, equalTo("updated_value")); });
+    }
+}