diff --git a/Misc/NEWS.d/next/Core_and_Builtins/2025-12-08-17-34-57.gh-issue-142402.iV0ON3.rst b/Misc/NEWS.d/next/Core_and_Builtins/2025-12-08-17-34-57.gh-issue-142402.iV0ON3.rst
new file mode 100644
index 00000000000000..bad31470a25552
--- /dev/null
+++ b/Misc/NEWS.d/next/Core_and_Builtins/2025-12-08-17-34-57.gh-issue-142402.iV0ON3.rst
@@ -0,0 +1,3 @@
+Fix reference counting when adjacent literal parts are merged while constructing
+:class:`string.templatelib.Template`, preventing the displaced string object
+from leaking.
diff --git a/Objects/templateobject.c b/Objects/templateobject.c
index ac38e4de435d5d..a05208e4c8fc8e 100644
--- a/Objects/templateobject.c
+++ b/Objects/templateobject.c
@@ -148,13 +148,14 @@ template_new(PyTypeObject *type, PyObject *args, PyObject *kwds)
             if (last_was_str) {
                 PyObject *laststring = PyTuple_GET_ITEM(strings, stringsidx - 1);
                 PyObject *concat = PyUnicode_Concat(laststring, item);
-                Py_DECREF(laststring);
                 if (!concat) {
                     Py_DECREF(strings);
                     Py_DECREF(interpolations);
                     return NULL;
                 }
+                /* Replace laststring with concat */
                 PyTuple_SET_ITEM(strings, stringsidx - 1, concat);
+                Py_DECREF(laststring);
             }
             else {
                 PyTuple_SET_ITEM(strings, stringsidx++, Py_NewRef(item));