diff --git a/.changeset/short-mails-know.md b/.changeset/short-mails-know.md
new file mode 100644
index 0000000000..0b8b62d575
--- /dev/null
+++ b/.changeset/short-mails-know.md
@@ -0,0 +1,5 @@
+---
+'svelte': patch
+---
+
+fix: avoid shadowing a variable in dynamic components
diff --git a/packages/svelte/src/compiler/phases/3-transform/client/visitors/Component.js b/packages/svelte/src/compiler/phases/3-transform/client/visitors/Component.js
index d58a24b455..9b86557536 100644
--- a/packages/svelte/src/compiler/phases/3-transform/client/visitors/Component.js
+++ b/packages/svelte/src/compiler/phases/3-transform/client/visitors/Component.js
@@ -8,12 +8,6 @@ import { build_component } from './shared/component.js';
  * @param {ComponentContext} context
  */
 export function Component(node, context) {
-	const component = build_component(
-		node,
-		// if it's not dynamic we will just use the node name, if it is dynamic we will use the node name
-		// only if it's a valid identifier, otherwise we will use a default name
-		!node.metadata.dynamic || regex_is_valid_identifier.test(node.name) ? node.name : '$$component',
-		context
-	);
+	const component = build_component(node, node.name, context);
 	context.state.init.push(component);
 }
diff --git a/packages/svelte/src/compiler/phases/3-transform/client/visitors/shared/component.js b/packages/svelte/src/compiler/phases/3-transform/client/visitors/shared/component.js
index 19ed9cdeb8..cb6e4de478 100644
--- a/packages/svelte/src/compiler/phases/3-transform/client/visitors/shared/component.js
+++ b/packages/svelte/src/compiler/phases/3-transform/client/visitors/shared/component.js
@@ -52,6 +52,15 @@ export function build_component(node, component_name, context) {
 	/** @type {ExpressionStatement[]} */
 	const binding_initializers = [];
 
+	const is_component_dynamic =
+		node.type === 'SvelteComponent' || (node.type === 'Component' && node.metadata.dynamic);
+
+	// The variable name used for the component inside $.component()
+	const intermediate_name =
+		node.type === 'Component' && node.metadata.dynamic
+			? context.state.scope.generate(node.name)
+			: '$$component';
+
 	/**
 	 * If this component has a slot property, it is a named slot within another component. In this case
 	 * the slot scope applies to the component itself, too, and not just its children.
@@ -199,7 +208,7 @@ export function build_component(node, component_name, context) {
 							b.call(
 								'$$ownership_validator.binding',
 								b.literal(binding.node.name),
-								b.id(component_name),
+								b.id(is_component_dynamic ? intermediate_name : component_name),
 								b.thunk(expression)
 							)
 						)
@@ -414,8 +423,8 @@ export function build_component(node, component_name, context) {
 			// TODO We can remove this ternary once we remove legacy mode, since in runes mode dynamic components
 			// will be handled separately through the `$.component` function, and then the component name will
 			// always be referenced through just the identifier here.
-			node.type === 'SvelteComponent' || (node.type === 'Component' && node.metadata.dynamic)
-				? component_name
+			is_component_dynamic
+				? intermediate_name
 				: /** @type {Expression} */ (context.visit(b.member_id(component_name))),
 			node_id,
 			props_expression
@@ -432,7 +441,7 @@ export function build_component(node, component_name, context) {
 
 	const statements = [...snippet_declarations];
 
-	if (node.type === 'SvelteComponent' || (node.type === 'Component' && node.metadata.dynamic)) {
+	if (is_component_dynamic) {
 		const prev = fn;
 
 		fn = (node_id) => {
@@ -441,11 +450,11 @@ export function build_component(node, component_name, context) {
 				node_id,
 				b.thunk(
 					/** @type {Expression} */ (
-						context.visit(node.type === 'Component' ? b.member_id(node.name) : node.expression)
+						context.visit(node.type === 'Component' ? b.member_id(component_name) : node.expression)
 					)
 				),
 				b.arrow(
-					[b.id('$$anchor'), b.id(component_name)],
+					[b.id('$$anchor'), b.id(intermediate_name)],
 					b.block([...binding_initializers, b.stmt(prev(b.id('$$anchor')))])
 				)
 			);
diff --git a/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/A.svelte b/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/A.svelte
new file mode 100644
index 0000000000..d37c929273
--- /dev/null
+++ b/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/A.svelte
@@ -0,0 +1,5 @@
+<script>
+	const { children } = $props()
+</script>
+
+{@render children()}
diff --git a/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/_config.js b/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/_config.js
new file mode 100644
index 0000000000..cd1fa2b1b9
--- /dev/null
+++ b/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/_config.js
@@ -0,0 +1,8 @@
+import { test } from '../../test';
+import { flushSync } from 'svelte';
+
+export default test({
+	async test({ assert, target }) {
+		assert.htmlEqual(target.innerHTML, 'test');
+	}
+});
diff --git a/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/main.svelte b/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/main.svelte
new file mode 100644
index 0000000000..d0646b319b
--- /dev/null
+++ b/packages/svelte/tests/runtime-runes/samples/dynamic-component-nested/main.svelte
@@ -0,0 +1,9 @@
+<script>
+	import A from './A.svelte';
+
+	const B = $derived(A);
+</script>
+
+<B>
+	<B>test</B>
+</B>