diff --git a/platform/lang-impl/src/com/intellij/util/indexing/roots/ModuleFilesIteratorImpl.kt b/platform/lang-impl/src/com/intellij/util/indexing/roots/ModuleFilesIteratorImpl.kt
index 45857e3c0940..bf288e4383cf 100644
--- a/platform/lang-impl/src/com/intellij/util/indexing/roots/ModuleFilesIteratorImpl.kt
+++ b/platform/lang-impl/src/com/intellij/util/indexing/roots/ModuleFilesIteratorImpl.kt
@@ -16,8 +16,12 @@ import com.intellij.workspaceModel.core.fileIndex.WorkspaceFileIndex.Companion.g
 import com.intellij.workspaceModel.core.fileIndex.WorkspaceFileSetWithCustomData
 import com.intellij.workspaceModel.core.fileIndex.impl.ModuleRelatedRootData
 import com.intellij.workspaceModel.core.fileIndex.impl.WorkspaceFileIndexEx
+import org.jetbrains.annotations.ApiStatus
+import org.jetbrains.annotations.VisibleForTesting
 
-internal class ModuleFilesIteratorImpl(
+@ApiStatus.Internal
+@VisibleForTesting
+class ModuleFilesIteratorImpl(
   private val module: Module,
   private val root: VirtualFile,
   private val recursive: Boolean,
@@ -61,7 +65,12 @@ internal class ModuleFilesIteratorImpl(
     val myWorkspaceFileIndex = getInstance(project) as WorkspaceFileIndexEx
 
     return if (recursive) {
-      iterateContentUnderDirectory(root, processorEx, fileFilter, myWorkspaceFileIndex)
+      val customFilter = VirtualFileFilter { file ->
+        val info = myWorkspaceFileIndex.getFileInfo(file, true, true, false, false, false ,false, false)
+        info.findFileSet { it.kind.isIndexable && (it.data as? ModuleRelatedRootData)?.module == module } != null
+      }.and(fileFilter) // run `fileFilter` second, so if it is deduplication filter, it won't be invoked on files outside module
+      val fileSetFilter: (WorkspaceFileSetWithCustomData<*>) -> Boolean = { fileSet -> !isScopeDisposed() && fileSet.kind.isContent }
+      myWorkspaceFileIndex.processContentUnderDirectory(root, processorEx, customFilter, fileSetFilter)
     }
     else {
       fileFilter.accept(root) && processorEx.processFileEx(root) != TreeNodeProcessingResult.STOP
diff --git a/platform/platform-tests/testSrc/com/intellij/openapi/roots/impl/indexing/ModuleFilesIteratorImplTest.kt b/platform/platform-tests/testSrc/com/intellij/openapi/roots/impl/indexing/ModuleFilesIteratorImplTest.kt
new file mode 100644
index 000000000000..40124383b76f
--- /dev/null
+++ b/platform/platform-tests/testSrc/com/intellij/openapi/roots/impl/indexing/ModuleFilesIteratorImplTest.kt
@@ -0,0 +1,116 @@
+// Copyright 2000-2026 JetBrains s.r.o. and contributors. Use of this source code is governed by the Apache 2.0 license.
+package com.intellij.openapi.roots.impl.indexing
+
+import com.intellij.openapi.Disposable
+import com.intellij.openapi.application.readAction
+import com.intellij.openapi.module.Module
+import com.intellij.openapi.module.ModuleManager
+import com.intellij.openapi.roots.ContentIterator
+import com.intellij.openapi.vfs.VfsUtilCore
+import com.intellij.openapi.vfs.VirtualFile
+import com.intellij.openapi.vfs.VirtualFileFilter
+import com.intellij.platform.backend.workspace.toVirtualFileUrl
+import com.intellij.platform.backend.workspace.workspaceModel
+import com.intellij.platform.workspace.jps.entities.ContentRootEntity
+import com.intellij.platform.workspace.jps.entities.ModuleEntity
+import com.intellij.platform.workspace.storage.url.VirtualFileUrl
+import com.intellij.testFramework.IndexingTestUtil
+import com.intellij.testFramework.junit5.TestApplication
+import com.intellij.testFramework.rules.ProjectModelExtension
+import com.intellij.testFramework.rules.TempDirectoryExtension
+import com.intellij.testFramework.workspaceModel.update
+import com.intellij.util.indexing.roots.IndexableFilesIterator
+import com.intellij.util.indexing.roots.ModuleFilesIteratorImpl
+import com.intellij.util.indexing.testEntities.NonIndexableKindFileSetTestContributor
+import com.intellij.util.indexing.testEntities.NonIndexableTestEntity
+import com.intellij.workspaceModel.core.fileIndex.impl.WorkspaceFileIndexImpl
+import com.intellij.workspaceModel.ide.NonPersistentEntitySource
+import kotlinx.coroutines.runBlocking
+import org.assertj.core.api.Assertions.assertThat
+import org.junit.jupiter.api.BeforeEach
+import org.junit.jupiter.api.Test
+import org.junit.jupiter.api.extension.RegisterExtension
+
+@TestApplication
+internal class ModuleFilesIteratorImplTest {
+  @RegisterExtension
+  private val projectModel = ProjectModelExtension()
+
+  @RegisterExtension
+  private val tempDir = TempDirectoryExtension()
+
+
+  private val disposable: Disposable get() = projectModel.disposableRule.disposable
+
+  private val project get() = projectModel.project
+  private val workspaceModel get() = project.workspaceModel
+  private val virtualFileUrlManager get() = workspaceModel.getVirtualFileUrlManager()
+
+  private lateinit var module: Module
+  private lateinit var moduleRoot: VirtualFile
+  private lateinit var innerRoot: VirtualFile
+
+  @BeforeEach
+  fun setUp(): Unit = runBlocking {
+    WorkspaceFileIndexImpl.EP_NAME.point.registerExtension(NonIndexableKindFileSetTestContributor(), disposable)
+
+    moduleRoot = tempDir.newVirtualDirectory("root")
+    tempDir.newVirtualFile("root/root.txt")
+    innerRoot = tempDir.newVirtualDirectory("root/inner")
+    tempDir.newVirtualFile("root/inner/inner.txt")
+
+    workspaceModel.update { storage ->
+      storage.addEntity(ModuleEntity("module", emptyList(), NonPersistentEntitySource) {
+        contentRoots = listOf(ContentRootEntity(moduleRoot.toVirtualFileUrl(), emptyList(), NonPersistentEntitySource))
+      })
+    }
+
+    IndexingTestUtil.waitUntilIndexesAreReady(project)
+
+    module = ModuleManager.getInstance(project).modules.single()
+  }
+
+  @Test
+  fun `iterates module root without an inner non-indexable fileset`(): Unit = runBlocking {
+    assertIteratesModuleRoot()
+  }
+
+  @Test
+  fun `iterates module root with an inner non-indexable fileset`(): Unit = runBlocking {
+    workspaceModel.update { storage ->
+      storage.addEntity(NonIndexableTestEntity(innerRoot.toVirtualFileUrl(), NonPersistentEntitySource))
+    }
+    IndexingTestUtil.waitUntilIndexesAreReady(project)
+
+    assertIteratesModuleRoot()
+  }
+
+  private suspend fun assertIteratesModuleRoot() {
+    val files = readAction {
+      val result = mutableListOf<VirtualFile>()
+      val fullyProcessed = moduleFilesIterator().iterateFiles(
+        project,
+        ContentIterator { file ->
+          result.add(file)
+          true
+        },
+        VirtualFileFilter.ALL,
+      )
+      assertThat(fullyProcessed).isTrue()
+      result
+    }
+
+    assertThat(relativePaths(files)).containsExactlyInAnyOrder("", "root.txt", "inner", "inner/inner.txt")
+  }
+
+  private fun moduleFilesIterator(): IndexableFilesIterator =
+    ModuleFilesIteratorImpl(module, moduleRoot, true, true)
+
+  private fun relativePaths(files: Collection<VirtualFile>): Set<String> {
+    return files.mapTo(linkedSetOf()) { file ->
+      VfsUtilCore.getRelativePath(file, moduleRoot, '/') ?: ""
+    }
+  }
+
+  private fun VirtualFile.toVirtualFileUrl(): VirtualFileUrl = this.toVirtualFileUrl(virtualFileUrlManager)
+}