diff --git a/changelogs/fragments/74864-display_failed_stderr-per-item.yml b/changelogs/fragments/74864-display_failed_stderr-per-item.yml
new file mode 100644
index 00000000000..e2348466f0d
--- /dev/null
+++ b/changelogs/fragments/74864-display_failed_stderr-per-item.yml
@@ -0,0 +1,2 @@
+bugfixes:
+  - Apply ``display_failed_stderr`` callback option on loop item results. (https://github.com/ansible/ansible/issues/74864)
diff --git a/lib/ansible/plugins/callback/default.py b/lib/ansible/plugins/callback/default.py
index 64ec62b1ebf..8aca378b149 100644
--- a/lib/ansible/plugins/callback/default.py
+++ b/lib/ansible/plugins/callback/default.py
@@ -293,11 +293,15 @@ class CallbackModule(CallbackBase):
 
         host_label = self.host_label(result)
         self._clean_results(result._result, result._task.action)
-        self._handle_exception(result._result)
+        self._handle_exception(result._result, use_stderr=self.display_failed_stderr)
 
         msg = "failed: [%s]" % (host_label,)
         self._handle_warnings(result._result)
-        self._display.display(msg + " (item=%s) => %s" % (self._get_item_label(result._result), self._dump_results(result._result)), color=C.COLOR_ERROR)
+        self._display.display(
+            msg + " (item=%s) => %s" % (self._get_item_label(result._result), self._dump_results(result._result)),
+            color=C.COLOR_ERROR,
+            stderr=self.display_failed_stderr
+        )
 
     def v2_runner_item_on_skipped(self, result):
         if self.display_skipped_hosts:
diff --git a/test/integration/targets/callback_default/callback_default.out.failed_to_stderr.stderr b/test/integration/targets/callback_default/callback_default.out.failed_to_stderr.stderr
index 45d4af21f3d..9a39d78fda7 100644
--- a/test/integration/targets/callback_default/callback_default.out.failed_to_stderr.stderr
+++ b/test/integration/targets/callback_default/callback_default.out.failed_to_stderr.stderr
@@ -1,5 +1,8 @@
 + ansible-playbook -i inventory test.yml
 ++ set +x
 fatal: [testhost]: FAILED! => {"changed": false, "msg": "no reason"}
+failed: [testhost] (item=debug-2) => {
+    "msg": "debug-2"
+}
 fatal: [testhost]: FAILED! => {"msg": "One or more items failed"}
 fatal: [testhost]: FAILED! => {"changed": false, "msg": "Failed as requested from task"}
diff --git a/test/integration/targets/callback_default/callback_default.out.failed_to_stderr.stdout b/test/integration/targets/callback_default/callback_default.out.failed_to_stderr.stdout
index 87696ef829e..8e165a41ed5 100644
--- a/test/integration/targets/callback_default/callback_default.out.failed_to_stderr.stdout
+++ b/test/integration/targets/callback_default/callback_default.out.failed_to_stderr.stdout
@@ -25,9 +25,6 @@ TASK [debug loop] **************************************************************
 changed: [testhost] => (item=debug-1) => {
     "msg": "debug-1"
 }
-failed: [testhost] (item=debug-2) => {
-    "msg": "debug-2"
-}
 ok: [testhost] => (item=debug-3) => {
     "msg": "debug-3"
 }