diff --git a/changelogs/fragments/78612-rescue-block-ansible_play_hosts.yml b/changelogs/fragments/78612-rescue-block-ansible_play_hosts.yml
new file mode 100644
index 00000000000..3e200231479
--- /dev/null
+++ b/changelogs/fragments/78612-rescue-block-ansible_play_hosts.yml
@@ -0,0 +1,2 @@
+bugfixes:
+  - "Fix an issue where ``ansible_play_hosts`` and ``ansible_play_batch`` were not properly updated when a failure occured in an explicit block inside the rescue section (https://github.com/ansible/ansible/issues/78612)"
diff --git a/lib/ansible/executor/play_iterator.py b/lib/ansible/executor/play_iterator.py
index ed5b99dea63..a60848a521a 100644
--- a/lib/ansible/executor/play_iterator.py
+++ b/lib/ansible/executor/play_iterator.py
@@ -366,9 +366,6 @@ class PlayIterator:
             elif state.run_state == IteratingStates.RESCUE:
                 # The process here is identical to IteratingStates.TASKS, except instead
                 # we move into the always portion of the block.
-                if host.name in self._play._removed_hosts:
-                    self._play._removed_hosts.remove(host.name)
-
                 if state.rescue_child_state:
                     (state.rescue_child_state, task) = self._get_next_task_from_state(state.rescue_child_state, host=host)
                     if self._check_failed_state(state.rescue_child_state):
diff --git a/lib/ansible/plugins/strategy/__init__.py b/lib/ansible/plugins/strategy/__init__.py
index 9ce32fc51c8..c3c1a390ea0 100644
--- a/lib/ansible/plugins/strategy/__init__.py
+++ b/lib/ansible/plugins/strategy/__init__.py
@@ -575,6 +575,7 @@ class StrategyBase:
                     if state and (iterator.get_active_state(state).run_state == IteratingStates.RESCUE or
                                   iterator.is_any_block_rescuing(state)):
                         self._tqm._stats.increment('rescued', original_host.name)
+                        iterator._play._removed_hosts.remove(original_host.name)
                         self._variable_manager.set_nonpersistent_facts(
                             original_host.name,
                             dict(
diff --git a/test/integration/targets/blocks/78612.yml b/test/integration/targets/blocks/78612.yml
new file mode 100644
index 00000000000..38efc6bb857
--- /dev/null
+++ b/test/integration/targets/blocks/78612.yml
@@ -0,0 +1,16 @@
+- hosts: all
+  gather_facts: false
+  tasks:
+    - block:
+        - fail:
+          when: inventory_hostname == 'host1'
+      rescue:
+        - block:
+          - fail:
+            when: inventory_hostname == 'host1'
+
+    - assert:
+        that:
+          - "'host1' not in ansible_play_hosts"
+          - "'host1' not in ansible_play_batch"
+        success_msg: PASSED
diff --git a/test/integration/targets/blocks/runme.sh b/test/integration/targets/blocks/runme.sh
index 9b6c08ecece..4c345df1a99 100755
--- a/test/integration/targets/blocks/runme.sh
+++ b/test/integration/targets/blocks/runme.sh
@@ -118,3 +118,9 @@ set -e
 cat 72781.out
 [ "$(grep -c 'SHOULD NOT HAPPEN' 72781.out)" -eq 0 ]
 rm -f 72781.out
+
+set +e
+ansible-playbook -i host1,host2 -vv 78612.yml | tee 78612.out
+set -e
+[ "$(grep -c 'PASSED' 78612.out)" -eq 1 ]
+rm -f 78612.out