diff --git a/CHANGELOG.md b/CHANGELOG.md
index 96624981964..9cede27ce04 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -96,6 +96,8 @@ Ansible Changes By Release
   (https://github.com/ansible/ansible/pull/32342)
 * Ensure there is always a basdir so we always pickup group/host_vars
   https://github.com/ansible/ansible/pull/32269
+* Fix vars placement in ansible-inventory
+  https://github.com/ansible/ansible/pull/32276
 
 
 <a id="2.4.1"></a>
diff --git a/lib/ansible/cli/inventory.py b/lib/ansible/cli/inventory.py
index f0dba1171aa..6a4025cf3b7 100644
--- a/lib/ansible/cli/inventory.py
+++ b/lib/ansible/cli/inventory.py
@@ -206,7 +206,7 @@ class InventoryCLI(CLI):
         self._remove_internal(dump)
         if self.options.show_vars:
             for (name, val) in sorted(dump.items()):
-                result.append(self._graph_name('{%s = %s}' % (name, val), depth + 1))
+                result.append(self._graph_name('{%s = %s}' % (name, val), depth))
         return result
 
     def _graph_name(self, name, depth=0):
@@ -224,7 +224,7 @@ class InventoryCLI(CLI):
         if group.name != 'all':
             for host in sorted(group.hosts, key=attrgetter('name')):
                 result.append(self._graph_name(host.name, depth))
-                result.extend(self._show_vars(host.get_vars(), depth))
+                result.extend(self._show_vars(host.get_vars(), depth + 1))
 
         result.extend(self._show_vars(group.get_vars(), depth))
 
@@ -245,7 +245,6 @@ class InventoryCLI(CLI):
             results[group.name] = {}
             if group.name != 'all':
                 results[group.name]['hosts'] = [h.name for h in sorted(group.hosts, key=attrgetter('name'))]
-            results[group.name]['vars'] = group.get_vars()
             results[group.name]['children'] = []
             for subgroup in sorted(group.child_groups, key=attrgetter('name')):
                 results[group.name]['children'].append(subgroup.name)
@@ -274,7 +273,6 @@ class InventoryCLI(CLI):
 
             # initialize group + vars
             results[group.name] = {}
-            results[group.name]['vars'] = group.get_vars()
 
             # subgroups
             results[group.name]['children'] = {}