diff --git a/changelogs/fragments/vars_lk.yml b/changelogs/fragments/vars_lk.yml
new file mode 100644
index 00000000000..56f38a35107
--- /dev/null
+++ b/changelogs/fragments/vars_lk.yml
@@ -0,0 +1,2 @@
+bugfixes:
+    - correctly check hostvars for vars term https://github.com/ansible/ansible/pull/41819
diff --git a/lib/ansible/plugins/lookup/vars.py b/lib/ansible/plugins/lookup/vars.py
index fd6d23b5b64..1b1ca604643 100644
--- a/lib/ansible/plugins/lookup/vars.py
+++ b/lib/ansible/plugins/lookup/vars.py
@@ -78,15 +78,15 @@ class LookupModule(LookupBase):
                 raise AnsibleError('Invalid setting identifier, "%s" is not a string, its a %s' % (term, type(term)))
 
             try:
-                if term in myvars:
+                try:
                     value = myvars[term]
-                elif 'hostvars' in myvars and term in myvars['hostvars']:
-                    # maybe it is a host var?
-                    value = myvars['hostvars'][term]
-                else:
-                    raise AnsibleUndefinedVariable('No variable found with this name: %s' % term)
-                ret.append(self._templar.template(value, fail_on_undefined=True))
+                except KeyError:
+                    try:
+                        value = myvars['hostvars'][myvars['inventory_hostname']][term]
+                    except KeyError:
+                        raise AnsibleUndefinedVariable('No variable found with this name: %s' % term)
 
+                ret.append(self._templar.template(value, fail_on_undefined=True))
             except AnsibleUndefinedVariable:
                 if default is not None:
                     ret.append(default)