diff --git a/changelogs/fragments/84259-dnf5-latest-fix.yml b/changelogs/fragments/84259-dnf5-latest-fix.yml
new file mode 100644
index 00000000000..40f6ddb7408
--- /dev/null
+++ b/changelogs/fragments/84259-dnf5-latest-fix.yml
@@ -0,0 +1,2 @@
+bugfixes:
+  - "dnf5 - fix installing a package using ``state=latest`` when a binary of the same name as the package is already installed (https://github.com/ansible/ansible/issues/84259)"
diff --git a/lib/ansible/modules/dnf5.py b/lib/ansible/modules/dnf5.py
index df4ee206748..b157158514f 100644
--- a/lib/ansible/modules/dnf5.py
+++ b/lib/ansible/modules/dnf5.py
@@ -358,6 +358,15 @@ libdnf5 = None
 
 def is_installed(base, spec):
     settings = libdnf5.base.ResolveSpecSettings()
+    # Disable checking whether SPEC is a binary -> `/usr/(s)bin/<SPEC>`,
+    # this prevents scenarios like the following:
+    #   * the `sssd-common` package is installed and provides `/usr/sbin/sssd` binary
+    #   * the `sssd` package is NOT installed
+    #   * due to `set_with_binaries(True)` being default `is_installed(base, "sssd")` would "unexpectedly" return True
+    # If users wish to target the `sssd` binary they can by specifying the full path `name=/usr/sbin/sssd` explicitly
+    # due to settings.set_with_filenames(True) being default.
+    settings.set_with_binaries(False)
+
     installed_query = libdnf5.rpm.PackageQuery(base)
     installed_query.filter_installed()
     match, nevra = installed_query.resolve_pkg_spec(spec, settings, True)
diff --git a/test/integration/targets/dnf/tasks/repo.yml b/test/integration/targets/dnf/tasks/repo.yml
index 6ab8fa1a3b3..ec31fe4a4ae 100644
--- a/test/integration/targets/dnf/tasks/repo.yml
+++ b/test/integration/targets/dnf/tasks/repo.yml
@@ -517,3 +517,50 @@
       dnf:
         name: provides_foo*
         state: absent
+
+# https://github.com/ansible/ansible/issues/84259
+- name: test installing a package named `package-name` while a package providing `/usr/sbin/package-name` is installed
+  block:
+    - dnf:
+        name: package-name
+        state: absent
+
+    - dnf:
+        name: provides-binary
+        state: present
+
+    - dnf:
+        name: package-name
+        state: latest
+      register: dnf_result
+
+    - assert:
+        that:
+          - dnf_result is changed
+  always:
+    - name: Clean up
+      dnf:
+        name:
+          - provides-binary
+          - package-name
+        state: absent
+
+- name: test installing a package that provides a binary by specifying the binary name
+  block:
+    - dnf:
+        name: provides-binary
+        state: absent
+
+    - dnf:
+        name: /usr/sbin/package-name
+        state: present
+      register: dnf_result
+
+    - assert:
+        that:
+          - dnf_result is changed
+  always:
+    - name: Clean up
+      dnf:
+        name: provides-binary
+        state: absent
diff --git a/test/integration/targets/setup_rpm_repo/library/create_repo.py b/test/integration/targets/setup_rpm_repo/library/create_repo.py
index 5acf2397195..6fffe5ad90b 100644
--- a/test/integration/targets/setup_rpm_repo/library/create_repo.py
+++ b/test/integration/targets/setup_rpm_repo/library/create_repo.py
@@ -15,8 +15,10 @@ try:
     from rpmfluff.make import make_gif
     from rpmfluff.sourcefile import GeneratedSourceFile
     from rpmfluff.rpmbuild import SimpleRpmBuild
+    from rpmfluff.utils import expectedArch
     from rpmfluff.yumrepobuild import YumRepoBuild
 except ImportError:
+    expectedArch = None  # define here to avoid NameError as it is used on top level in SPECS
     HAS_RPMFLUFF = False
 
 
@@ -30,6 +32,7 @@ class RPM:
     recommends: list[str] | None = None
     requires: list[str] | None = None
     file: str | None = None
+    binary: str | None = None
 
 
 SPECS = [
@@ -58,6 +61,8 @@ SPECS = [
     RPM(name='broken-b', version='1.0', requires=['broken-a = 1.2.3-1']),
     RPM(name='broken-c', version='1.0', requires=['broken-c = 1.2.4-1']),
     RPM(name='broken-d', version='1.0', requires=['broken-a']),
+    RPM(name='provides-binary', version='1.0', arch=[expectedArch], binary='/usr/sbin/package-name'),
+    RPM(name='package-name', version='1.0'),
 ]
 
 
@@ -81,10 +86,13 @@ def create_repo():
                 )
             )
 
+        if spec.binary:
+            pkg.add_simple_compilation(installPath=spec.binary)
+
         pkgs.append(pkg)
 
     repo = YumRepoBuild(pkgs)
-    repo.make('noarch', 'i686', 'x86_64')
+    repo.make('noarch', 'i686', 'x86_64', expectedArch)
 
     for pkg in pkgs:
         pkg.clean()