diff --git a/airflow/policies.py b/airflow/policies.py
index 175ae5bbf9063..47c3dffcb22d9 100644
--- a/airflow/policies.py
+++ b/airflow/policies.py
@@ -138,7 +138,7 @@ def get_airflow_context_vars(context):
         return {}
 
 
-def make_plugin_from_local_settings(pm: pluggy.PluginManager, module, names: list[str]):
+def make_plugin_from_local_settings(pm: pluggy.PluginManager, module, names: set[str]):
     """
     Turn the functions from airflow_local_settings module into a custom/local plugin.
 
diff --git a/airflow/settings.py b/airflow/settings.py
index e51cd208d9f74..bdf70ecf27c88 100644
--- a/airflow/settings.py
+++ b/airflow/settings.py
@@ -465,11 +465,23 @@ def import_local_settings():
     """Import airflow_local_settings.py files to allow overriding any configs in settings.py file."""
     try:
         import airflow_local_settings
-
+    except ModuleNotFoundError as e:
+        if e.name == "airflow_local_settings":
+            log.debug("No airflow_local_settings to import.", exc_info=True)
+        else:
+            log.critical(
+                "Failed to import airflow_local_settings due to a transitive module not found error.",
+                exc_info=True,
+            )
+            raise
+    except ImportError:
+        log.critical("Failed to import airflow_local_settings.", exc_info=True)
+        raise
+    else:
         if hasattr(airflow_local_settings, "__all__"):
-            names = list(airflow_local_settings.__all__)
+            names = set(airflow_local_settings.__all__)
         else:
-            names = list(filter(lambda n: not n.startswith("__"), airflow_local_settings.__dict__.keys()))
+            names = {n for n in airflow_local_settings.__dict__ if not n.startswith("__")}
 
         if "policy" in names and "task_policy" not in names:
             warnings.warn(
@@ -485,30 +497,15 @@ def import_local_settings():
             POLICY_PLUGIN_MANAGER, airflow_local_settings, names
         )
 
-        for name in names:
-            # If we have already handled a function by adding it to the plugin, then don't clobber the global
-            # function
-            if name in plugin_functions:
-                continue
-
+        # If we have already handled a function by adding it to the plugin,
+        # then don't clobber the global function
+        for name in names - plugin_functions:
             globals()[name] = getattr(airflow_local_settings, name)
 
         if POLICY_PLUGIN_MANAGER.hook.task_instance_mutation_hook.get_hookimpls():
             task_instance_mutation_hook.is_noop = False
 
         log.info("Loaded airflow_local_settings from %s .", airflow_local_settings.__file__)
-    except ModuleNotFoundError as e:
-        if e.name == "airflow_local_settings":
-            log.debug("No airflow_local_settings to import.", exc_info=True)
-        else:
-            log.critical(
-                "Failed to import airflow_local_settings due to a transitive module not found error.",
-                exc_info=True,
-            )
-            raise
-    except ImportError:
-        log.critical("Failed to import airflow_local_settings.", exc_info=True)
-        raise
 
 
 def initialize():
diff --git a/tests/core/test_policies.py b/tests/core/test_policies.py
index e5fbf4fe682df..c7caff80b2c04 100644
--- a/tests/core/test_policies.py
+++ b/tests/core/test_policies.py
@@ -42,7 +42,7 @@ def dag_policy(dag):
 
     mod = Namespace(dag_policy=dag_policy)
 
-    policies.make_plugin_from_local_settings(plugin_manager, mod, ["dag_policy"])
+    policies.make_plugin_from_local_settings(plugin_manager, mod, {"dag_policy"})
 
     plugin_manager.hook.dag_policy(dag="a")
 
@@ -64,7 +64,7 @@ def dag_policy(wrong_arg_name):
 
     mod = Namespace(dag_policy=dag_policy)
 
-    policies.make_plugin_from_local_settings(plugin_manager, mod, ["dag_policy"])
+    policies.make_plugin_from_local_settings(plugin_manager, mod, {"dag_policy"})
 
     plugin_manager.hook.dag_policy(dag="passed_dag_value")