diff --git a/packages/runtime-core/__tests__/apiWatch.spec.ts b/packages/runtime-core/__tests__/apiWatch.spec.ts
index 0c3719e7364..f01b1338b7e 100644
--- a/packages/runtime-core/__tests__/apiWatch.spec.ts
+++ b/packages/runtime-core/__tests__/apiWatch.spec.ts
@@ -859,7 +859,7 @@ describe('api: watch', () => {
     expect(instance!.effects![0].active).toBe(false)
   })
 
-  test('this.$watch should pass `this.proxy` to watch source as the first argument ', () => {
+  test('this.$watch should pass `this.proxy` to watch source as the first argument', () => {
     let instance: any
     const source = jest.fn()
 
@@ -878,6 +878,22 @@ describe('api: watch', () => {
     expect(source).toHaveBeenCalledWith(instance)
   })
 
+  test('should not leak `this.proxy` to setup()', () => {
+    const source = jest.fn()
+
+    const Comp = defineComponent({
+      render() {},
+      setup() {
+        watch(source, () => {})
+      }
+    })
+
+    const root = nodeOps.createElement('div')
+    createApp(Comp).mount(root)
+
+    expect(source).toBeCalledWith(undefined)
+  })
+
   // #2728
   test('pre watcher callbacks should not track dependencies', async () => {
     const a = ref(0)
diff --git a/packages/runtime-core/src/apiWatch.ts b/packages/runtime-core/src/apiWatch.ts
index 9498ced48fb..0eb9db55e68 100644
--- a/packages/runtime-core/src/apiWatch.ts
+++ b/packages/runtime-core/src/apiWatch.ts
@@ -181,9 +181,7 @@ function doWatch(
         } else if (isReactive(s)) {
           return traverse(s)
         } else if (isFunction(s)) {
-          return callWithErrorHandling(s, instance, ErrorCodes.WATCH_GETTER, [
-            instance && (instance.proxy as any)
-          ])
+          return callWithErrorHandling(s, instance, ErrorCodes.WATCH_GETTER)
         } else {
           __DEV__ && warnInvalidSource(s)
         }
@@ -193,7 +191,7 @@ function doWatch(
       // getter with cb
       getter = () =>
         callWithErrorHandling(source, instance, ErrorCodes.WATCH_GETTER, [
-          instance && (instance.proxy as any)
+          arguments[3] && arguments[3].proxy
         ])
     } else {
       // no cb -> simple effect