diff --git a/doc/changes/12360.md b/doc/changes/12360.md
new file mode 100644
index 00000000000..67da37a5134
--- /dev/null
+++ b/doc/changes/12360.md
@@ -0,0 +1,2 @@
+- Fix issue where `dune exec -w` was unable to kill running programs on
+  rebuild. (#12360, fixes #12323, @Alizter)
diff --git a/src/dune_engine/process.ml b/src/dune_engine/process.ml
index 711e2d691d2..ca1ffcfb4b1 100644
--- a/src/dune_engine/process.ml
+++ b/src/dune_engine/process.ml
@@ -695,6 +695,7 @@ end
 type t =
   { started_at : float
   ; pid : Pid.t
+  ; is_process_group_leader : bool
   ; response_file : Path.t option
   ; stdout : Path.t option
   ; stderr : Path.t option
@@ -879,9 +880,9 @@ let report_process_finished
 
 let set_temp_dir_when_running_actions = ref true
 
-let await ~timeout_seconds { response_file; pid; _ } =
+let await ~timeout_seconds { response_file; pid; is_process_group_leader; _ } =
   let+ process_info, termination_reason =
-    Scheduler.wait_for_build_process ?timeout_seconds pid ~is_process_group_leader:true
+    Scheduler.wait_for_build_process ?timeout_seconds pid ~is_process_group_leader
   in
   Option.iter response_file ~f:Path.unlink_exn;
   process_info, termination_reason
@@ -990,6 +991,7 @@ let spawn
   Io.release stderr;
   { started_at
   ; pid
+  ; is_process_group_leader = Option.is_some setpgid
   ; response_file
   ; stdout = stdout_capture
   ; stderr = stderr_capture
diff --git a/src/dune_engine/scheduler.ml b/src/dune_engine/scheduler.ml
index 888a5fcbd3d..cf7924668e8 100644
--- a/src/dune_engine/scheduler.ml
+++ b/src/dune_engine/scheduler.ml
@@ -14,6 +14,7 @@ end
 
 type job =
   { pid : Pid.t
+  ; is_process_group_leader : bool
   ; ivar : Proc.Process_info.t Fiber.Ivar.t
   }
 
@@ -424,9 +425,9 @@ end = struct
   end
 end
 
-let kill_process_group pid signal =
-  match Sys.win32 with
-  | false ->
+let kill_process_group pid signal ~is_process_group_leader =
+  match (not Sys.win32) && is_process_group_leader with
+  | true ->
     (* Send to the entire process group so that any child processes created by
        the job are also terminated.
 
@@ -444,10 +445,15 @@ let kill_process_group pid signal =
        we call [wait] in parallel with [kill]. *)
     (try Unix.kill (-Pid.to_int pid) signal with
      | Unix.Unix_error _ -> ())
-  | true ->
+  | false ->
     (* Process groups are not supported on Windows (or even if they are, [spawn]
        does not know how to use them), so we're only sending the signal to the
-       job itself. *)
+       job itself.
+
+       There can also be other situations where [Spawn] explicitly does not
+       have a process group id that we know about. This happens when
+       [is_process_group_leader] is [false]. In those cases, it doesn't
+       make sense to pretend the pid corresponds to the correct process group. *)
     (try Unix.kill (Pid.to_int pid) signal with
      | Unix.Unix_error _ -> ())
 ;;
@@ -534,7 +540,8 @@ end = struct
 
   let killall t signal =
     Mutex.lock t.mutex;
-    Process_table.iter t ~f:(fun job -> kill_process_group job.pid signal);
+    Process_table.iter t ~f:(fun { pid; is_process_group_leader; _ } ->
+      kill_process_group pid signal ~is_process_group_leader);
     Mutex.unlock t.mutex
   ;;
 
@@ -868,9 +875,9 @@ let with_job_slot f =
     f t.cancel t.config)
 ;;
 
-let wait_for_process t pid =
+let wait_for_process t pid ~is_process_group_leader =
   let ivar = Fiber.Ivar.create () in
-  Process_watcher.register_job t.process_watcher { pid; ivar };
+  Process_watcher.register_job t.process_watcher { pid; is_process_group_leader; ivar };
   Fiber.Ivar.read ivar
 ;;
 
@@ -881,7 +888,7 @@ type termination_reason =
 
 (* We use this version privately in this module whenever we can pass the
    scheduler explicitly *)
-let wait_for_build_process t pid =
+let wait_for_build_process t pid ~is_process_group_leader =
   let+ res, outcome =
     Fiber.Cancel.with_handler
       t.cancel
@@ -889,10 +896,8 @@ let wait_for_build_process t pid =
         Process_watcher.killall t.process_watcher Sys.sigkill;
         Fiber.return ())
       (fun () ->
-         let+ r = wait_for_process t pid in
-         (* [kill_process_group] on Windows only kills the pid and by this
-            time the process should've exited anyway *)
-         if not Sys.win32 then kill_process_group pid Sys.sigterm;
+         let+ r = wait_for_process t pid ~is_process_group_leader in
+         kill_process_group pid Sys.sigterm ~is_process_group_leader;
          r)
   in
   ( res
@@ -1290,7 +1295,7 @@ module Run = struct
       | `Kill pid ->
         (* XXX this can't be right because if we ignore the fiber,
            we will not wait for the process *)
-        ignore (wait_for_build_process t pid : _ Fiber.t)
+        ignore (wait_for_build_process t pid ~is_process_group_leader:false : _ Fiber.t)
       | `Thunk f -> f ()
       | `No_op -> ());
     ignore (kill_and_wait_for_all_processes t : saw_shutdown);
@@ -1330,9 +1335,7 @@ let wait_for_process_with_timeout t pid waiter ~timeout_seconds ~is_process_grou
       Alarm_clock.await sleep
       >>| function
       | `Finished when Process_watcher.is_running t.process_watcher pid ->
-        if is_process_group_leader
-        then kill_process_group pid Sys.sigkill
-        else Unix.kill (Pid.to_int pid) Sys.sigkill;
+        kill_process_group pid Sys.sigkill ~is_process_group_leader;
         `Timed_out
       | _ -> `Finished
     and+ res, termination_reason =
@@ -1349,12 +1352,12 @@ let wait_for_process_with_timeout t pid waiter ~timeout_seconds ~is_process_grou
 let wait_for_build_process ?timeout_seconds ?(is_process_group_leader = false) pid =
   let* t = t () in
   match timeout_seconds with
-  | None -> wait_for_build_process t pid
+  | None -> wait_for_build_process t pid ~is_process_group_leader
   | Some timeout_seconds ->
     wait_for_process_with_timeout
       t
       pid
-      wait_for_build_process
+      (wait_for_build_process ~is_process_group_leader)
       ~timeout_seconds
       ~is_process_group_leader
 ;;
diff --git a/test/blackbox-tests/test-cases/exec-watch/exec-watch-server.t/run.t b/test/blackbox-tests/test-cases/exec-watch/exec-watch-server.t/run.t
index 158b2dfe9dd..5b38d7eb113 100644
--- a/test/blackbox-tests/test-cases/exec-watch/exec-watch-server.t/run.t
+++ b/test/blackbox-tests/test-cases/exec-watch/exec-watch-server.t/run.t
@@ -18,7 +18,6 @@ Below, 0: after should *not* be appearing.
 
   $ dune exec --watch ./foo.exe &
   0: before
-  0: after
   1: before
   1: after
   Success, waiting for filesystem changes...