diff --git a/.changeset/friendly-ravens-collect.md b/.changeset/friendly-ravens-collect.md
new file mode 100644
index 0000000000..da1850f24e
--- /dev/null
+++ b/.changeset/friendly-ravens-collect.md
@@ -0,0 +1,6 @@
+---
+"@pnpm/plugin-commands-setup": patch
+"pnpm": patch
+---
+
+`pnpm setup` should remove the CLI from the target location before moving the new binary [#8173](https://github.com/pnpm/pnpm/issues/8173).
diff --git a/packages/plugin-commands-setup/package.json b/packages/plugin-commands-setup/package.json
index 9d83dcb786..9d7b9a542c 100644
--- a/packages/plugin-commands-setup/package.json
+++ b/packages/plugin-commands-setup/package.json
@@ -33,6 +33,7 @@
     "@pnpm/cli-meta": "workspace:*",
     "@pnpm/cli-utils": "workspace:*",
     "@pnpm/os.env.path-extender": "catalog:",
+    "@zkochan/rimraf": "catalog:",
     "render-help": "catalog:"
   },
   "funding": "https://opencollective.com/pnpm",
diff --git a/packages/plugin-commands-setup/src/setup.ts b/packages/plugin-commands-setup/src/setup.ts
index 1c647887e8..99aa07425d 100644
--- a/packages/plugin-commands-setup/src/setup.ts
+++ b/packages/plugin-commands-setup/src/setup.ts
@@ -9,6 +9,7 @@ import {
   type PathExtenderReport,
 } from '@pnpm/os.env.path-extender'
 import renderHelp from 'render-help'
+import rimraf from '@zkochan/rimraf'
 
 export const rcOptionsTypes = (): Record<string, unknown> => ({})
 
@@ -59,6 +60,7 @@ function copyCli (currentLocation: string, targetDir: string): void {
     prefix: process.cwd(),
   })
   fs.mkdirSync(targetDir, { recursive: true })
+  rimraf.sync(newExecPath)
   fs.copyFileSync(currentLocation, newExecPath)
 }
 
diff --git a/pnpm-lock.yaml b/pnpm-lock.yaml
index f862efd14b..03e22daaef 100644
--- a/pnpm-lock.yaml
+++ b/pnpm-lock.yaml
@@ -3875,6 +3875,9 @@ importers:
       '@pnpm/os.env.path-extender':
         specifier: 'catalog:'
         version: 2.0.0
+      '@zkochan/rimraf':
+        specifier: 'catalog:'
+        version: 3.0.2
       render-help:
         specifier: 'catalog:'
         version: 1.0.3