diff --git a/plugins/woocommerce-blocks/assets/js/blocks/product-template/edit.tsx b/plugins/woocommerce-blocks/assets/js/blocks/product-template/edit.tsx
index ad8605df27b..b92ee0cb185 100644
--- a/plugins/woocommerce-blocks/assets/js/blocks/product-template/edit.tsx
+++ b/plugins/woocommerce-blocks/assets/js/blocks/product-template/edit.tsx
@@ -27,6 +27,7 @@ import type { BlockEditProps, BlockInstance } from '@wordpress/blocks';
  */
 import { useGetLocation, useProductCollectionQueryContext } from './utils';
 import './editor.scss';
+import { getDefaultStockStatuses } from '../product-collection/constants';
 
 const DEFAULT_QUERY_CONTEXT_ATTRIBUTES = [ 'collection' ];
 
@@ -251,6 +252,14 @@ const ProductTemplateEdit = (
 					location,
 					productCollectionQueryContext,
 					previewState: __privateProductCollectionPreviewState,
+					/**
+					 * Use value of "Out of stock visibility" setting to determine
+					 * which stock statuses to include if inherit query
+					 * from template is true.
+					 */
+					...( inherit && {
+						woocommerceStockStatus: getDefaultStockStatuses(),
+					} ),
 				} ),
 				blocks: getBlocks( clientId ),
 			};
diff --git a/plugins/woocommerce/changelog/47537-fix-47536-product-collection-out-of-stock-products-still-visible-despite-hide-out-of-stock-items-setting b/plugins/woocommerce/changelog/47537-fix-47536-product-collection-out-of-stock-products-still-visible-despite-hide-out-of-stock-items-setting
new file mode 100644
index 00000000000..51933fa9dff
--- /dev/null
+++ b/plugins/woocommerce/changelog/47537-fix-47536-product-collection-out-of-stock-products-still-visible-despite-hide-out-of-stock-items-setting
@@ -0,0 +1,4 @@
+Significance: patch
+Type: fix
+
+Fix: Product Collection Block Respects 'Out of stock visibility' Setting
\ No newline at end of file