diff --git a/Lib/test/test_dict.py b/Lib/test/test_dict.py
index 3b9ff672a1aa03..9ab0f994045ca7 100644
--- a/Lib/test/test_dict.py
+++ b/Lib/test/test_dict.py
@@ -1894,6 +1894,20 @@ def test_copy(self):
         self.assertEqual(d2, frozendict(x=1, y=2))
         self.assertEqual(type(d2), frozendict)
 
+    def test_copy_iter_override(self):
+        class CustomReversedDict(frozendict):
+            def keys(self):
+                return reversed(list(frozendict.keys(self)))
+
+            __iter__ = keys
+
+        pairs = [('a', 1), ('b', 2), ('c', 3)]
+        d = CustomReversedDict(pairs)
+        d2 = d.copy()
+        self.assertIsNot(d2, d)
+        self.assertEqual(type(d2), frozendict)
+        self.assertEqual(list(d2.items()), pairs[::-1])
+
     def test_merge(self):
         # test "a | b" operator
         self.assertEqual(frozendict(x=1) | frozendict(y=2),
diff --git a/Misc/NEWS.d/next/Core_and_Builtins/2026-10-01-00-00-00.gh-issue-158525.Xw3K9a.rst b/Misc/NEWS.d/next/Core_and_Builtins/2026-10-01-00-00-00.gh-issue-158525.Xw3K9a.rst
new file mode 100644
index 00000000000000..43e5bcbf1817b0
--- /dev/null
+++ b/Misc/NEWS.d/next/Core_and_Builtins/2026-10-01-00-00-00.gh-issue-158525.Xw3K9a.rst
@@ -0,0 +1,2 @@
+Avoid reacquiring the source dictionary lock when copying a sparse dictionary
+in the free-threaded build.
diff --git a/Objects/dictobject.c b/Objects/dictobject.c
index 15377ac083c2b2..e5bf7c0da4b05d 100644
--- a/Objects/dictobject.c
+++ b/Objects/dictobject.c
@@ -4209,7 +4209,9 @@ static int
 dict_dict_merge(PyDictObject *mp, PyDictObject *other, int override, PyObject **dupkey)
 {
     assert(can_modify_dict(mp));
-    ASSERT_DICT_LOCKED(other);
+    if (!PyFrozenDict_Check(other)) {
+        ASSERT_DICT_LOCKED(other);
+    }
 
     if (other == mp || other->ma_used == 0)
         /* a.update(a) or a.update({}); nothing to do */
@@ -4575,7 +4577,14 @@ copy_lock_held_untracked(PyObject *o, int as_frozendict)
     }
     if (copy == NULL)
         return NULL;
-    if (dict_merge(copy, o, 1, NULL) < 0) {
+    int res;
+    if (Py_TYPE(mp)->tp_iter == dict_iter) {
+        res = dict_dict_merge((PyDictObject *)copy, mp, 1, NULL);
+    }
+    else {
+        res = dict_merge(copy, o, 1, NULL);
+    }
+    if (res < 0) {
         Py_DECREF(copy);
         return NULL;
     }