diff --git a/src/nvim/api/window.c b/src/nvim/api/window.c
index 09caafa580..e3f080c407 100644
--- a/src/nvim/api/window.c
+++ b/src/nvim/api/window.c
@@ -454,7 +454,6 @@ void nvim_win_set_hl_ns(Window window, Integer ns_id, Error *err)
   }
 
   win->w_ns_hl = (NS)ns_id;
-  win->w_ns_hl_winhl = -1;
   win->w_hl_needs_update = true;
   redraw_later(win, UPD_NOT_VALID);
 }
diff --git a/src/nvim/buffer_defs.h b/src/nvim/buffer_defs.h
index 06a52ccc88..a8923fdb4b 100644
--- a/src/nvim/buffer_defs.h
+++ b/src/nvim/buffer_defs.h
@@ -1100,7 +1100,7 @@ struct window_S {
   synblock_T *w_s;                 ///< for :ownsyntax
 
   int w_ns_hl;
-  int w_ns_hl_winhl;  ///< when set to -1, 'winhighlight' shouldn't be used
+  int w_ns_hl_winhl;
   int w_ns_hl_active;
   int *w_ns_hl_attr;
 
diff --git a/src/nvim/option.c b/src/nvim/option.c
index 237a3036f6..d87c3901cd 100644
--- a/src/nvim/option.c
+++ b/src/nvim/option.c
@@ -1730,12 +1730,6 @@ bool parse_winhl_opt(const char *winhl, win_T *wp)
     p = wp->w_p_winhl;
   }
 
-  if (wp != NULL && wp->w_ns_hl_winhl < 0) {
-    // 'winhighlight' shouldn't be used for this window.
-    // Only check that the value is valid.
-    wp = NULL;
-  }
-
   if (!*p) {
     if (wp != NULL && wp->w_ns_hl_winhl > 0 && wp->w_ns_hl == wp->w_ns_hl_winhl) {
       wp->w_ns_hl = 0;
@@ -1754,8 +1748,10 @@ bool parse_winhl_opt(const char *winhl, win_T *wp)
       DecorProvider *dp = get_decor_provider(wp->w_ns_hl_winhl, true);
       dp->hl_valid++;
     }
-    wp->w_ns_hl = wp->w_ns_hl_winhl;
-    ns_hl = wp->w_ns_hl;
+    ns_hl = wp->w_ns_hl_winhl;
+    if (wp->w_ns_hl <= 0) {
+      wp->w_ns_hl = wp->w_ns_hl_winhl;
+    }
   }
 
   while (*p) {
diff --git a/test/functional/api/highlight_spec.lua b/test/functional/api/highlight_spec.lua
index 90928363b3..3be4d83532 100644
--- a/test/functional/api/highlight_spec.lua
+++ b/test/functional/api/highlight_spec.lua
@@ -1,7 +1,7 @@
 local t = require('test.testutil')
 local n = require('test.functional.testnvim')()
 
-local clear, eq = n.clear, t.eq
+local clear, eq, neq = n.clear, t.eq, t.neq
 local command = n.command
 local exec_capture = n.exec_capture
 local api = n.api
@@ -548,6 +548,8 @@ describe('API: get highlight', function()
 end)
 
 describe('API: set/get highlight namespace', function()
+  before_each(clear)
+
   it('set/get highlight namespace', function()
     eq(0, api.nvim_get_hl_ns({}))
     local ns = api.nvim_create_namespace('')
@@ -563,16 +565,38 @@ describe('API: set/get highlight namespace', function()
   end)
 
   it('setting namespace takes priority over &winhighlight', function()
+    local win = api.nvim_get_current_win()
+    eq(-1, api.nvim_get_hl_ns({ winid = win }))
     command('set winhighlight=Visual:Search')
+    local winhl_ns = api.nvim_get_hl_ns({ winid = win })
+    neq(0, winhl_ns)
+    eq('Search', api.nvim_get_hl(winhl_ns, { name = 'Visual' }).link)
     n.insert('foobar')
     local ns = api.nvim_create_namespace('')
-    api.nvim_win_set_hl_ns(0, ns)
-    eq(ns, api.nvim_get_hl_ns({ winid = 0 }))
-    command('enew') -- switching buffer keeps namespace #30904
-    eq(ns, api.nvim_get_hl_ns({ winid = 0 }))
+    neq(winhl_ns, ns)
+    api.nvim_win_set_hl_ns(win, ns)
+    eq(ns, api.nvim_get_hl_ns({ winid = win }))
+    command('enew') -- Switching buffer keeps namespace. #30904
+    eq(ns, api.nvim_get_hl_ns({ winid = win }))
     command('set winhighlight=')
-    eq(ns, api.nvim_get_hl_ns({ winid = 0 }))
-    command('set winhighlight=Visual:Search')
-    eq(ns, api.nvim_get_hl_ns({ winid = 0 }))
+    eq(ns, api.nvim_get_hl_ns({ winid = win }))
+    -- Setting 'winhighlight' changes its namespace even when not using it.
+    command('set winhighlight=Visual:IncSearch')
+    eq('IncSearch', api.nvim_get_hl(winhl_ns, { name = 'Visual' }).link)
+    eq(ns, api.nvim_get_hl_ns({ winid = win }))
+    -- Setting 'winhighlight' works with global namespace. #37865
+    api.nvim_win_set_hl_ns(win, 0)
+    eq(0, api.nvim_get_hl_ns({ winid = win }))
+    command('set winhighlight=Visual:IncSearch')
+    eq('IncSearch', api.nvim_get_hl(winhl_ns, { name = 'Visual' }).link)
+    eq(winhl_ns, api.nvim_get_hl_ns({ winid = win }))
+    command('set winhighlight=')
+    eq(0, api.nvim_get_hl_ns({ winid = win }))
+    -- 'winhighlight' keeps the same namespace.
+    api.nvim_win_set_hl_ns(win, winhl_ns)
+    eq(winhl_ns, api.nvim_get_hl_ns({ winid = win }))
+    command('set winhighlight=Visual:Substitute')
+    eq('Substitute', api.nvim_get_hl(winhl_ns, { name = 'Visual' }).link)
+    eq(winhl_ns, api.nvim_get_hl_ns({ winid = win }))
   end)
 end)