diff --git a/lisp/oc.el b/lisp/oc.el
index 4b1420271..69b5cff7a 100644
--- a/lisp/oc.el
+++ b/lisp/oc.el
@@ -602,7 +602,18 @@ to (adaptive outside after)."
    (append (mapcar (lambda (value)
 		     (pcase value
 		       (`(,f . ,d)
-                        (expand-file-name (org-strip-quotes f) d))))
+                        (setq f (org-strip-quotes f))
+                        (if (or (file-name-absolute-p f)
+                                (file-remote-p f)
+                                (equal d default-directory))
+                            ;; Keep absolute paths, remote paths, and
+                            ;; local relative paths.
+                            f
+                          ;; Adjust relative bibliography path for
+                          ;; #+SETUP files located in other directory.
+                          ;; Also, see `org-export--update-included-link'.
+                          (file-relative-name
+                           (expand-file-name f d) default-directory)))))
 		   (pcase (org-collect-keywords
                            '("BIBLIOGRAPHY") nil '("BIBLIOGRAPHY"))
 		     (`(("BIBLIOGRAPHY" . ,pairs)) pairs)))
diff --git a/testing/examples/sub-bib/include-global-bib.org b/testing/examples/sub-bib/include-global-bib.org
new file mode 100644
index 000000000..e7a4ffb79
--- /dev/null
+++ b/testing/examples/sub-bib/include-global-bib.org
@@ -0,0 +1 @@
+#+bibliography: /foo.bib
diff --git a/testing/examples/sub-bib/include-relative-bib.org b/testing/examples/sub-bib/include-relative-bib.org
new file mode 100644
index 000000000..9fae85005
--- /dev/null
+++ b/testing/examples/sub-bib/include-relative-bib.org
@@ -0,0 +1 @@
+#+bibliography: ./foo.bib
diff --git a/testing/lisp/test-oc.el b/testing/lisp/test-oc.el
index 4a39874a8..b1db742d7 100644
--- a/testing/lisp/test-oc.el
+++ b/testing/lisp/test-oc.el
@@ -482,8 +482,20 @@
             (let ((org-cite-global-bibliography '("/other-bibliography")))
               (org-cite-list-bibliography-files)))))
   (should
-   (equal '(t)
+   (equal '("./bibliography")
           (org-test-with-temp-text "#+bibliography: ./bibliography"
+            (let ((org-cite-global-bibliography nil))
+              (org-cite-list-bibliography-files)))))
+  (should
+   (equal '("/foo.bib")
+          (org-test-with-temp-text
+              (format "#+SETUPFILE: \"%s/examples/sub-bib/include-global-bib.org\"" org-test-dir)
+            (let ((org-cite-global-bibliography nil))
+              (org-cite-list-bibliography-files)))))
+  (should
+   (equal '(nil)
+          (org-test-with-temp-text
+              (format "#+SETUPFILE: \"%s/examples/sub-bib/include-relative-bib.org\"" org-test-dir)
             (let ((org-cite-global-bibliography nil))
               (mapcar #'file-name-absolute-p (org-cite-list-bibliography-files))))))
   (should