diff --git a/R/data.table.R b/R/data.table.R
index a3ea551fa..648271f8e 100644
--- a/R/data.table.R
+++ b/R/data.table.R
@@ -2893,6 +2893,28 @@ setattr = function(x,name,value) {
   invisible(x)
 }
 
+process_name_policy = function(names_vec) {
+  policy = getOption("datatable.unique.names", "off")
+  if (policy == "off") return(names_vec)
+
+  allowed = c("warn", "error", "rename")
+  if (!policy %in% allowed) {
+    warningf("Invalid value for 'datatable.unique.names': [%s]. Falling back to 'off'. Allowed values are: 'off', 'warn', 'error', 'rename'.", as.character(policy))
+    return(names_vec)
+  }
+
+  if (anyDuplicated(names_vec)) {
+    dups = unique(names_vec[duplicated(names_vec)])
+    msg = paste0("Duplicate column names created: ", brackify(dups), ". This may cause ambiguity.")
+    switch(policy,
+      warn = warningf("%s", msg),
+      error = stopf("%s", msg),
+      rename = return(make.unique(names_vec))
+    )
+  }
+  names_vec
+}
+
 setnames = function(x,old,new,skip_absent=FALSE) {
   # Sets by reference, maintains truelength, no copy of table at all.
   # But also more convenient than names(DT)[i]="newname"  because we can also do setnames(DT,"oldname","newname")
@@ -2950,6 +2972,12 @@ setnames = function(x,old,new,skip_absent=FALSE) {
     if (!length(new)) return(invisible(x)) # no changes
     if (length(i) != length(new)) internal_error("length(i)!=length(new)") # nocov
   }
+
+  full_names = names(x)
+  full_names[i] = new
+  full_names = process_name_policy(full_names)
+  new = full_names[i]
+
   # update the key if the column name being change is in the key
   m = chmatch(names(x)[i], key(x))
   w = which(!is.na(m))
diff --git a/R/onLoad.R b/R/onLoad.R
index b72fee4d1..ba404305b 100644
--- a/R/onLoad.R
+++ b/R/onLoad.R
@@ -98,7 +98,8 @@
     datatable.auto.index=TRUE,          # DT[col=="val"] to auto add index so 2nd time faster
     datatable.use.index=TRUE,           # global switch to address #1422
     datatable.prettyprint.char=NULL,    # FR #1091
-    datatable.old.matrix.autoname=FALSE # #7145: how data.table(x=1, matrix(1)) is auto-named set to change
+    datatable.old.matrix.autoname=FALSE, # #7145: how data.table(x=1, matrix(1)) is auto-named set to change
+    datatable.unique.names = "off"
   )
   opts = opts[!names(opts) %chin% names(options())]
   options(opts)
diff --git a/inst/tests/tests.Rraw b/inst/tests/tests.Rraw
index 687bf929e..5f3767627 100644
--- a/inst/tests/tests.Rraw
+++ b/inst/tests/tests.Rraw
@@ -21660,3 +21660,13 @@ test(2374.08, key(DT[, .(a, a)]), NULL)
 test(2374.09, key(subset(DT, select=c(a, a))), NULL)
 DT = data.table(a=1:2, a.1=3:4, val=10:11)
 test(2374.10, key(DT[, .(a.1, sum(val)), keyby=.(a, a)]), NULL)
+
+# PR #7674: Add datatable.unique.names option to control duplicate names in setnames()
+DT = data.table(a=1, b=2)
+test(2375.1, names(setnames(copy(DT), "b", "a")), c("a", "a"), options = list(datatable.unique.names = "off"))
+test(2375.2, names(setnames(copy(DT), "b", "a")), c("a", "a"), warning = "Duplicate column names created", options = list(datatable.unique.names = "warn"))
+test(2375.3, setnames(copy(DT), "b", "a"), error = "Duplicate column names created", options = list(datatable.unique.names = "error"))
+test(2375.4, names(setnames(copy(DT), "b", "a")), c("a", "a.1"), options = list(datatable.unique.names = "rename"))
+DT_pct = data.table("a%d"=1, b=2)
+test(2375.5, names(setnames(copy(DT_pct), "b", "a%d")), c("a%d", "a%d"), warning = "Duplicate column names created", options = list(datatable.unique.names = "warn"))
+test(2375.6, names(setnames(copy(DT), "b", "a")), c("a", "a"), warning = "Invalid value for 'datatable.unique.names'", options = list(datatable.unique.names = "wrong_choice"))
diff --git a/man/data.table-options.Rd b/man/data.table-options.Rd
index 439e88ef2..a7d0c7084 100644
--- a/man/data.table-options.Rd
+++ b/man/data.table-options.Rd
@@ -105,6 +105,15 @@
     \item{\code{datatable.enlist}}{Experimental feature. Default is \code{NULL}. If set to a function
       (e.g., \code{list}), the \code{j} expression can return a \code{list}, which will then
       be "enlisted" into columns in the result.}
+    \item{\code{datatable.unique.names}}{A character string, default \code{"off"}. 
+      Controls the behavior when \code{setnames} would result in duplicate column names. 
+      Possible values:
+      \itemize{
+        \item \code{"off"}: (default) Duplicates are allowed silently.
+        \item \code{"warn"}: A warning is issued if duplicates are created.
+        \item \code{"error"}: An error is raised, preventing the change.
+        \item \code{"rename"}: Duplicate names are made unique via \code{make.unique}.
+      }}
   }
 }