diff --git a/dvc/parsing/__init__.py b/dvc/parsing/__init__.py
index 13d7c53c5..c62ce2c00 100644
--- a/dvc/parsing/__init__.py
+++ b/dvc/parsing/__init__.py
@@ -499,8 +499,26 @@ class MatrixDefinition:
             iterable = self.context.resolve(self.matrix_data, unwrap=False)
         except (ContextError, ParseError) as exc:
             format_and_raise(exc, f"'{self.where}.{self.name}.matrix'", self.relpath)
+
+        # Matrix entries will have `key` and `item` added to the context.
+        # Warn users if these are already in the context from the global vars.
+        self._warn_if_overwriting(["key", "item"])
         return iterable
 
+    def _warn_if_overwriting(self, keys: List[str]):
+        warn_for = [k for k in keys if k in self.context]
+        if warn_for:
+            linking_verb = "is" if len(warn_for) == 1 else "are"
+            logger.warning(
+                (
+                    "%s %s already specified, "
+                    "will be overwritten for stages generated from '%s'"
+                ),
+                " and ".join(warn_for),
+                linking_verb,
+                self.name,
+            )
+
     @cached_property
     def normalized_iterable(self) -> Dict[str, "DictStrAny"]:
         """Convert sequence to Mapping with keys normalized."""
@@ -540,7 +558,7 @@ class MatrixDefinition:
         with reraise(KeyError, EntryNotFound(err_message)):
             value = self.normalized_iterable[key]
 
-        temp_dict = {self.pair.value: value}
+        temp_dict = {self.pair.key: key, self.pair.value: value}
         with self.context.set_temporarily(temp_dict, reserve=True):
             # optimization: item and key can be removed on __exit__() as they
             # are top-level values, and are not merged recursively.
diff --git a/tests/func/parsing/test_matrix.py b/tests/func/parsing/test_matrix.py
index eb9a45a42..a35085a6d 100644
--- a/tests/func/parsing/test_matrix.py
+++ b/tests/func/parsing/test_matrix.py
@@ -50,3 +50,47 @@ def test_matrix_interpolated(tmp_dir, dvc, matrix):
         "build@linux-3.8-dict1-list0": {"cmd": "echo linux 3.8 --arg2 2 -- out1 out11"},
         "build@linux-3.8-dict1-list1": {"cmd": "echo linux 3.8 --arg2 2 -- out2 out22"},
     }
+
+
+@pytest.mark.parametrize(
+    "matrix",
+    [
+        MATRIX_DATA,
+        {
+            "os": "${os}",
+            "pyv": "${pyv}",
+            "dict": "${dict}",
+            "list": "${list}",
+        },
+    ],
+)
+def test_matrix_key_present(tmp_dir, dvc, matrix):
+    (tmp_dir / "params.yaml").dump(MATRIX_DATA)
+    resolver = DataResolver(dvc, tmp_dir.fs_path, {})
+    data = {
+        "matrix": matrix,
+        "cmd": "echo ${key}",
+    }
+    definition = MatrixDefinition(resolver, resolver.context, "build", data)
+
+    assert definition.resolve_all() == {
+        f"build@{key}": {"cmd": f"echo {key}"}
+        for key in (
+            "win-3.7-dict0-list0",
+            "win-3.7-dict0-list1",
+            "win-3.7-dict1-list0",
+            "win-3.7-dict1-list1",
+            "win-3.8-dict0-list0",
+            "win-3.8-dict0-list1",
+            "win-3.8-dict1-list0",
+            "win-3.8-dict1-list1",
+            "linux-3.7-dict0-list0",
+            "linux-3.7-dict0-list1",
+            "linux-3.7-dict1-list0",
+            "linux-3.7-dict1-list1",
+            "linux-3.8-dict0-list0",
+            "linux-3.8-dict0-list1",
+            "linux-3.8-dict1-list0",
+            "linux-3.8-dict1-list1",
+        )
+    }