diff --git a/docs/configuration.rst b/docs/configuration.rst
index 955f62e2..4f253cd8 100644
--- a/docs/configuration.rst
+++ b/docs/configuration.rst
@@ -135,7 +135,7 @@ Top level keys
 
     ``towncrier check`` will fail if there are any news fragment files that have invalid filenames, except for those in the list. ``towncrier build`` will likewise fail, but only if this list has been configured (set to an empty list if there are no files to ignore).
 
-    Some filenames such as ``.gitignore`` and ``README`` are automatically ignored. However, if a custom template is stored in the news fragment directory, you should add it to this list.
+    Some filenames such as .gitignore, README.rst. README.md, and the template file, are automatically ignored.
 
     ``None`` by default.
 
diff --git a/src/towncrier/_builder.py b/src/towncrier/_builder.py
index 62a7d3f3..4192942a 100644
--- a/src/towncrier/_builder.py
+++ b/src/towncrier/_builder.py
@@ -115,6 +115,11 @@ def find_fragments(
     If strict, raise ClickException if any fragments have an invalid name.
     """
     ignored_files = {".gitignore", ".keep", "readme", "readme.md", "readme.rst"}
+    if isinstance(config.template, str):
+        # Template can be a tuple of (package_name, resource_name).
+        #
+        # See https://github.com/twisted/towncrier/issues/634
+        ignored_files.add(config.template)
     if config.ignore:
         ignored_files.update(filename.lower() for filename in config.ignore)
 
diff --git a/src/towncrier/newsfragments/632.bugfix.rst b/src/towncrier/newsfragments/632.bugfix.rst
new file mode 100644
index 00000000..ea6b68ca
--- /dev/null
+++ b/src/towncrier/newsfragments/632.bugfix.rst
@@ -0,0 +1 @@
+When the template file is stored in the same directory with the news fragments, it is automatically ignored when checking for valid fragment file names.
diff --git a/src/towncrier/test/test_build.py b/src/towncrier/test/test_build.py
index c14fd582..aa989fd2 100644
--- a/src/towncrier/test/test_build.py
+++ b/src/towncrier/test/test_build.py
@@ -1631,6 +1631,29 @@ def test_invalid_fragment_name(self, runner):
         self.assertEqual(1, result.exit_code, result.output)
         self.assertIn("Invalid news fragment name: feature.124", result.output)
 
+    @with_project(
+        config="""
+        [tool.towncrier]
+        package = "foo"
+        template = "foo/newsfragments/template.jinja"
+        """
+    )
+    def test_ignored_template_string(self, runner):
+        """
+        Files used in `template` are automatically ignored.
+        """
+        with open("foo/newsfragments/123.feature", "w") as f:
+            f.write("This has valid filename (control case)")
+        with open("foo/newsfragments/template.jinja", "w") as f:
+            f.write("Template file should be automatically ignored")
+        with open("foo/newsfragments/.gitignore", "w") as f:
+            f.write("gitignore is automatically ignored")
+
+        result = runner.invoke(
+            _main, ["--draft", "--date", "01-01-2001", "--version", "1.0.0"]
+        )
+        self.assertEqual(0, result.exit_code, result.output)
+
     @with_project()
     def test_no_ignore_configured(self, runner):
         """