diff --git a/packages/sveltekit/src/server/sdk.ts b/packages/sveltekit/src/server/sdk.ts
index 902a6a7d1a06..670f7879e7ba 100644
--- a/packages/sveltekit/src/server/sdk.ts
+++ b/packages/sveltekit/src/server/sdk.ts
@@ -5,6 +5,7 @@ import { init as initNodeSdk, Integrations } from '@sentry/node';
 import { addOrUpdateIntegration } from '@sentry/utils';
 
 import { applySdkMetadata } from '../common/metadata';
+import { rewriteFramesIteratee } from './utils';
 
 /**
  *
@@ -24,5 +25,8 @@ export function init(options: NodeOptions): void {
 
 function addServerIntegrations(options: NodeOptions): void {
   options.integrations = addOrUpdateIntegration(new Integrations.Undici(), options.integrations || []);
-  options.integrations = addOrUpdateIntegration(new RewriteFrames(), options.integrations || []);
+  options.integrations = addOrUpdateIntegration(
+    new RewriteFrames({ iteratee: rewriteFramesIteratee }),
+    options.integrations || [],
+  );
 }
diff --git a/packages/sveltekit/src/server/utils.ts b/packages/sveltekit/src/server/utils.ts
index 67c3bfe9e050..644cd8477fff 100644
--- a/packages/sveltekit/src/server/utils.ts
+++ b/packages/sveltekit/src/server/utils.ts
@@ -1,5 +1,5 @@
-import type { DynamicSamplingContext, TraceparentData } from '@sentry/types';
-import { baggageHeaderToDynamicSamplingContext, extractTraceparentData } from '@sentry/utils';
+import type { DynamicSamplingContext, StackFrame, TraceparentData } from '@sentry/types';
+import { baggageHeaderToDynamicSamplingContext, basename, extractTraceparentData } from '@sentry/utils';
 import type { RequestEvent } from '@sveltejs/kit';
 
 /**
@@ -17,3 +17,40 @@ export function getTracePropagationData(event: RequestEvent): {
 
   return { traceparentData, dynamicSamplingContext };
 }
+
+/**
+ * A custom iteratee function for the `RewriteFrames` integration.
+ *
+ * Does the same as the default iteratee, but also removes the `module` property from the
+ * frame to improve issue grouping.
+ *
+ * For some reason, our stack trace processing pipeline isn't able to resolve the bundled
+ * module name to the original file name correctly, leading to individual error groups for
+ * each module. Removing the `module` field makes the grouping algorithm fall back to the
+ * `filename` field, which is correctly resolved and hence grouping works as expected.
+ */
+export function rewriteFramesIteratee(frame: StackFrame): StackFrame {
+  if (!frame.filename) {
+    return frame;
+  }
+
+  const prefix = 'app:///';
+
+  // Check if the frame filename begins with `/` or a Windows-style prefix such as `C:\`
+  const isWindowsFrame = /^[a-zA-Z]:\\/.test(frame.filename);
+  const startsWithSlash = /^\//.test(frame.filename);
+  if (isWindowsFrame || startsWithSlash) {
+    const filename = isWindowsFrame
+      ? frame.filename
+          .replace(/^[a-zA-Z]:/, '') // remove Windows-style prefix
+          .replace(/\\/g, '/') // replace all `\\` instances with `/`
+      : frame.filename;
+
+    const base = basename(filename);
+    frame.filename = `${prefix}${base}`;
+  }
+
+  delete frame.module;
+
+  return frame;
+}
diff --git a/packages/sveltekit/test/server/utils.test.ts b/packages/sveltekit/test/server/utils.test.ts
index 8e5c064c338c..179cc6682d85 100644
--- a/packages/sveltekit/test/server/utils.test.ts
+++ b/packages/sveltekit/test/server/utils.test.ts
@@ -1,4 +1,7 @@
-import { getTracePropagationData } from '../../src/server/utils';
+import { RewriteFrames } from '@sentry/integrations';
+import type { StackFrame } from '@sentry/types';
+
+import { getTracePropagationData, rewriteFramesIteratee } from '../../src/server/utils';
 
 const MOCK_REQUEST_EVENT: any = {
   request: {
@@ -53,3 +56,42 @@ describe('getTracePropagationData', () => {
     expect(dynamicSamplingContext).toBeUndefined();
   });
 });
+
+describe('rewriteFramesIteratee', () => {
+  it('removes the module property from the frame', () => {
+    const frame: StackFrame = {
+      filename: '/some/path/to/server/chunks/3-ab34d22f.js',
+      module: '3-ab34d22f.js',
+    };
+
+    const result = rewriteFramesIteratee(frame);
+
+    expect(result).not.toHaveProperty('module');
+  });
+
+  it('does the same filename modification as the default RewriteFrames iteratee', () => {
+    const frame: StackFrame = {
+      filename: '/some/path/to/server/chunks/3-ab34d22f.js',
+      lineno: 1,
+      colno: 1,
+      module: '3-ab34d22f.js',
+    };
+
+    const originalRewriteFrames = new RewriteFrames();
+    // @ts-ignore this property exists
+    const defaultIteratee = originalRewriteFrames._iteratee;
+
+    const defaultResult = defaultIteratee({ ...frame });
+    delete defaultResult.module;
+
+    const result = rewriteFramesIteratee({ ...frame });
+
+    expect(result).toEqual({
+      filename: 'app:///3-ab34d22f.js',
+      lineno: 1,
+      colno: 1,
+    });
+
+    expect(result).toStrictEqual(defaultResult);
+  });
+});