diff --git a/changes/1999-me-ransh.md b/changes/1999-me-ransh.md
new file mode 100644
index 0000000..236886f
--- /dev/null
+++ b/changes/1999-me-ransh.md
@@ -0,0 +1,2 @@
+Call validator with the correct `values` parameter type in `BaseModel.__setattr__`,
+when `validate_assignment = True` in model config.
diff --git a/pydantic/main.py b/pydantic/main.py
index e55d61c..02e27d1 100644
--- a/pydantic/main.py
+++ b/pydantic/main.py
@@ -365,8 +365,10 @@ class BaseModel(Representation, metaclass=ModelMetaclass):
 
             known_field = self.__fields__.get(name, None)
             if known_field:
-                value, error_ = known_field.validate(value, self.dict(exclude={name}), loc=name, cls=self.__class__)
+                original_value = self.__dict__.pop(name)
+                value, error_ = known_field.validate(value, self.__dict__, loc=name, cls=self.__class__)
                 if error_:
+                    self.__dict__[name] = original_value
                     raise ValidationError([error_], self.__class__)
                 new_values[name] = value
 
diff --git a/tests/test_validators.py b/tests/test_validators.py
index 9e3f4dc..44ca23c 100644
--- a/tests/test_validators.py
+++ b/tests/test_validators.py
@@ -199,6 +199,30 @@ def test_validating_assignment_dict():
     ]
 
 
+def test_validating_assignment_values_dict():
+    class ModelOne(BaseModel):
+        a: int
+
+    class ModelTwo(BaseModel):
+        m: ModelOne
+        b: int
+
+        @validator('b')
+        def validate_b(cls, b, values):
+            if 'm' in values:
+                return b + values['m'].a  # this fails if values['m'] is a dict
+            else:
+                return b
+
+        class Config:
+            validate_assignment = True
+
+    model = ModelTwo(m=ModelOne(a=1), b=2)
+    assert model.b == 3
+    model.b = 3
+    assert model.b == 4
+
+
 def test_validate_multiple():
     # also test TypeError
     class Model(BaseModel):