Docker Desktop - WSL update failed

Currently I use Docker Desktop 4.32.0 version on Windows 10, I updated to new version, after this Docker Engine stopped tunning and gave error:

wsl update failed: update failed: updating wsl: exit code: 4294967295: running WSL command wsl.exe C:\WINDOWS\System32\wsl.exe --update --web-download.

I tried wsl --update and wsl --update --web-download but both show this message in PowerShell:

Installing: Windows Subsystem for Linux The provided package is already installed, and reinstallation of the package was blocked. Check the AppXDeployment-Server event log for details.

I downloaded msi file and executed still docker engine gives same error. I got some file permission error so updated docker desktop, but wsl2 is not getting updated. Please anyone help me.

No need to downgrade your Docker Desktop. There is just something wrong with the default installation of Wsl.exe.

Option 1: A quick fix 🩹

1. Run wsl --update OR wsl --update --web-download

This worked for many but not for me. What worked for me is option 2

Option 2: A clean install 🏠

1. Make sure there are no pending Windows Updates (thanks @Nik)
2. Optionally, you can uninstall "Docker Desktop". There are people who made this work without uninstalling Docker Desktop. (thanks @alfred-luu)
3. Turn off "Windows Subsystem for Linux" in "Turn Windows features on or off" (I've restarted, but you may not need to)

4. Install the latest release of Wsl here https://github.com/microsoft/WSL/releases/ (or just run wsl --install or wsl.exe --install)
5. Run wsl --status to confirm installation.
6. Install "Docker Desktop" again