diff --git a/lib/blocks.php b/lib/blocks.php
index d172682f932f7..3cd1ce33daa80 100644
--- a/lib/blocks.php
+++ b/lib/blocks.php
@@ -110,6 +110,7 @@ function get_dynamic_block_names() {
  * @return string
  */
 function get_dynamic_blocks_regex() {
+	_deprecated_function( __FUNCTION__, '4.1.0', __( "Dynamic blocks shouldn't be extracted by regex. Use parse_blocks() instead.", 'gutenberg' ) );
 	$dynamic_block_names   = get_dynamic_block_names();
 	$dynamic_block_pattern = (
 		'/<!--\s+wp:(' .
@@ -171,10 +172,22 @@ function gutenberg_render_block( $block ) {
  * @return string          Updated post content.
  */
 function do_blocks( $content ) {
-	global $post;
+	$blocks = gutenberg_parse_blocks( $content );
+	return _recurse_blocks( $blocks, $blocks );
+}
+add_filter( 'the_content', 'do_blocks', 9 ); // BEFORE do_shortcode().
 
-	$rendered_content      = '';
-	$dynamic_block_pattern = get_dynamic_blocks_regex();
+/**
+ * Helper function for do_blocks(), to recurse through the block tree.
+ *
+ * @since 4.1.0
+ * @access private
+ *
+ * @param array $blocks Array of blocks from parse_blocks()
+ * @return string
+ */
+function _recurse_blocks( $blocks, $all_blocks ) {
+	global $post;
 
 	/*
 	 * Back up global post, to restore after render callback.
@@ -182,87 +195,84 @@ function do_blocks( $content ) {
 	 */
 	$global_post = $post;
 
-	while ( preg_match( $dynamic_block_pattern, $content, $block_match, PREG_OFFSET_CAPTURE ) ) {
-		$opening_tag     = $block_match[0][0];
-		$offset          = $block_match[0][1];
-		$block_name      = $block_match[1][0];
-		$is_self_closing = isset( $block_match[4] );
-
-		// Reset attributes JSON to prevent scope bleed from last iteration.
-		$block_attributes_json = null;
-		if ( isset( $block_match[3] ) ) {
-			$block_attributes_json = $block_match[3][0];
+	$rendered_content = '';
+	$dynamic_blocks   = get_dynamic_block_names();
+
+	foreach ( $blocks as $block ) {
+		$block = (array) $block;
+		if ( in_array( $block['blockName'], $dynamic_blocks ) ) {
+			// Find registered block type. We can assume it exists since we use the
+			// `get_dynamic_block_names` function as a source for pattern matching.
+			$block_type = WP_Block_Type_Registry::get_instance()->get_registered( $block['blockName'] );
+
+			// Replace dynamic block with server-rendered output.
+			$block_content = $block_type->render( (array) $block['attrs'], $block['innerHTML'] );
+		} elseif ( $block['innerBlocks'] ) {
+			$block_content = _recurse_blocks( $block['innerBlocks'], $all_blocks );
+		} else {
+			$block_content = $block['innerHTML'];
 		}
 
-		// Since content is a working copy since the last match, append to
-		// rendered content up to the matched offset...
-		$rendered_content .= substr( $content, 0, $offset );
-
-		// ...then update the working copy of content.
-		$content = substr( $content, $offset + strlen( $opening_tag ) );
-
-		// Make implicit core namespace explicit.
-		$is_implicit_core_namespace = ( false === strpos( $block_name, '/' ) );
-		$normalized_block_name      = $is_implicit_core_namespace ? 'core/' . $block_name : $block_name;
-
-		// Find registered block type. We can assume it exists since we use the
-		// `get_dynamic_block_names` function as a source for pattern matching.
-		$block_type = WP_Block_Type_Registry::get_instance()->get_registered( $normalized_block_name );
-
-		// Attempt to parse attributes JSON, if available.
-		$attributes = array();
-		if ( ! empty( $block_attributes_json ) ) {
-			$decoded_attributes = json_decode( $block_attributes_json, true );
-			if ( ! is_null( $decoded_attributes ) ) {
-				$attributes = $decoded_attributes;
-			}
-		}
-
-		$inner_content = '';
-
-		if ( ! $is_self_closing ) {
-			$end_tag_pattern = '/<!--\s+\/wp:' . str_replace( '/', '\/', preg_quote( $block_name ) ) . '\s+-->/';
-			if ( ! preg_match( $end_tag_pattern, $content, $block_match_end, PREG_OFFSET_CAPTURE ) ) {
-				// If no closing tag is found, abort all matching, and continue
-				// to append remainder of content to rendered output.
-				break;
-			}
-
-			// Update content to omit text up to and including closing tag.
-			$end_tag    = $block_match_end[0][0];
-			$end_offset = $block_match_end[0][1];
-
-			$inner_content = substr( $content, 0, $end_offset );
-			$content       = substr( $content, $end_offset + strlen( $end_tag ) );
-		}
-
-		// Replace dynamic block with server-rendered output.
-		$rendered_content .= $block_type->render( $attributes, $inner_content );
+		/**
+		 * Filters the content of a single block.
+		 *
+		 * During the_content, each block is parsed and added to the output individually. This filter allows
+		 * that content to be altered immediately before it's appended.
+		 *
+		 * @since 5.0.0
+		 *
+		 * @param string $block_content The block content about to be appended.
+		 * @param array  $block         The full block, including name and attributes.
+		 * @param array  $all_blocks    The array of all blocks being processed.
+		 */
+		$rendered_content .= apply_filters( 'do_block', $block_content, $block, $all_blocks );
 
 		// Restore global $post.
 		$post = $global_post;
 	}
 
-	// Append remaining unmatched content.
-	$rendered_content .= $content;
-
 	// Strip remaining block comment demarcations.
-	$rendered_content = preg_replace( '/<!--\s+\/?wp:.*?-->\r?\n?/m', '', $rendered_content );
+	$rendered_content = preg_replace( '/<!--\s+\/?wp:.*?-->/m', '', $rendered_content );
 
 	return $rendered_content;
 }
-add_filter( 'the_content', 'do_blocks', 9 ); // BEFORE do_shortcode().
 
 /**
  * Remove all dynamic blocks from the given content.
  *
- * @since 3.6.0
+ * @since 4.1.0
  *
  * @param string $content Content of the current post.
  * @return string
  */
 function strip_dynamic_blocks( $content ) {
-	return preg_replace( get_dynamic_blocks_regex(), '', $content );
+	return _recurse_strip_dynamic_blocks( gutenberg_parse_blocks( $content ) );
+}
+
+/**
+ * Helper function for strip_dynamic_blocks(), to recurse through the block tree.
+ *
+ * @since 4.1.0
+ * @access private
+ *
+ * @param array $blocks Array of blocks from parse_blocks()
+ * @return string
+ */
+function _recurse_strip_dynamic_blocks( $blocks ) {
+	$clean_content  = '';
+	$dynamic_blocks = get_dynamic_block_names();
+
+	foreach ( $blocks as $block ) {
+		if ( ! in_array( $block['blockName'], $dynamic_blocks ) ) {
+			if ( $block['innerBlocks'] ) {
+				$clean_content .= _recurse_strip_dynamic_blocks( $block['innerBlocks'] );
+			} else {
+				$clean_content .= $block['innerHTML'];
+			}
+		}
+	}
+
+	return $clean_content;
 }
 
 /**
diff --git a/packages/block-serialization-default-parser/parser.php b/packages/block-serialization-default-parser/parser.php
index 78b6921787cc4..96f1c3a0e4900 100644
--- a/packages/block-serialization-default-parser/parser.php
+++ b/packages/block-serialization-default-parser/parser.php
@@ -306,7 +306,14 @@ function proceed() {
 				 * block and add it as a new innerBlock to the parent
 				 */
 				$stack_top = array_pop( $this->stack );
-				$stack_top->block->innerHTML .= substr( $this->document, $stack_top->prev_offset, $start_offset - $stack_top->prev_offset );
+
+				$html = substr( $this->document, $stack_top->prev_offset, $start_offset - $stack_top->prev_offset );
+				if ( $stack_top->block->innerBlocks ) {
+					$stack_top->block->innerBlocks[] = (array) $this->freeform( $html );
+				} else {
+					$stack_top->block->innerHTML = $html;
+				}
+
 				$stack_top->prev_offset = $start_offset + $token_length;
 
 				$this->add_inner_block(
@@ -440,8 +447,8 @@ function add_freeform( $length = null ) {
 	 */
 	function add_inner_block( WP_Block_Parser_Block $block, $token_start, $token_length, $last_offset = null ) {
 		$parent = $this->stack[ count( $this->stack ) - 1 ];
-		$parent->block->innerBlocks[] = $block;
-		$parent->block->innerHTML .= substr( $this->document, $parent->prev_offset, $token_start - $parent->prev_offset );
+		$parent->block->innerBlocks[] = (array) $this->freeform( substr( $this->document, $parent->prev_offset, $token_start - $parent->prev_offset ) );
+		$parent->block->innerBlocks[] = (array) $block;
 		$parent->prev_offset = $last_offset ? $last_offset : $token_start + $token_length;
 	}
 
@@ -456,10 +463,16 @@ function add_block_from_stack( $end_offset = null ) {
 		$stack_top   = array_pop( $this->stack );
 		$prev_offset = $stack_top->prev_offset;
 
-		$stack_top->block->innerHTML .= isset( $end_offset )
+		$html = isset( $end_offset )
 			? substr( $this->document, $prev_offset, $end_offset - $prev_offset )
 			: substr( $this->document, $prev_offset );
 
+		if ( $stack_top->block->innerBlocks ) {
+			$stack_top->block->innerBlocks[] = (array) $this->freeform( $html );
+		} else {
+			$stack_top->block->innerHTML = $html;
+		}
+
 		if ( isset( $stack_top->leading_html_start ) ) {
 			$this->output[] = (array) self::freeform( substr(
 				$this->document,