diff --git a/cms/djangoapps/contentstore/tests/test_libraries.py b/cms/djangoapps/contentstore/tests/test_libraries.py
index bb692c016033..33351b94db9f 100644
--- a/cms/djangoapps/contentstore/tests/test_libraries.py
+++ b/cms/djangoapps/contentstore/tests/test_libraries.py
@@ -106,7 +106,7 @@ def _refresh_children(self, lib_content_block, status_code_expected=200):
             lib_content_block.runtime._services['user'] = user_service  # pylint: disable=protected-access
 
         handler_url = reverse_usage_url(
-            'component_handler',
+            'preview_handler',
             lib_content_block.location,
             kwargs={'handler': 'refresh_children'}
         )
@@ -359,8 +359,6 @@ def test_change_after_first_sync(self):
         self.assertEqual(resp.status_code, 200)
         lc_block = modulestore().get_item(lc_block.location)
         self.assertEqual(len(lc_block.children), 1)  # Children should not be deleted due to a bad setting.
-        html_block = modulestore().get_item(lc_block.children[0])
-        self.assertEqual(html_block.data, data_value)
 
     def test_refreshes_children_if_libraries_change(self):
         """ Tests that children are automatically refreshed if libraries list changes """
@@ -406,7 +404,7 @@ def test_refreshes_children_if_libraries_change(self):
         html_block = modulestore().get_item(lc_block.children[0])
         self.assertEqual(html_block.data, data2)
 
-    @patch("xmodule.library_tools.SearchEngine.get_search_engine", Mock(return_value=None, autospec=True))
+    @patch("xmodule.tasks.SearchEngine.get_search_engine", Mock(return_value=None, autospec=True))
     def test_refreshes_children_if_capa_type_change(self):
         """ Tests that children are automatically refreshed if capa type field changes """
         name1, name2 = "Option Problem", "Multiple Choice Problem"
@@ -993,23 +991,21 @@ def test_duplicated_version(self):
         self.library = store.get_library(self.lib_key)
 
         # Refresh our reference to the block
-        self.lc_block = store.get_item(self.lc_block.location)
+        self.lc_block = self._refresh_children(self.lc_block)
         self.problem_in_course = store.get_item(self.problem_in_course.location)
 
         # The library has changed...
         self.assertEqual(len(self.library.children), 2)
 
-        # But the block hasn't.
-        self.assertEqual(len(self.lc_block.children), 1)
-        self.assertEqual(self.problem_in_course.location, self.lc_block.children[0])
-        self.assertEqual(self.problem_in_course.display_name, self.original_display_name)
+        # and the block has changed too.
+        self.assertEqual(len(self.lc_block.children), 2)
 
         # Duplicate self.lc_block:
         duplicate = store.get_item(
             duplicate_block(self.course.location, self.lc_block.location, self.user)
         )
         # The duplicate should have identical children to the original:
-        self.assertEqual(len(duplicate.children), 1)
+        self.assertEqual(len(duplicate.children), 2)
         self.assertTrue(self.lc_block.source_library_version)
         self.assertEqual(self.lc_block.source_library_version, duplicate.source_library_version)
         problem2_in_course = store.get_item(duplicate.children[0])
diff --git a/cms/djangoapps/contentstore/views/component.py b/cms/djangoapps/contentstore/views/component.py
index 148b259898cc..e20642b72ee5 100644
--- a/cms/djangoapps/contentstore/views/component.py
+++ b/cms/djangoapps/contentstore/views/component.py
@@ -195,6 +195,9 @@ def container_handler(request, usage_key_string):
 
             # Get the status of the user's clipboard so they can paste components if they have something to paste
             user_clipboard = content_staging_api.get_user_clipboard_json(request.user.id, request)
+            library_block_types = [problem_type['component'] for problem_type in LIBRARY_BLOCK_TYPES]
+            is_library_xblock = xblock.location.block_type in library_block_types
+
             return render_to_response('container.html', {
                 'language_code': request.LANGUAGE_CODE,
                 'context_course': course,  # Needed only for display of menus at top of page.
@@ -203,6 +206,7 @@ def container_handler(request, usage_key_string):
                 'xblock_locator': xblock.location,
                 'unit': unit,
                 'is_unit_page': is_unit_page,
+                'is_collapsible': is_library_xblock,
                 'subsection': subsection,
                 'section': section,
                 'position': index,
@@ -218,6 +222,8 @@ def container_handler(request, usage_key_string):
                 'templates': CONTAINER_TEMPLATES,
                 # Status of the user's clipboard, exactly as would be returned from the "GET clipboard" REST API.
                 'user_clipboard': user_clipboard,
+                'is_sourced_block': xblock.location.block_type == 'library_sourced',
+                'is_fullwidth_content': is_library_xblock,
             })
     else:
         return HttpResponseBadRequest("Only supports HTML requests")
diff --git a/cms/djangoapps/contentstore/views/preview.py b/cms/djangoapps/contentstore/views/preview.py
index 5ee2740abe78..3729b8e627b9 100644
--- a/cms/djangoapps/contentstore/views/preview.py
+++ b/cms/djangoapps/contentstore/views/preview.py
@@ -45,7 +45,7 @@
     wrap_xblock_aside
 )
 
-from ..utils import get_visibility_partition_info
+from ..utils import get_visibility_partition_info, StudioPermissionsService
 from .access import get_user_role
 from .session_kv_store import SessionKeyValueStore
 
@@ -198,6 +198,7 @@ def _prepare_runtime_for_preview(request, block):
         deprecated_anonymous_user_id = anonymous_id_for_user(request.user, None)
 
     services = {
+        "studio_user_permissions": StudioPermissionsService(request.user),
         "i18n": XBlockI18nService,
         'mako': mako_service,
         "settings": SettingsService(),
@@ -310,6 +311,9 @@ def _studio_wrap_xblock(xblock, view, frag, context, display_name_only=False):
             'is_reorderable': is_reorderable,
             'can_edit': can_edit,
             'can_edit_visibility': context.get('can_edit_visibility', is_course),
+            'is_loading': context.get('is_loading', False),
+            'is_selected': context.get('is_selected', False),
+            'selectable': context.get('selectable', False),
             'selected_groups_label': selected_groups_label,
             'can_add': context.get('can_add', True),
             'can_move': context.get('can_move', is_course),
diff --git a/cms/djangoapps/contentstore/views/tests/test_block.py b/cms/djangoapps/contentstore/views/tests/test_block.py
index ce5771ef83e8..b415b86a088d 100644
--- a/cms/djangoapps/contentstore/views/tests/test_block.py
+++ b/cms/djangoapps/contentstore/views/tests/test_block.py
@@ -211,7 +211,7 @@ def test_get_empty_container_fragment(self):
         self.assertNotRegex(html, r"wrapper-xblock[^-]+")
 
         # Verify that the header and article tags are still added
-        self.assertIn('<header class="xblock-header xblock-header-vertical">', html)
+        self.assertIn('<header class="xblock-header xblock-header-vertical ">', html)
         self.assertIn('<article class="xblock-render">', html)
 
     def test_get_container_fragment(self):
diff --git a/cms/djangoapps/contentstore/xblock_storage_handlers/view_handlers.py b/cms/djangoapps/contentstore/xblock_storage_handlers/view_handlers.py
index f7d369630769..34cde1950778 100644
--- a/cms/djangoapps/contentstore/xblock_storage_handlers/view_handlers.py
+++ b/cms/djangoapps/contentstore/xblock_storage_handlers/view_handlers.py
@@ -178,6 +178,7 @@ def handle_xblock(request, usage_key_string=None):
     the public studio content API.
     """
     if usage_key_string:
+
         usage_key = usage_key_with_run(usage_key_string)
 
         access_check = (
@@ -218,7 +219,10 @@ def handle_xblock(request, usage_key_string=None):
             _delete_item(usage_key, request.user)
             return JsonResponse()
         else:  # Since we have a usage_key, we are updating an existing xblock.
-            return modify_xblock(usage_key, request)
+            modified_xblock = modify_xblock(usage_key, request)
+            _post_editor_saved_callback(get_xblock(usage_key, request.user))
+            return modified_xblock
+
 
     elif request.method in ("PUT", "POST"):
         if "duplicate_source_locator" in request.json:
@@ -226,7 +230,6 @@ def handle_xblock(request, usage_key_string=None):
             duplicate_source_usage_key = usage_key_with_run(
                 request.json["duplicate_source_locator"]
             )
-
             source_course = duplicate_source_usage_key.course_key
             dest_course = parent_usage_key.course_key
             if not has_studio_write_access(
@@ -253,6 +256,8 @@ def handle_xblock(request, usage_key_string=None):
                 request.user,
                 request.json.get("display_name"),
             )
+            _post_editor_saved_callback(get_xblock(dest_usage_key, request.user))
+
             return JsonResponse(
                 {
                     "locator": str(dest_usage_key),
@@ -296,7 +301,6 @@ def handle_xblock(request, usage_key_string=None):
 
 def modify_xblock(usage_key, request):
     request_data = request.json
-    print(f'In modify_xblock with data = {request_data.get("data")}, fields = {request_data.get("fields")}')
     return _save_xblock(
         request.user,
         get_xblock(usage_key, request.user),
@@ -372,11 +376,19 @@ def _update_with_callback(xblock, user, old_metadata=None, old_content=None):
     return modulestore().update_item(xblock, user.id)
 
 
-def _save_xblock(  # lint-amnesty, pylint: disable=too-many-statements
+def _post_editor_saved_callback(xblock):
+    """
+    Updates the xblock in the modulestore after saving xblock.
+    """
+    if callable(getattr(xblock, "post_editor_saved", None)):
+        xblock.post_editor_saved()
+
+
+def _save_xblock(
     user,
     xblock,
     data=None,
-    children_strings=None,
+    children_strings=None, # lint-amnesty, pylint: disable=too-many-statements
     metadata=None,
     nullout=None,
     grader_type=None,
diff --git a/cms/envs/common.py b/cms/envs/common.py
index cbc100bcabe6..0fe6c07f141b 100644
--- a/cms/envs/common.py
+++ b/cms/envs/common.py
@@ -1994,8 +1994,10 @@
 ]
 
 LIBRARY_BLOCK_TYPES = [
-    # Per https://github.com/openedx/build-test-release-wg/issues/231
-    # we removed the library source content block from defaults until complete.
+    {
+        'component': 'library_sourced',
+        'boilerplate_name': None
+    },
     {
         'component': 'library_content',
         'boilerplate_name': None
diff --git a/cms/lib/xblock/tagging/test.py b/cms/lib/xblock/tagging/test.py
index f00d1a53c89b..173523452d54 100644
--- a/cms/lib/xblock/tagging/test.py
+++ b/cms/lib/xblock/tagging/test.py
@@ -148,9 +148,12 @@ def test_preview_html(self):
         tree = etree.parse(StringIO(problem_html), parser)
 
         main_div_nodes = tree.xpath('/html/body/div/section/div')
-        self.assertEqual(len(main_div_nodes), 1)
+        self.assertEqual(len(main_div_nodes), 2)
 
-        div_node = main_div_nodes[0]
+        loader_div_node = main_div_nodes[0]
+        self.assertIn('ui-loading', loader_div_node.get('class'))
+
+        div_node = main_div_nodes[1]
         self.assertEqual(div_node.get('data-init'), 'StructuredTagsInit')
         self.assertEqual(div_node.get('data-runtime-class'), 'PreviewRuntime')
         self.assertEqual(div_node.get('data-block-type'), 'tagging_aside')
diff --git a/cms/static/js/views/pages/container.js b/cms/static/js/views/pages/container.js
index 83a3c177d13b..4889f621a9b0 100644
--- a/cms/static/js/views/pages/container.js
+++ b/cms/static/js/views/pages/container.js
@@ -7,11 +7,14 @@ define(['jquery', 'underscore', 'backbone', 'gettext', 'js/views/pages/base_page
     'js/views/components/add_xblock', 'js/views/modals/edit_xblock', 'js/views/modals/move_xblock_modal',
     'js/models/xblock_info', 'js/views/xblock_string_field_editor', 'js/views/xblock_access_editor',
     'js/views/pages/container_subviews', 'js/views/unit_outline', 'js/views/utils/xblock_utils',
-    'common/js/components/views/feedback_notification', 'common/js/components/views/feedback_prompt',
+    'common/js/components/views/feedback_notification', 'common/js/components/views/feedback_prompt', 'js/utils/module',
 ],
-function($, _, Backbone, gettext, BasePage, ViewUtils, ContainerView, XBlockView, AddXBlockComponent,
-    EditXBlockModal, MoveXBlockModal, XBlockInfo, XBlockStringFieldEditor, XBlockAccessEditor,
-    ContainerSubviews, UnitOutlineView, XBlockUtils, NotificationView, PromptView) {
+function($, _, Backbone, gettext, BasePage,
+    ViewUtils, ContainerView, XBlockView,
+    AddXBlockComponent, EditXBlockModal, MoveXBlockModal,
+    XBlockInfo, XBlockStringFieldEditor, XBlockAccessEditor,
+    ContainerSubviews, UnitOutlineView, XBlockUtils,
+    NotificationView, PromptView,  ModuleUtils) {
     'use strict';
 
     var XBlockContainerPage = BasePage.extend({
@@ -26,7 +29,10 @@ function($, _, Backbone, gettext, BasePage, ViewUtils, ContainerView, XBlockView
             'click .delete-button': 'deleteXBlock',
             'click .show-actions-menu-button': 'showXBlockActionsMenu',
             'click .new-component-button': 'scrollToNewComponentButtons',
+            'click .save-button': 'saveSelectedLibraryComponents',
             'click .paste-component-button': 'pasteComponent',
+            'change .header-library-checkbox': 'toggleLibraryComponent',
+            'click .collapse-button': 'collapseXBlock',
         },
 
         options: {
@@ -48,6 +54,7 @@ function($, _, Backbone, gettext, BasePage, ViewUtils, ContainerView, XBlockView
             BasePage.prototype.initialize.call(this, options);
             this.viewClass = options.viewClass || this.defaultViewClass;
             this.isLibraryPage = (this.model.attributes.category === 'library');
+            this.isLibrarySourced = (this.model.attributes.category === 'library_sourced');
             this.nameEditor = new XBlockStringFieldEditor({
                 el: this.$('.wrapper-xblock-field'),
                 model: this.model
@@ -101,6 +108,12 @@ function($, _, Backbone, gettext, BasePage, ViewUtils, ContainerView, XBlockView
                     model: this.model
                 });
                 this.unitOutlineView.render();
+
+            }
+            if (this.isLibrarySourced) {
+                this.selectedLibraryComponents = [];
+                this.storedSelectedLibraryComponents = [];
+                this.getSelectedLibraryComponents();
             }
 
             this.listenTo(Backbone, 'move:onXBlockMoved', this.onXBlockMoved);
@@ -500,6 +513,78 @@ function($, _, Backbone, gettext, BasePage, ViewUtils, ContainerView, XBlockView
                 });
         },
 
+        duplicateXBlock: function(event) {
+            event.preventDefault();
+            this.duplicateComponent(this.findXBlockElement(event.target));
+        },
+
+        showMoveXBlockModal: function(event) {
+            var xblockElement = this.findXBlockElement(event.target),
+                parentXBlockElement = xblockElement.parents('.studio-xblock-wrapper'),
+                modal = new MoveXBlockModal({
+                sourceXBlockInfo: XBlockUtils.findXBlockInfo(xblockElement, this.model),
+                sourceParentXBlockInfo: XBlockUtils.findXBlockInfo(parentXBlockElement, this.model),
+                XBlockURLRoot: this.getURLRoot(),
+                outlineURL: this.options.outlineURL
+            });
+
+            event.preventDefault();
+            modal.show();
+        },
+
+        deleteXBlock: function(event) {
+            event.preventDefault();
+            this.deleteComponent(this.findXBlockElement(event.target));
+        },
+
+        createPlaceholderElement: function() {
+            return $('<div/>', {class: 'studio-xblock-wrapper'});
+        },
+
+        createComponent: function(template, target) {
+            // A placeholder element is created in the correct location for the new xblock
+            // and then onNewXBlock will replace it with a rendering of the xblock. Note that
+            // for xblocks that can't be replaced inline, the entire parent will be refreshed.
+            var parentElement = this.findXBlockElement(target),
+                parentLocator = parentElement.data('locator'),
+                buttonPanel = target.closest('.add-xblock-component'),
+                listPanel = buttonPanel.prev(),
+                scrollOffset = ViewUtils.getScrollOffset(buttonPanel),
+                $placeholderEl = $(this.createPlaceholderElement()),
+                requestData = _.extend(template, {
+                    parent_locator: parentLocator
+                }),
+                placeholderElement;
+            placeholderElement = $placeholderEl.appendTo(listPanel);
+            return $.postJSON(this.getURLRoot() + '/', requestData,
+                _.bind(this.onNewXBlock, this, placeholderElement, scrollOffset, false))
+                .fail(function() {
+                    // Remove the placeholder if the update failed
+                    placeholderElement.remove();
+            });
+        },
+
+        duplicateComponent: function(xblockElement) {
+            // A placeholder element is created in the correct location for the duplicate xblock
+            // and then onNewXBlock will replace it with a rendering of the xblock. Note that
+            // for xblocks that can't be replaced inline, the entire parent will be refreshed.
+            var self = this,
+                parentElement = self.findXBlockElement(xblockElement.parent()),
+                scrollOffset = ViewUtils.getScrollOffset(xblockElement),
+                $placeholderEl = $(self.createPlaceholderElement()),
+                placeholderElement;
+
+            placeholderElement = $placeholderEl.insertAfter(xblockElement);
+            XBlockUtils.duplicateXBlock(xblockElement, parentElement)
+                .done(function(data) {
+                    self.onNewXBlock(placeholderElement, scrollOffset, true, data);
+                })
+                .fail(function() {
+                    // Remove the placeholder if the update failed
+                    placeholderElement.remove();
+                });
+        },
+
         deleteComponent: function(xblockElement) {
             var self = this,
                 xblockInfo = new XBlockInfo({
@@ -510,6 +595,61 @@ function($, _, Backbone, gettext, BasePage, ViewUtils, ContainerView, XBlockView
             });
         },
 
+        getSelectedLibraryComponents: function() {
+            var self = this;
+            var locator = this.$el.find('.studio-xblock-wrapper').data('locator');
+            console.log(ModuleUtils);
+            $.getJSON(
+                ModuleUtils.getUpdateUrl(locator) + '/handler/get_block_ids',
+                function(data) {
+                    self.selectedLibraryComponents = Array.from(data.source_block_ids);
+                    self.storedSelectedLibraryComponents = Array.from(data.source_block_ids);
+                }
+            );
+        },
+
+        saveSelectedLibraryComponents: function(e) {
+            var self = this;
+            var locator = this.$el.find('.studio-xblock-wrapper').data('locator');
+            e.preventDefault();
+            $.postJSON(
+                ModuleUtils.getUpdateUrl(locator) + '/handler/submit_studio_edits',
+                {values: {source_block_ids: self.storedSelectedLibraryComponents}},
+                function() {
+                    self.selectedLibraryComponents = Array.from(self.storedSelectedLibraryComponents);
+                    self.toggleSaveButton();
+                }
+            );
+        },
+
+        toggleLibraryComponent: function(event) {
+            var componentId = $(event.target).closest('.studio-xblock-wrapper').data('locator');
+            var storeIndex = this.storedSelectedLibraryComponents.indexOf(componentId);
+            if (storeIndex > -1) {
+                this.storedSelectedLibraryComponents.splice(storeIndex, 1);
+                this.toggleSaveButton();
+            } else {
+                this.storedSelectedLibraryComponents.push(componentId);
+                this.toggleSaveButton();
+            }
+        },
+
+        toggleSaveButton: function() {
+            var $saveButton = $('.nav-actions .save-button');
+            if (JSON.stringify(this.selectedLibraryComponents.sort()) === JSON.stringify(this.storedSelectedLibraryComponents.sort())) {
+                $saveButton.addClass('is-hidden');
+                window.removeEventListener('beforeunload', this.onBeforePageUnloadCallback);
+            } else {
+                $saveButton.removeClass('is-hidden');
+                window.addEventListener('beforeunload', this.onBeforePageUnloadCallback);
+            }
+        },
+
+        onBeforePageUnloadCallback: function (event) {
+            event.preventDefault();
+            event.returnValue = '';
+        },
+
         onDelete: function(xblockElement) {
             // get the parent so we can remove this component from its parent.
             var xblockView = this.xblockView,
diff --git a/cms/static/sass/elements/_layout.scss b/cms/static/sass/elements/_layout.scss
index d4240b450f47..ae1090fe4623 100644
--- a/cms/static/sass/elements/_layout.scss
+++ b/cms/static/sass/elements/_layout.scss
@@ -223,6 +223,10 @@
     box-shadow: none;
     border: 0;
     background-color: $white;
+
+    &-fullwidth {
+      width: flex-grid(12, 12);
+    }
   }
 
   .content-supplementary {
diff --git a/cms/static/sass/elements/_xblocks.scss b/cms/static/sass/elements/_xblocks.scss
index 87dcb8c7d7c6..119a14826c63 100644
--- a/cms/static/sass/elements/_xblocks.scss
+++ b/cms/static/sass/elements/_xblocks.scss
@@ -43,6 +43,19 @@
     display: flex;
     align-items: center;
 
+    .header-library-checkbox {
+      margin-right: 10px;
+      width: 17px;
+      height: 17px;
+      cursor: pointer;
+      vertical-align: middle;
+    }
+
+    .header-library-checkbox-label {
+      vertical-align: middle;
+      cursor: pointer;
+    }
+
     .header-details {
       @extend %cont-truncated;
 
@@ -433,7 +446,17 @@
       border-color: $blue;
     }
 
-    .xblock-header {
+    &.is-collapsed {
+      .xblock-render {
+        display: none;
+      }
+
+      .collapse-button .fa {
+        transform: scale(1, -1);
+      }
+    }
+
+    .xblock-header:not(.is-hidden) {
       display: block;
     }
 
diff --git a/cms/templates/container.html b/cms/templates/container.html
index 89cb4bbfd62f..3b1108d84124 100644
--- a/cms/templates/container.html
+++ b/cms/templates/container.html
@@ -145,12 +145,27 @@ <h3 class="sr">${_("Page Actions")}</h3>
                         </a>
                     </li>
                 % else:
+                    % if is_sourced_block:
+                    <li class="action-item action-save nav-item">
+                        <a href="#" class="button button-save action-button save-button is-hidden">
+                            <span class="action-button-text">${_("Save changes")}</span>
+                        </a>
+                    </li>
+                    % endif
                     <li class="action-item action-edit nav-item">
                         <a href="#" class="button button-edit action-button edit-button">
                             <span class="icon fa fa-pencil" aria-hidden="true"></span>
                             <span class="action-button-text">${_("Edit")}</span>
                         </a>
                     </li>
+                    % if is_collapsible:
+                        <li class="action-item action-toggle-preview nav-item">
+                            <a href="#" class="button button-toggle-preview action-button">
+                                <span class="icon fa fa-arrow-up" aria-hidden="true"></span>
+                                <span class="action-button-text preview-text">${_("Collapse All")}</span>
+                            </a>
+                        </li>
+                    % endif
                 % endif
             </ul>
         </nav>
@@ -163,8 +178,7 @@ <h3 class="sr">${_("Page Actions")}</h3>
 <div class="wrapper-content wrapper">
     <div class="inner-wrapper">
         <section class="content-area">
-
-            <article class="content-primary">
+            <article class="content-primary ${'content-primary-fullwidth' if is_fullwidth_content else ''}">
                 <div class="container-message wrapper-message"></div>
                 <section class="wrapper-xblock level-page is-hidden studio-xblock-wrapper" data-locator="${xblock_locator}" data-course-key="${xblock_locator.course_key}">
                 </section>
diff --git a/cms/templates/studio_xblock_wrapper.html b/cms/templates/studio_xblock_wrapper.html
index fa48a905cca4..229be95ed6cc 100644
--- a/cms/templates/studio_xblock_wrapper.html
+++ b/cms/templates/studio_xblock_wrapper.html
@@ -17,10 +17,10 @@
 xblock_url = xblock_studio_url(xblock)
 show_inline = xblock.has_children and not xblock_url
 section_class = "level-nesting" if show_inline else "level-element"
-collapsible_class = "is-collapsible" if xblock.has_children else ""
 label = determine_label(xblock.display_name_with_default, xblock.scope_ids.block_type)
 messages = xblock.validate().to_json()
 block_is_unit = is_unit(xblock)
+is_sourced_block = xblock.location.block_type == 'library_sourced'
 %>
 
 <%namespace name='static' file='static_content.html'/>
@@ -48,14 +48,17 @@
     <div class="studio-xblock-wrapper" data-locator="${xblock.location}" data-course-key="${xblock.location.course_key}">
     % endif
 
-    <section class="wrapper-xblock ${section_class} ${collapsible_class}
+    <section class="wrapper-xblock is-collapsible ${section_class}
     % if is_visible_to_specific_partition_groups(xblock):
         has-group-visibility-set
     % endif
     ">
+    <div class="ui-loading ${'is-hidden' if not is_loading else ''}">
+        <p><span class="spin"><span class="icon fa fa-refresh" aria-hidden="true"></span></span> <span class="copy">${_("Importing components")}</span></p>
+    </div>
 % endif
 
-<header class="xblock-header xblock-header-${xblock.category}">
+<header class="xblock-header xblock-header-${xblock.category} ${'is-hidden' if is_loading else ''}">
     <div class="xblock-header-primary
     % if not show_preview:
         is-collapsed
@@ -77,7 +80,16 @@
             </a>
             % endif
             <div class="xblock-display-title">
+                % if selectable:
+                <input type="checkbox" name="library-component" id="${xblock.location}"
+                       class="header-library-checkbox" ${'checked="checked"' if is_selected else ''}>
+                <label for="${xblock.location}" class="xblock-display-name header-library-checkbox-label">
+                    <span class="sr-only">${_("Select this problem")}</span>
+                    ${label}
+                </label>
+                % else:
                 <span class="xblock-display-name">${label}</span>
+                % endif
                 % if selected_groups_label:
                 <p class="xblock-group-visibility-label">${selected_groups_label}</p>
                 % endif
@@ -158,7 +170,7 @@
                 <li class="action-item action-view">
                     <a href="${xblock_url}" class="action-button">
                         ## Translators: this is a verb describing the action of viewing more details
-                        <span class="action-button-text">${_('View')}</span>
+                        <span class="action-button-text">${_('Configure') if is_sourced_block else _('View')}</span>
                         <span class="icon fa fa-arrow-right" aria-hidden="true"></span>
                     </a>
                 </li>
diff --git a/docs/docs_settings.py b/docs/docs_settings.py
index 8c1b813df17d..5bc9b1594697 100644
--- a/docs/docs_settings.py
+++ b/docs/docs_settings.py
@@ -37,7 +37,6 @@
     'cms.djangoapps.course_creators',
     'cms.djangoapps.xblock_config.apps.XBlockConfig',
     'lms.djangoapps.lti_provider',
-    'user_tasks',
 ])
 
 
diff --git a/lms/envs/common.py b/lms/envs/common.py
index 4f9d9d17f440..214a7d3b68bf 100644
--- a/lms/envs/common.py
+++ b/lms/envs/common.py
@@ -3213,6 +3213,9 @@ def _make_locale_paths(settings):  # pylint: disable=missing-function-docstring
     'rules.apps.AutodiscoverRulesConfig',
     'bridgekeeper',
 
+    # management of user-triggered async tasks (course import/export, etc.)
+    'user_tasks',
+
     # Customized celery tasks, including persisting failed tasks so they can
     # be retried
     'celery_utils',
diff --git a/openedx/core/lib/blockstore_api/methods.py b/openedx/core/lib/blockstore_api/methods.py
index 7d7c65decdc1..86b4730efe1b 100644
--- a/openedx/core/lib/blockstore_api/methods.py
+++ b/openedx/core/lib/blockstore_api/methods.py
@@ -195,15 +195,18 @@ def delete_collection(collection_uuid):
 @toggle_blockstore_api
 def get_bundles(uuids=None, text_search=None):
     """
-    Get the details of all bundles
+    Get the details of all bundles.
     """
     query_params = {}
+    data = {}
     if uuids:
-        query_params['uuid'] = ','.join(map(str, uuids))
+        # Potentially we could have a lot of libraries which will lead to 414 error (Request-URI Too Long)
+        # if sending uuids in the query_params. So we have to use the request data instead.
+        data = {'uuid': ','.join(map(str, uuids))}
     if text_search:
         query_params['text_search'] = text_search
     version_url = api_url('bundles') + '?' + urlencode(query_params)
-    response = api_request('get', version_url)
+    response = api_request('get', version_url, json=data)
     # build bundle from response, convert map object to list and return
     return [_bundle_from_response(item) for item in response]
 
diff --git a/webpack.builtinblocks.config.js b/webpack.builtinblocks.config.js
index 53ce30a9c0e2..8ea887e34a83 100644
--- a/webpack.builtinblocks.config.js
+++ b/webpack.builtinblocks.config.js
@@ -75,6 +75,10 @@ module.exports = {
             './xmodule/js/src/xmodule.js',
             './xmodule/js/src/vertical/edit.js'
         ],
+        LibrarySourcedBlockStudio: [
+            './xmodule/js/src/xmodule.js',
+            './xmodule/js/src/vertical/edit.js'
+        ],
         PollBlockDisplay: [
             './xmodule/js/src/xmodule.js',
             './xmodule/js/src/javascript_loader.js',
diff --git a/webpack.common.config.js b/webpack.common.config.js
index 4a7bb7366bba..3f8e2f9255fa 100644
--- a/webpack.common.config.js
+++ b/webpack.common.config.js
@@ -77,7 +77,6 @@ module.exports = Merge.smart({
             // Studio
             Import: './cms/static/js/features/import/factories/import.js',
             CourseOrLibraryListing: './cms/static/js/features_jsx/studio/CourseOrLibraryListing.jsx',
-            LibrarySourcedBlockPicker: './xmodule/assets/library_source_block/LibrarySourcedBlockPicker.jsx', // eslint-disable-line max-len
             'js/factories/textbooks': './cms/static/js/factories/textbooks.js',
             'js/factories/container': './cms/static/js/factories/container.js',
             'js/factories/context_course': './cms/static/js/factories/context_course.js',
@@ -459,18 +458,6 @@ module.exports = Merge.smart({
                 {
                     test: /logger/,
                     loader: 'imports-loader?this=>window'
-                },
-                {
-                    test: /\.css$/,
-                    use: [
-                        'style-loader',
-                        {
-                            loader: 'css-loader',
-                            options: {
-                                modules: true
-                            }
-                        }
-                    ]
                 }
             ]
         },
diff --git a/xmodule/assets/library_content/public/js/library_content_edit.js b/xmodule/assets/library_content/public/js/library_content_edit.js
index 3c10f40627a7..08e877137d32 100644
--- a/xmodule/assets/library_content/public/js/library_content_edit.js
+++ b/xmodule/assets/library_content/public/js/library_content_edit.js
@@ -33,4 +33,22 @@ window.LibraryContentAuthorView = function(runtime, element) {
             }
         });
     });
+    // Hide loader and show element when import task finished.
+    var $loader = $wrapper.find('.ui-loading');
+    var $xblockHeader = $wrapper.find('.xblock-header');
+    if (!$loader.hasClass('is-hidden')) {
+        var timer = setInterval(function() {
+            $.get(runtime.handlerUrl(element, 'get_import_task_status'), function( data ) {
+                if (data.status == 'Succeeded') {
+                    $loader.addClass('is-hidden');
+                    $xblockHeader.removeClass('is-hidden');
+                    clearInterval(timer);
+                    runtime.notify('save', {
+                        state: 'end',
+                        element: element
+                    });
+                }
+            })
+        }, 1000);
+    }
 };
diff --git a/xmodule/assets/library_content/public/js/library_content_edit_helpers.js b/xmodule/assets/library_content/public/js/library_content_edit_helpers.js
new file mode 100644
index 000000000000..564cc5fb0fbe
--- /dev/null
+++ b/xmodule/assets/library_content/public/js/library_content_edit_helpers.js
@@ -0,0 +1,54 @@
+/* JavaScript for special editing operations that can be done on LibraryContentXBlock */
+// This is a temporary UI improvements that will be removed when V2 content libraries became
+// fully functional
+
+/**
+ * Toggle the "Problem Type" settings section depending on selected library type.
+ * As for now, the V2 libraries don't support different problem types, so they can't be
+ * filtered by it. We're hiding the Problem Type field for them.
+ */
+function checkProblemTypeShouldBeVisible(editor) {
+    var libraries = editor.find('.wrapper-comp-settings.metadata_edit.is-active')
+        .data().metadata.source_library_id.options;
+    var selectedIndex = $("select[name='Library']", editor)[0].selectedIndex;
+    var libraryKey = libraries[selectedIndex].value;
+    var url = URI('/xblock')
+        .segment(editor.find('.xblock.xblock-studio_view.xblock-studio_view-library_content.xblock-initialized')
+        .data('usage-id'))
+        .segment('handler')
+        .segment('is_v2_library');
+
+    $.ajax({
+        type: 'POST',
+        url: url,
+        data: JSON.stringify({'library_key': libraryKey}),
+        success: function(data) {
+            var problemTypeSelect = editor.find("select[name='Problem Type']")
+                .parents("li.field.comp-setting-entry.metadata_entry");
+            data.is_v2 ? problemTypeSelect.hide() : problemTypeSelect.show();
+        }
+    });
+}
+
+/**
+ * Waits untill editor html loaded, than calls checks for Program Type field toggling.
+ */
+function waitForEditorLoading() {
+    var checkContent = setInterval(function() {
+        var $modal = $('.xblock-editor');
+        var content = $modal.html();
+        if (content) {
+            clearInterval(checkContent);
+            checkProblemTypeShouldBeVisible($modal);
+        }
+    }, 10);
+}
+// Initial call
+waitForEditorLoading();
+
+var $librarySelect = $("select[name='Library']");
+$(document).on('change', $librarySelect, waitForEditorLoading)
+
+var $libraryContentEditors = $('.xblock-header.xblock-header-library_content');
+var $editBtns = $libraryContentEditors.find('.action-item.action-edit');
+$(document).on('click', $editBtns, waitForEditorLoading)
diff --git a/xmodule/assets/library_source_block/LibrarySourcedBlockPicker.jsx b/xmodule/assets/library_source_block/LibrarySourcedBlockPicker.jsx
deleted file mode 100644
index 0b6363893a76..000000000000
--- a/xmodule/assets/library_source_block/LibrarySourcedBlockPicker.jsx
+++ /dev/null
@@ -1,236 +0,0 @@
-/* globals gettext */
-
-import 'whatwg-fetch';
-import PropTypes from 'prop-types';
-import React from 'react';
-import _ from 'underscore';
-import styles from './style.css';
-
-class LibrarySourcedBlockPicker extends React.Component {
-    constructor(props) {
-        super(props);
-        this.state = {
-            libraries: [],
-            xblocks: [],
-            // eslint-disable-next-line react/no-unused-state
-            searchedLibrary: '',
-            libraryLoading: false,
-            xblocksLoading: false,
-            selectedLibrary: undefined,
-            selectedXblocks: new Set(this.props.selectedXblocks),
-        };
-        this.onLibrarySearchInput = this.onLibrarySearchInput.bind(this);
-        this.onXBlockSearchInput = this.onXBlockSearchInput.bind(this);
-        this.onLibrarySelected = this.onLibrarySelected.bind(this);
-        this.onXblockSelected = this.onXblockSelected.bind(this);
-        this.onDeleteClick = this.onDeleteClick.bind(this);
-    }
-
-    componentDidMount() {
-        this.fetchLibraries();
-    }
-
-    // eslint-disable-next-line react/sort-comp
-    fetchLibraries(textSearch = '', page = 1, append = false) {
-        this.setState({
-            // eslint-disable-next-line react/no-access-state-in-setstate
-            libraries: append ? this.state.libraries : [],
-            libraryLoading: true,
-        }, async function() {
-            try {
-                let res = await fetch(`/api/libraries/v2/?pagination=true&page=${page}&text_search=${textSearch}`);
-                res = await res.json();
-                this.setState({
-                    // eslint-disable-next-line react/no-access-state-in-setstate
-                    libraries: this.state.libraries.concat(res.results),
-                    libraryLoading: false,
-                }, () => {
-                    if (res.next) {
-                        this.fetchLibraries(textSearch, page + 1, true);
-                    }
-                });
-            } catch (error) {
-                $('#library-sourced-block-picker').trigger('error', {
-                    title: 'Could not fetch library',
-                    message: error,
-                });
-                this.setState({
-                    libraries: [],
-                    libraryLoading: false,
-                });
-            }
-        });
-    }
-
-    fetchXblocks(library, textSearch = '', page = 1, append = false) {
-        this.setState({
-            // eslint-disable-next-line react/no-access-state-in-setstate
-            xblocks: append ? this.state.xblocks : [],
-            xblocksLoading: true,
-        }, async function() {
-            try {
-                let res = await fetch(`/api/libraries/v2/${library}/blocks/?pagination=true&page=${page}&text_search=${textSearch}`);
-                res = await res.json();
-                this.setState({
-                    // eslint-disable-next-line react/no-access-state-in-setstate
-                    xblocks: this.state.xblocks.concat(res.results),
-                    xblocksLoading: false,
-                }, () => {
-                    if (res.next) {
-                        this.fetchXblocks(library, textSearch, page + 1, true);
-                    }
-                });
-            } catch (error) {
-                $('#library-sourced-block-picker').trigger('error', {
-                    title: 'Could not fetch xblocks',
-                    message: error,
-                });
-                this.setState({
-                    xblocks: [],
-                    xblocksLoading: false,
-                });
-            }
-        });
-    }
-
-    onLibrarySearchInput(event) {
-        event.persist();
-        this.setState({
-            // eslint-disable-next-line react/no-unused-state
-            searchedLibrary: event.target.value,
-        });
-        if (!this.debouncedFetchLibraries) {
-            this.debouncedFetchLibraries = _.debounce(value => {
-                this.fetchLibraries(value);
-            }, 300);
-        }
-        this.debouncedFetchLibraries(event.target.value);
-    }
-
-    onXBlockSearchInput(event) {
-        event.persist();
-        if (!this.debouncedFetchXblocks) {
-            this.debouncedFetchXblocks = _.debounce(value => {
-                this.fetchXblocks(this.state.selectedLibrary, value);
-            }, 300);
-        }
-        this.debouncedFetchXblocks(event.target.value);
-    }
-
-    onLibrarySelected(event) {
-        this.setState({
-            selectedLibrary: event.target.value,
-        });
-        this.fetchXblocks(event.target.value);
-    }
-
-    onXblockSelected(event) {
-        // eslint-disable-next-line prefer-const, react/no-access-state-in-setstate
-        let state = new Set(this.state.selectedXblocks);
-        if (event.target.checked) {
-            state.add(event.target.value);
-        } else {
-            state.delete(event.target.value);
-        }
-        this.setState({
-            selectedXblocks: state,
-        }, this.updateList);
-    }
-
-    onDeleteClick(event) {
-        let value;
-        if (event.target.tagName == 'SPAN') {
-            value = event.target.parentElement.dataset.value;
-        } else {
-            value = event.target.dataset.value;
-        }
-        // eslint-disable-next-line prefer-const, react/no-access-state-in-setstate
-        let state = new Set(this.state.selectedXblocks);
-        state.delete(value);
-        this.setState({
-            selectedXblocks: state,
-        }, this.updateList);
-    }
-
-    updateList(list) {
-        $('#library-sourced-block-picker').trigger('selected-xblocks', {
-            sourceBlockIds: Array.from(this.state.selectedXblocks),
-        });
-    }
-
-    render() {
-        return (
-            <section>
-                <div className="container-message wrapper-message">
-                    <div className="message has-warnings" style={{margin: 0, color: 'white'}}>
-                        <p className="warning">
-                            <span className="icon fa fa-warning" aria-hidden="true" />
-                            {/* eslint-disable-next-line react/no-unescaped-entities */}
-                            Hitting 'Save and Import' will import the latest versions of the selected blocks, overwriting any changes done to this block post-import.
-                        </p>
-                    </div>
-                </div>
-                <div style={{display: 'flex', flexDirection: 'row', justifyContent: 'center'}}>
-                    <div className={styles.column}>
-                        <input type="text" className={[styles.search]} aria-label="Search for library" placeholder="Search for library" label="Search for library" name="librarySearch" onChange={this.onLibrarySearchInput} />
-                        <div className={styles.elementList} onChange={this.onLibrarySelected}>
-                            {
-                                this.state.libraries.map(lib => (
-                                    <div key={lib.id} className={styles.element}>
-                                        <input id={`sourced-library-${lib.id}`} type="radio" value={lib.id} name="library" />
-                                        <label className={styles.elementItem} htmlFor={`sourced-library-${lib.id}`}>{lib.title}</label>
-                                    </div>
-                                ))
-                            }
-                            { this.state.libraryLoading && <span>{gettext('Loading...')}</span> }
-                        </div>
-                    </div>
-                    <div className={styles.column}>
-                        <input type="text" className={[styles.search]} aria-label="Search for XBlocks" placeholder="Search for XBlocks" name="xblockSearch" onChange={this.onXBlockSearchInput} disabled={!this.state.selectedLibrary || this.state.libraryLoading} />
-                        <div className={styles.elementList} onChange={this.onXblockSelected}>
-                            {
-                                this.state.xblocks.map(block => (
-                                    <div key={block.id} className={styles.element}>
-                                        <input id={`sourced-block-${block.id}`} type="checkbox" value={block.id} name="block" checked={this.state.selectedXblocks.has(block.id)} readOnly />
-                                        <label className={styles.elementItem} htmlFor={`sourced-block-${block.id}`}>{block.display_name} ({block.id})</label>
-                                    </div>
-                                ))
-                            }
-                            { this.state.xblocksLoading && <span>{gettext('Loading...')}</span> }
-                        </div>
-                    </div>
-                    <div className={styles.column}>
-                        <h4 className={styles.selectedBlocks}>{gettext('Selected blocks')}</h4>
-                        <ul>
-                            {
-                                Array.from(this.state.selectedXblocks).map(block => (
-                                    <li key={block} className={styles.element} style={{display: 'flex'}}>
-                                        {/* eslint-disable-next-line jsx-a11y/label-has-associated-control */}
-                                        <label className={styles.elementItem}>
-                                            {block}
-                                        </label>
-                                        {/* eslint-disable-next-line react/button-has-type */}
-                                        <button className={[styles.remove]} data-value={block} onClick={this.onDeleteClick} aria-label="Remove block">
-                                            <span aria-hidden="true" className="icon fa fa-times" />
-                                        </button>
-                                    </li>
-                                ))
-                            }
-                        </ul>
-                    </div>
-                </div>
-            </section>
-        );
-    }
-}
-
-LibrarySourcedBlockPicker.propTypes = {
-    // eslint-disable-next-line react/forbid-prop-types
-    selectedXblocks: PropTypes.array,
-};
-
-LibrarySourcedBlockPicker.defaultProps = {
-    selectedXblocks: [],
-};
-
-export {LibrarySourcedBlockPicker}; // eslint-disable-line import/prefer-default-export
diff --git a/xmodule/assets/library_source_block/public/js/library_source_block.js b/xmodule/assets/library_source_block/public/js/library_source_block.js
deleted file mode 100644
index 9674080d59dc..000000000000
--- a/xmodule/assets/library_source_block/public/js/library_source_block.js
+++ /dev/null
@@ -1,58 +0,0 @@
-/* JavaScript for allowing editing options on LibrarySourceBlock's studio view */
-window.LibrarySourceBlockStudioView = function(runtime, element) {
-    'use strict';
-    var self = this;
-
-    $('#library-sourced-block-picker', element).on('selected-xblocks', function(e, params) {
-        self.sourceBlockIds = params.sourceBlockIds;
-    });
-
-    $('#library-sourced-block-picker', element).on('error', function(e, params) {
-        runtime.notify('error', {title: gettext(params.title), message: params.message});
-    });
-
-    $('.save-button', element).on('click', function(e) {
-        e.preventDefault();
-        var url = $(e.target).data('submit-url');
-        var data = {
-            values: {
-                source_block_ids: self.sourceBlockIds
-            },
-            defaults: ['display_name']
-        };
-
-        runtime.notify('save', {
-            state: 'start',
-            message: gettext('Saving'),
-            element: element
-        });
-        $.ajax({
-            type: 'POST',
-            url: url,
-            data: JSON.stringify(data),
-            global: false // Disable error handling that conflicts with studio's notify('save') and notify('cancel')
-        }).done(function() {
-            runtime.notify('save', {
-                state: 'end',
-                element: element
-            });
-        }).fail(function(jqXHR) {
-            var message = gettext('This may be happening because of an error with our server or your internet connection. Try refreshing the page or making sure you are online.');  // eslint-disable-line max-len
-            if (jqXHR.responseText) { // Is there a more specific error message we can show?
-                try {
-                    message = JSON.parse(jqXHR.responseText).error;
-                    if (typeof message === 'object' && message.messages) {
-                        // e.g. {"error": {"messages": [{"text": "Unknown user 'bob'!", "type": "error"}, ...]}} etc.
-                        message = $.map(message.messages, function(msg) { return msg.text; }).join(', ');
-                    }
-                } catch (error) { message = jqXHR.responseText.substr(0, 300); }
-            }
-            runtime.notify('error', {title: gettext('Unable to update settings'), message: message});
-        });
-    });
-
-    $('.cancel-button', element).on('click', function(e) {
-        e.preventDefault();
-        runtime.notify('cancel', {});
-    });
-};
diff --git a/xmodule/assets/library_source_block/public/js/library_source_edit.js b/xmodule/assets/library_source_block/public/js/library_source_edit.js
new file mode 100644
index 000000000000..8a1b2938e807
--- /dev/null
+++ b/xmodule/assets/library_source_block/public/js/library_source_edit.js
@@ -0,0 +1,54 @@
+/* JavaScript for special editing operations that can be done on LibraryContentXBlock */
+window.LibrarySourceAuthorView = function(runtime, element) {
+    'use strict';
+    var $element = $(element);
+    var usage_id = $element.data('usage-id');
+    // The "Update Now" button is not a child of 'element', as it is in the validation message area
+    // But it is still inside this xblock's wrapper element, which we can easily find:
+    var $wrapper = $element.parents('*[data-locator="' + usage_id + '"]');
+
+    // We can't bind to the button itself because in the bok choy test environment,
+    // it may not yet exist at this point in time... not sure why.
+    $wrapper.on('click', '.library-update-btn', function(e) {
+        e.preventDefault();
+        // Update the XBlock with the latest matching content from the library:
+        runtime.notify('save', {
+            state: 'start',
+            element: element,
+            message: gettext('Updating with latest library content')
+        });
+        $.post(runtime.handlerUrl(element, 'refresh_children')).done(function() {
+            runtime.notify('save', {
+                state: 'end',
+                element: element
+            });
+            if ($element.closest('.wrapper-xblock').is(':not(.level-page)')) {
+                // We are on a course unit page. The notify('save') should refresh this block,
+                // but that is only working on the container page view of this block.
+                // Why? On the unit page, this XBlock's runtime has no reference to the
+                // XBlockContainerPage - only the top-level XBlock (a vertical) runtime does.
+                // But unfortunately there is no way to get a reference to our parent block's
+                // JS 'runtime' object. So instead we must refresh the whole page:
+                location.reload();
+            }
+        });
+    });
+    // Hide loader and show element when import task finished.
+    var $loader = $wrapper.find('.ui-loading');
+    var $xblockHeader = $wrapper.find('.xblock-header');
+    if (!$loader.hasClass('is-hidden')) {
+        var timer = setInterval(function() {
+            $.get(runtime.handlerUrl(element, 'get_import_task_status'), function( data ) {
+                if (data.status == 'Succeeded') {
+                    $loader.addClass('is-hidden');
+                    $xblockHeader.removeClass('is-hidden');
+                    clearInterval(timer);
+                    runtime.notify('save', {
+                        state: 'end',
+                        element: element
+                    });
+                }
+            })
+        }, 1000);
+    }
+};
diff --git a/xmodule/assets/library_source_block/style.css b/xmodule/assets/library_source_block/style.css
deleted file mode 100644
index 4892f20405c0..000000000000
--- a/xmodule/assets/library_source_block/style.css
+++ /dev/null
@@ -1,58 +0,0 @@
-.column {
-  display: flex;
-  flex-direction: column;
-  margin: 10px;
-  max-width: 300px;
-  flex-grow: 1;
-}
-.elementList {
-  margin-top: 10px;
-}
-input.search {
-  width: 100% !important;
-  height: auto !important;
-}
-.element > input[type='checkbox'],
-.element > input[type='radio'] {
-  position: absolute;
-  width: 0 !important;
-  height: 0 !important;
-  top: -9999px;
-}
-.element > .elementItem {
-  display: flex;
-  flex-grow: 1;
-  padding: 0.625rem 1.25rem;
-  border: 1px solid rgba(0, 0, 0, 0.25);
-}
-.element + .element > label {
-  border-top: 0;
-}
-.element > input[type='checkbox']:focus + label,
-.element > input[type='radio']:focus + label,
-.element > input:hover + label {
-  background: #f6f6f7;
-  cursor: pointer;
-}
-.element > input:checked + label {
-  background: #23419f;
-  color: #fff;
-}
-.element > input[type='checkbox']:checked:focus + label,
-.element > input[type='radio']:checked:focus + label,
-.element > input:checked:hover + label {
-  background: #193787;
-  cursor: pointer;
-}
-.selectedBlocks {
-  padding: 12px 8px 20px;
-}
-button.remove {
-  background: #e00;
-  color: #fff;
-  border: solid rgba(0,0,0,0.25) 1px;
-}
-button.remove:focus,
-button.remove:hover {
-  background: #d00;
-}
diff --git a/xmodule/library_content_block.py b/xmodule/library_content_block.py
index dd8b73112739..2a561fbc3137 100644
--- a/xmodule/library_content_block.py
+++ b/xmodule/library_content_block.py
@@ -7,8 +7,7 @@
 import logging
 import random
 from copy import copy
-from gettext import ngettext
-from rest_framework import status
+from gettext import ngettext, gettext
 
 import bleach
 from django.conf import settings
@@ -16,12 +15,15 @@
 from lazy import lazy
 from lxml import etree
 from lxml.etree import XMLSyntaxError
-from opaque_keys.edx.locator import LibraryLocator
+from opaque_keys import InvalidKeyError
+from opaque_keys.edx.locator import LibraryLocator, LibraryLocatorV2
+from pkg_resources import resource_string
+from rest_framework import status
 from web_fragments.fragment import Fragment
 from webob import Response
 from xblock.completable import XBlockCompletionMode
 from xblock.core import XBlock
-from xblock.fields import Integer, List, Scope, String, Boolean
+from xblock.fields import Boolean, Integer, List, Scope, String
 
 from xmodule.capa.responsetypes import registry
 from xmodule.mako_block import MakoTemplateBlockBase
@@ -30,14 +32,13 @@
 from xmodule.validation import StudioValidation, StudioValidationMessage
 from xmodule.xml_block import XmlMixin
 from xmodule.x_module import (
-    ResourceTemplates,
-    shim_xmodule_js,
     STUDENT_VIEW,
+    ResourceTemplates,
     XModuleMixin,
     XModuleToXBlockMixin,
+    shim_xmodule_js,
 )
 
-
 # Make '_' a no-op so we can scrape strings. Using lambda instead of
 #  `django.utils.translation.ugettext_noop` because Django cannot be imported in this file
 _ = lambda text: text
@@ -169,9 +170,14 @@ def completion_mode(cls):  # pylint: disable=no-self-argument
     @property
     def source_library_key(self):
         """
-        Convenience method to get the library ID as a LibraryLocator and not just a string
+        Convenience method to get the library ID as a LibraryLocator and not just a string.
+
+        Supports either library v1 or library v2 locators.
         """
-        return LibraryLocator.from_string(self.source_library_id)
+        try:
+            return LibraryLocator.from_string(self.source_library_id)
+        except InvalidKeyError:
+            return LibraryLocatorV2.from_string(self.source_library_id)
 
     @classmethod
     def make_selection(cls, selected, children, max_count, mode):
@@ -413,8 +419,8 @@ def author_view(self, context):
         fragment = Fragment()
         root_xblock = context.get('root_xblock')
         is_root = root_xblock and root_xblock.location == self.location
-
-        if is_root:
+        is_loading = self.tools.is_loading(self.location)
+        if is_root and not is_loading:
             # User has clicked the "View" link. Show a preview of all possible children:
             if self.children:  # pylint: disable=no-member
                 max_count = self.max_count
@@ -428,9 +434,11 @@ def author_view(self, context):
                     }))
                 context['can_edit_visibility'] = False
                 context['can_move'] = False
+                context['can_collapse'] = True
                 self.render_children(context, fragment, can_reorder=False, can_add=False)
         # else: When shown on a unit page, don't show any sort of preview -
         # just the status of this block in the validation area.
+        context['is_loading'] = is_loading
 
         # The following JS is used to make the "Update now" button work on the unit page and the container view:
         fragment.add_javascript_url(self.runtime.local_resource_url(self, 'public/js/library_content_edit.js'))
@@ -444,6 +452,7 @@ def studio_view(self, _context):
         fragment = Fragment(
             self.runtime.service(self, 'mako').render_cms_template(self.mako_template, self.get_context())
         )
+        fragment.add_javascript_url(self.runtime.local_resource_url(self, 'public/js/library_content_edit_helpers.js'))
         add_webpack_js_to_fragment(fragment, 'LibraryContentBlockEditor')
         shim_xmodule_js(fragment, self.studio_js_module_name)
         return fragment
@@ -505,6 +514,30 @@ def refresh_children(self, request=None, suffix=None):  # lint-amnesty, pylint:
         self.tools.update_children(self, user_perms)
         return Response()
 
+    @XBlock.json_handler
+    def is_v2_library(self, data, suffix=''):  # lint-amnesty, pylint: disable=unused-argument
+        """
+        Check the library version by library_id.
+
+        This is a temporary handler needed for hiding the Problem Type xblock editor field for V2 libraries.
+        """
+        lib_key = data.get('library_key')
+        try:
+            LibraryLocatorV2.from_string(lib_key)
+        except InvalidKeyError:
+            is_v2 = False
+        else:
+            is_v2 = True
+        return {'is_v2': is_v2}
+
+    @XBlock.handler
+    def get_import_task_status(self, request, suffix=''):  # lint-amnesty, pylint: disable=unused-argument
+        """
+        Return task status for update_children_task.
+        """
+        task_status = self.tools.import_task_status(self.location)
+        return Response(json.dumps({'status': task_status}))
+
     # Copy over any overridden settings the course author may have applied to the blocks.
     def _copy_overrides(self, store, user_id, source, dest):
         """
@@ -619,7 +652,10 @@ def validate(self):
                 validation,
                 StudioValidationMessage(
                     StudioValidationMessage.WARNING,
-                    _('There are no matching problem types in the specified libraries.'),
+                    (
+                        gettext(
+                            'There are no problems in the specified library of type {capa_type}.',
+                    )).format(capa_type= self.capa_type),
                     action_class='edit-button',
                     action_label=_("Select another problem type.")
                 )
@@ -668,15 +704,23 @@ def source_library_values(self):
 
     def editor_saved(self, user, old_metadata, old_content):  # lint-amnesty, pylint: disable=unused-argument
         """
-        If source_library_id or capa_type has been edited, refresh_children automatically.
+        If source_library_id is empty, clear source_library_version and children.
         """
-        old_source_library_id = old_metadata.get('source_library_id', [])
-        if (old_source_library_id != self.source_library_id or
-                old_metadata.get('capa_type', ANY_CAPA_TYPE_VALUE) != self.capa_type):
-            try:
+        if not self.source_library_id:
+            self.children = []  # lint-amnesty, pylint: disable=attribute-defined-outside-init
+            self.source_library_version = ""
+        else:
+            self.source_library_version = str(self.tools.get_library_version(self.source_library_id))
+
+    def post_editor_saved(self):
+        """
+        If xblock has been edited, refresh_children automatically.
+        """
+        try:
+            if self.source_library_id:
                 self.refresh_children()
-            except ValueError:
-                pass  # The validation area will display an error message, no need to do anything now.
+        except ValueError:
+            pass  # The validation area will display an error message, no need to do anything now.
 
     def has_dynamic_children(self):
         """
diff --git a/xmodule/library_sourced_block.py b/xmodule/library_sourced_block.py
index d96741d6e447..126c9655d926 100644
--- a/xmodule/library_sourced_block.py
+++ b/xmodule/library_sourced_block.py
@@ -1,20 +1,34 @@
 """
 Library Sourced Content XBlock
 """
+import json
 import logging
-
 from copy import copy
-from mako.template import Template as MakoTemplate
+
+import bleach
+from lazy import lazy
+from opaque_keys import InvalidKeyError
+from opaque_keys.edx.keys import UsageKey
+from opaque_keys.edx.locator import LibraryLocator, LibraryLocatorV2
+from pkg_resources import resource_string
+from web_fragments.fragment import Fragment
+from webob import Response
 from xblock.core import XBlock
-from xblock.fields import Scope, String, List
-from xblock.validation import ValidationMessage
+from xblock.fields import List, Scope, String
 from xblockutils.resources import ResourceLoader
 from xblockutils.studio_editable import StudioEditableXBlockMixin
-from webob import Response
-from web_fragments.fragment import Fragment
 
+from xmodule.mako_block import MakoTemplateBlockBase
 from xmodule.studio_editable import StudioEditableBlock as EditableChildrenMixin
+from xmodule.util.builtin_assets import add_webpack_js_to_fragment, add_sass_to_fragment
 from xmodule.validation import StudioValidation, StudioValidationMessage
+from xmodule.x_module import (
+    STUDENT_VIEW,
+    ResourceTemplates,
+    XModuleMixin,
+    XModuleToXBlockMixin,
+    shim_xmodule_js
+)
 
 log = logging.getLogger(__name__)
 loader = ResourceLoader(__name__)
@@ -25,7 +39,15 @@
 
 
 @XBlock.wants('library_tools')  # Only needed in studio
-class LibrarySourcedBlock(StudioEditableXBlockMixin, EditableChildrenMixin, XBlock):
+@XBlock.wants('studio_user_permissions')  # Only available in studio
+class LibrarySourcedBlock(
+    StudioEditableXBlockMixin,
+    MakoTemplateBlockBase,
+    XModuleToXBlockMixin,
+    ResourceTemplates,
+    XModuleMixin,
+    EditableChildrenMixin,
+):
     """
     Library Sourced Content XBlock
 
@@ -38,50 +60,91 @@ class LibrarySourcedBlock(StudioEditableXBlockMixin, EditableChildrenMixin, XBlo
     """
     display_name = String(
         help=_("The display name for this component."),
-        default="Library Sourced Content",
+        default="Library Reference Block",
         display_name=_("Display Name"),
         scope=Scope.content,
     )
+    source_library_id = String(
+        display_name=_("Library"),
+        help=_("Select the library from which you want to draw content."),
+        scope=Scope.settings,
+        values_provider=lambda instance: instance.source_library_values(),
+    )
+    source_library_version = String(
+        # This is a hidden field that stores the version of source_library when we last pulled content from it
+        display_name=_("Library Version"),
+        scope=Scope.settings,
+    )
     source_block_ids = List(
         display_name=_("Library Blocks List"),
         help=_("Enter the IDs of the library XBlocks that you wish to use."),
         scope=Scope.content,
     )
-    editable_fields = ("display_name", "source_block_ids")
+    editable_fields = ("source_block_ids",)
     has_children = True
     has_author_view = True
+
     resources_dir = 'assets/library_source_block'
-    MAX_BLOCKS_ALLOWED = 10
+
+    preview_view_js = {
+        'js': [],
+        'xmodule_js': resource_string(__name__, 'js/src/xmodule.js'),
+    }
+    preview_view_css = {
+        'scss': [],
+    }
+
+    mako_template = 'widgets/metadata-edit.html'
+    studio_js_module_name = "VerticalDescriptor"
+    studio_view_js = {
+        'js': [
+            resource_string(__name__, 'js/src/vertical/edit.js'),
+        ],
+        'xmodule_js': resource_string(__name__, 'js/src/xmodule.js'),
+    }
+    studio_view_css = {
+        'scss': [],
+    }
 
     def __str__(self):
         return f"LibrarySourcedBlock: {self.display_name}"
 
-    def __init__(self, *args, **kwargs):
-        super().__init__(*args, **kwargs)
-        if not self.source_block_ids:
-            self.has_children = False
+    def render_children(self, context, fragment, can_reorder=False, can_add=False):
+        """
+        Renders the children of the module with HTML appropriate for Studio. If can_reorder is True,
+        then the children will be rendered to support drag and drop.
+        """
+        contents = []
+        for child in self.get_children():  # pylint: disable=no-member
+            if can_reorder:
+                context['reorderable_items'].add(child.location)
+            context['can_add'] = can_add
+            context['is_selected'] = str(child.location) in self.source_block_ids
+            rendered_child = child.render(EditableChildrenMixin.get_preview_view_name(child), context)
+            fragment.add_fragment_resources(rendered_child)
+
+            contents.append({
+                'id': str(child.location),
+                'content': rendered_child.content
+            })
 
-    def studio_view(self, context):
+        fragment.add_content(self.runtime.service(self, 'mako').render_template("studio_render_children_view.html", {  # pylint: disable=no-member
+            'items': contents,
+            'xblock_context': context,
+            'can_add': can_add,
+            'can_reorder': can_reorder,
+        }))
+
+    def studio_view(self, _context):
         """
-        Render a form for editing this XBlock
+        Return the studio view.
         """
-        fragment = Fragment()
-        static_content = ResourceLoader('common.djangoapps.pipeline_mako').load_unicode('templates/static_content.html')
-        render_react = MakoTemplate(static_content, default_filters=[]).get_def('renderReact')
-        react_content = render_react.render(
-            component="LibrarySourcedBlockPicker",
-            id="library-sourced-block-picker",
-            props={
-                'selectedXblocks': self.source_block_ids,
-            }
+        fragment = Fragment(
+            self.runtime.service(self, 'mako').render_template(self.mako_template, self.get_context())
         )
-        fragment.content = loader.render_django_template('templates/library-sourced-block-studio-view.html', {
-            'react_content': react_content,
-            'save_url': self.runtime.handler_url(self, 'submit_studio_edits'),
-        })
+        add_webpack_js_to_fragment(fragment, 'LibrarySourcedBlockStudio')
+        shim_xmodule_js(fragment, self.studio_js_module_name)
 
-        fragment.add_javascript_url(self.runtime.local_resource_url(self, 'public/js/library_source_block.js'))
-        fragment.initialize_js('LibrarySourceBlockStudioView')
 
         return fragment
 
@@ -90,39 +153,97 @@ def author_view(self, context):
         Renders the Studio preview view.
         """
         fragment = Fragment()
-        context = {} if not context else copy(context)  # Isolate context - without this there are weird bugs in Studio
-        # EditableChildrenMixin.render_children will render HTML that allows instructors to make edits to the children
-        context['can_move'] = False
-        self.render_children(context, fragment, can_reorder=False, can_add=False)
+        root_xblock = context.get('root_xblock')
+        is_root = root_xblock and root_xblock.location == self.location  # pylint: disable=no-member
+        # If block ID is not defined, ask user for the component ID in the author_view itself.
+        # We don't display the editor if is_root as that page should represent the student_view without any ambiguity
+        is_loading = self.tools.is_loading(self.location)
+        if is_root and not is_loading:
+            context = {} if not context else copy(context)  # Isolate context - without this there are weird
+            # bugs in Studio EditableChildrenMixin.render_children will render HTML that allows instructors
+            # to make edits to the children
+            context['can_move'] = False
+            context['selectable'] = True
+            context['can_collapse'] = True
+            self.render_children(context, fragment, can_reorder=False, can_add=False)
+            return fragment
+        context['is_loading'] = is_loading
+        fragment.add_javascript_url(self.runtime.local_resource_url(self, 'public/js/library_source_edit.js'))
+        fragment.initialize_js('LibrarySourceAuthorView')
         return fragment
 
+    def _get_selected_child_blocks(self):
+        """
+        Generator returning XBlock instances of the children selected for the
+        current user.
+        """
+        for block_id in self.source_block_ids:
+            usage_key = UsageKey.from_string(block_id)
+            yield self.runtime.get_block(usage_key)
+
     def student_view(self, context):
         """
         Renders the view that learners see.
         """
-        result = Fragment()
-        child_frags = self.runtime.render_children(self, context=context)
-        result.add_resources(child_frags)
-        result.add_content('<div class="library-sourced-content">')
-        for frag in child_frags:
-            result.add_content(frag.content)
-        result.add_content('</div>')
-        return result
-
-    def validate_field_data(self, validation, data):
-        """
-        Validate this block's field data. Instead of checking fields like self.name, check the
-        fields set on data, e.g. data.name. This allows the same validation method to be re-used
-        for the studio editor.
-        """
-        if len(data.source_block_ids) > self.MAX_BLOCKS_ALLOWED:
-            # Because importing library blocks is an expensive operation
-            validation.add(
-                ValidationMessage(
-                    ValidationMessage.ERROR,
-                    _("A maximum of {0} components may be added.").format(self.MAX_BLOCKS_ALLOWED)
+        fragment = Fragment()
+        child_context = {} if not context else copy(context)
+
+        fragment.add_content('<div class="library-sourced-content">')
+        for child in self._get_selected_child_blocks():
+            if child is None:
+                # TODO: Fix the underlying issue in TNL-7424
+                # This shouldn't be happening, but does for an as-of-now
+                # unknown reason. Until we address the underlying issue,
+                # let's at least log the error explicitly, ignore the
+                # exception, and prevent the page from resulting in a
+                # 500-response.
+                log.error('Skipping display for child block that is None')
+                continue
+            for displayable in child.displayable_items():
+                rendered_child = displayable.render(STUDENT_VIEW, child_context)
+                fragment.add_content(rendered_child.content)
+                fragment.add_fragment_resources(rendered_child)
+
+        fragment.add_content('</div>')
+        return fragment
+
+    def _validate_library_version(self, validation, lib_tools, version, library_key):
+        """
+        Validates library version
+        """
+        latest_version = lib_tools.get_library_version(library_key)
+        if latest_version is not None:
+            if version is None or version != str(latest_version):
+                validation.set_summary(
+                    StudioValidationMessage(
+                        StudioValidationMessage.WARNING,
+                        _('This component is out of date. The library has new content.'),
+                        # TODO: change this to action_runtime_event='...' once the unit page supports that feature.
+                        # See https://openedx.atlassian.net/browse/TNL-993
+                        action_class='library-update-btn',
+                        # Translators: {refresh_icon} placeholder is substituted to "↻" (without double quotes)
+                        action_label=_("{refresh_icon} Update now.").format(refresh_icon="↻")
+                    )
+                )
+                return False
+        else:
+            validation.set_summary(
+                StudioValidationMessage(
+                    StudioValidationMessage.ERROR,
+                    _('Library is invalid, corrupt, or has been deleted.'),
+                    action_class='edit-button',
+                    action_label=_("Edit Library List.")
                 )
             )
+            return False
+        return True
+
+    def _set_validation_error_if_empty(self, validation, summary):
+        """
+        Helper method to only set validation summary if it's empty
+        """
+        if validation.empty:
+            validation.set_summary(summary)
 
     def validate(self):
         """
@@ -132,28 +253,126 @@ def validate(self):
         validation = super().validate()
         validation = StudioValidation.copy(validation)
 
-        if not self.source_block_ids:
+        if not self.source_library_id:
             validation.set_summary(
                 StudioValidationMessage(
                     StudioValidationMessage.NOT_CONFIGURED,
-                    _("No XBlock has been configured for this component. Use the editor to select the target blocks."),
+                    _("A library has not been selected yet."),
                     action_class='edit-button',
-                    action_label=_("Open Editor")
+                    action_label=_("Select a Library.")
                 )
             )
+            return validation
+
+        if not self.children:
+            validation.set_summary(
+                StudioValidationMessage(
+                    StudioValidationMessage.NOT_CONFIGURED,
+                    _("There is no content in the specified library."),
+                    action_class='edit-button',
+                    action_label=_("Select another Library.")
+                )
+            )
+            return validation
+
+        self._validate_library_version(validation, self.tools, self.source_library_version, self.source_library_key)
         return validation
 
-    @XBlock.handler
-    def submit_studio_edits(self, data, suffix=''):
+    def source_library_values(self):
+        """
+        Return a list of possible values for self.source_library_id
+        """
+
+        user_perms = self.runtime.service(self, 'studio_user_permissions')
+        all_libraries = [
+            (key, bleach.clean(name)) for key, name in self.tools.list_available_libraries()
+            if user_perms.can_read(key) or self.source_library_id == str(key)
+        ]
+        all_libraries.sort(key=lambda entry: entry[1])  # Sort by name
+        if self.source_library_id and self.source_library_key not in [entry[0] for entry in all_libraries]:
+            all_libraries.append((self.source_library_id, _("Invalid Library")))
+        all_libraries = [("", _("No Library Selected"))] + all_libraries
+        values = [{"display_name": name, "value": str(key)} for key, name in all_libraries]
+        return values
+
+    @property
+    def non_editable_metadata_fields(self):
+        non_editable_fields = super().non_editable_metadata_fields
+        non_editable_fields.extend([
+            LibrarySourcedBlock.source_block_ids,
+            LibrarySourcedBlock.source_library_version,
+        ])
+        return non_editable_fields
+
+    @property
+    def source_library_key(self):
         """
-        Save changes to this block, applying edits made in Studio.
+        Convenience method to get the library ID as a LibraryLocator and not just a string
         """
-        response = super().submit_studio_edits(data, suffix)
-        # Replace our current children with the latest ones from the libraries.
-        lib_tools = self.runtime.service(self, 'library_tools')
         try:
-            lib_tools.import_from_blockstore(self, self.source_block_ids)
-        except Exception as err:  # pylint: disable=broad-except
-            log.exception(err)
-            return Response(_("Importing Library Block failed - are the IDs valid and readable?"), status=400)
-        return response
+            return LibraryLocator.from_string(self.source_library_id)
+        except InvalidKeyError:
+            return LibraryLocatorV2.from_string(self.source_library_id)
+
+    @lazy
+    def tools(self):
+        """
+        Grab the library tools service or raise an error.
+        """
+        return self.runtime.service(self, 'library_tools')
+
+    def editor_saved(self, user, old_metadata, old_content):  # lint-amnesty, pylint: disable=unused-argument
+        """
+        If source_library_id is empty, clear source_library_version and children.
+        """
+        if not self.source_library_id:
+            self.children = []  # lint-amnesty, pylint: disable=attribute-defined-outside-init
+            self.source_library_version = ""
+        else:
+            self.source_library_version = str(self.tools.get_library_version(self.source_library_id))
+
+    def post_editor_saved(self):  # lint-amnesty, pylint: disable=unused-argument
+        """
+        If source_library_id has been edited, refresh_children automatically.
+        """
+        try:
+            if self.source_library_id:
+                self.refresh_children()
+        except ValueError:
+            pass  # The validation area will display an error message, no need to do anything now.
+
+    @XBlock.handler
+    def refresh_children(self, request=None, suffix=None):  # lint-amnesty, pylint: disable=unused-argument
+        """
+        Refresh children:
+        This method is to be used when any of the libraries that this block
+        references have been updated. It will re-fetch all matching blocks from
+        the libraries, and copy them as children of this block. The children
+        will be given new block_ids, but the definition ID used should be the
+        exact same definition ID used in the library.
+
+        This method will update this block's 'source_library_id' field to store
+        the version number of the libraries used, so we easily determine if
+        this block is up to date or not.
+        """
+        user_perms = self.runtime.service(self, 'studio_user_permissions')
+        if not self.tools:
+            return Response("Library Tools unavailable in current runtime.", status=400)
+
+        self.tools.update_children(self, user_perms)
+        return Response()
+
+    @XBlock.handler
+    def get_block_ids(self, request, suffix=''):  # lint-amnesty, pylint: disable=unused-argument
+        """
+        Return source_block_ids.
+        """
+        return Response(json.dumps({'source_block_ids': self.source_block_ids}))
+
+    @XBlock.handler
+    def get_import_task_status(self, request, suffix=''):  # lint-amnesty, pylint: disable=unused-argument
+        """
+        Return task status for update_children_task.
+        """
+        status = self.tools.import_task_status(self.location)
+        return Response(json.dumps({'status': status}))
diff --git a/xmodule/library_tools.py b/xmodule/library_tools.py
index 58cd8212416f..d8cb7aa078eb 100644
--- a/xmodule/library_tools.py
+++ b/xmodule/library_tools.py
@@ -1,14 +1,20 @@
 """
 XBlock runtime services for LibraryContentBlock
 """
-import hashlib
-
 from django.contrib.auth.models import User  # lint-amnesty, pylint: disable=imported-auth-user
 from django.core.exceptions import PermissionDenied
+from opaque_keys import InvalidKeyError
 from opaque_keys.edx.keys import UsageKey
-from opaque_keys.edx.locator import LibraryLocator, LibraryUsageLocator, LibraryUsageLocatorV2, BlockUsageLocator
+from opaque_keys.edx.locator import (
+    BlockUsageLocator,
+    LibraryLocator,
+    LibraryLocatorV2,
+    LibraryUsageLocator,
+    LibraryUsageLocatorV2,
+)
 from search.search_engine_base import SearchEngine
 from xblock.fields import Scope
+from user_tasks.models import UserTaskStatus
 
 from openedx.core.djangoapps.content_libraries import api as library_api
 from openedx.core.djangoapps.xblock.api import load_block
@@ -18,6 +24,16 @@
 from xmodule.library_content_block import ANY_CAPA_TYPE_VALUE
 from xmodule.modulestore import ModuleStoreEnum
 from xmodule.modulestore.exceptions import ItemNotFoundError
+from xmodule.tasks import update_children_task, get_import_task_status
+
+from openedx.core.djangoapps.content_libraries import api as library_api
+from openedx.core.djangoapps.content_libraries.models import ContentLibrary
+
+from common.djangoapps.student.auth import has_studio_write_access
+from openedx.core.djangoapps.content_libraries import api as library_api
+from openedx.core.djangoapps.content_libraries.models import ContentLibrary
+from openedx.core.djangoapps.xblock.api import load_block
+from openedx.core.lib import blockstore_api
 
 
 def normalize_key_for_search(library_key):
@@ -27,39 +43,63 @@ def normalize_key_for_search(library_key):
 
 class LibraryToolsService:
     """
-    Service that allows LibraryContentBlock to interact with libraries in the
-    modulestore.
+    Service for LibraryContentBlock and LibrarySourcedBlock.
+
+    Allows to interact with libraries in the modulestore and blockstore.
     """
     def __init__(self, modulestore, user_id):
         self.store = modulestore
         self.user_id = user_id
 
-    def _get_library(self, library_key):
+    def _get_library(self, library_key, is_v2_lib):
         """
-        Given a library key like "library-v1:ProblemX+PR0B", return the
-        'library' XBlock with meta-information about the library.
+        Helper method to get either V1 or V2 library.
 
-        A specific version may be specified.
+        Given a library key like "library-v1:ProblemX+PR0B" (V1) or "lib:RG:rg-1" (v2), return the 'library'.
+
+        is_v2_lib (bool) indicates which library storage should be requested:
+            True - blockstore (V2 library);
+            False - modulestore (V1 library).
 
         Returns None on error.
         """
-        if not isinstance(library_key, LibraryLocator):
-            library_key = LibraryLocator.from_string(library_key)
-
-        try:
-            return self.store.get_library(
-                library_key, remove_version=False, remove_branch=False, head_validation=False
-            )
-        except ItemNotFoundError:
-            return None
+        if is_v2_lib:
+            try:
+                return library_api.get_library(library_key)
+            except ContentLibrary.DoesNotExist:
+                return None
+        else:
+            try:
+                return self.store.get_library(
+                    library_key, remove_version=False, remove_branch=False, head_validation=False
+                )
+            except ItemNotFoundError:
+                return None
 
     def get_library_version(self, lib_key):
         """
-        Get the version (an ObjectID) of the given library.
-        Returns None if the library does not exist.
+        Get the version of the given library.
+
+        The return value (library version) could be:
+            ObjectID - for V1 library;
+            int      - for V2 library.
+            None     - if the library does not exist.
         """
-        library = self._get_library(lib_key)
+        if not isinstance(lib_key, (LibraryLocator, LibraryLocatorV2)):
+            try:
+                lib_key = LibraryLocator.from_string(lib_key)
+                is_v2_lib = False
+            except InvalidKeyError:
+                lib_key = LibraryLocatorV2.from_string(lib_key)
+                is_v2_lib = True
+        else:
+            is_v2_lib = isinstance(lib_key, LibraryLocatorV2)
+
+        library = self._get_library(lib_key, is_v2_lib)
+
         if library:
+            if is_v2_lib:
+                return library.version
             # We need to know the library's version so ensure it's set in library.location.library_key.version_guid
             assert library.location.library_key.version_guid is not None
             return library.location.library_key.version_guid
@@ -137,15 +177,14 @@ def can_use_library_content(self, block):
 
     def update_children(self, dest_block, user_perms=None, version=None):
         """
-        This method is to be used when the library that a LibraryContentBlock
-        references has been updated. It will re-fetch all matching blocks from
-        the libraries, and copy them as children of dest_block. The children
-        will be given new block_ids, but the definition ID used should be the
-        exact same definition ID used in the library.
-
-        This method will update dest_block's 'source_library_version' field to
-        store the version number of the libraries used, so we easily determine
-        if dest_block is up to date or not.
+        Update xBlock's children.
+
+        Re-fetch all matching blocks from the libraries, and copy them as children of dest_block.
+        The children will be given new block_ids.
+
+        NOTE: V1 libraies blocks definition ID should be the
+        exact same definition ID used in the copy block.
+
         """
         if user_perms and not user_perms.can_write(dest_block.location.course_key):
             raise PermissionDenied()
@@ -155,49 +194,61 @@ def update_children(self, dest_block, user_perms=None, version=None):
             return
 
         source_blocks = []
+
         library_key = dest_block.source_library_key
-        if version:
+        is_v2_lib = isinstance(library_key, LibraryLocatorV2)
+
+        if version and not is_v2_lib:
             library_key = library_key.replace(branch=ModuleStoreEnum.BranchName.library, version_guid=version)
-        library = self._get_library(library_key)
+
+        library = self._get_library(library_key, is_v2_lib)
+
         if library is None:
             raise ValueError(f"Requested library {library_key} not found.")
         if user_perms and not user_perms.can_read(library_key):
             raise PermissionDenied()
-        filter_children = (dest_block.capa_type != ANY_CAPA_TYPE_VALUE)
-        if filter_children:
-            # Apply simple filtering based on CAPA problem types:
-            source_blocks.extend(self._problem_type_filter(library, dest_block.capa_type))
-        else:
-            source_blocks.extend(library.children)
-
-        with self.store.bulk_operations(dest_block.location.course_key):
-            dest_block.source_library_version = str(library.location.library_key.version_guid)
-            self.store.update_item(dest_block, self.user_id)
-            head_validation = not version
-            dest_block.children = self.store.copy_from_template(
-                source_blocks, dest_block.location, self.user_id, head_validation=head_validation
-            )
-            # ^-- copy_from_template updates the children in the DB
-            # but we must also set .children here to avoid overwriting the DB again
+
+        if not is_v2_lib:
+            if user_perms and not user_perms.can_read(library_key):
+                raise PermissionDenied()
+        update_children_task.delay(self.user_id, str(dest_block.location), version)
+
+    def import_task_status(self, location):
+        """
+        Return task status for update_children_task.
+        """
+        return get_import_task_status(location)
+
+    def is_loading(self, location):
+        """
+        Return True if status is IN_PROGRESS.
+        """
+        return self.import_task_status(location) == UserTaskStatus.IN_PROGRESS
 
     def list_available_libraries(self):
         """
         List all known libraries.
-        Returns tuples of (LibraryLocator, display_name)
+
+        Collects V1 libraries along with V2.
+        Returns tuples of (library key, display_name).
         """
-        return [
+        user = User.objects.get(id=self.user_id)
+
+        v1_libs = [
             (lib.location.library_key.replace(version_guid=None, branch=None), lib.display_name)
             for lib in self.store.get_library_summaries()
         ]
+        v2_query = library_api.get_libraries_for_user(user)
+        v2_libs_with_meta = library_api.get_metadata_from_index(v2_query)
+        v2_libs = [(lib.key, lib.title) for lib in v2_libs_with_meta]
+
+        return v1_libs + v2_libs
 
     def import_from_blockstore(self, dest_block, blockstore_block_ids):
         """
         Imports a block from a blockstore-based learning context (usually a
         content library) into modulestore, as a new child of dest_block.
         Any existing children of dest_block are replaced.
-
-        This is only used by LibrarySourcedBlock. It should verify first that
-        the number of block IDs is reasonable.
         """
         dest_key = dest_block.scope_ids.usage_id
         if not isinstance(dest_key, BlockUsageLocator):
@@ -254,7 +305,7 @@ def generate_block_key(source_key, dest_parent_key):
         new_block_key = generate_block_key(source_key, dest_parent_key)
         try:
             new_block = self.store.get_item(new_block_key)
-            if new_block.parent != dest_parent_key:
+            if new_block.parent.block_id != dest_parent_key.block_id:
                 raise ValueError(
                     "Expected existing block {} to be a child of {} but instead it's a child of {}".format(
                         new_block_key, dest_parent_key, new_block.parent,
diff --git a/xmodule/modulestore/split_mongo/caching_descriptor_system.py b/xmodule/modulestore/split_mongo/caching_descriptor_system.py
index b3234df5a28e..b0965d63fecb 100644
--- a/xmodule/modulestore/split_mongo/caching_descriptor_system.py
+++ b/xmodule/modulestore/split_mongo/caching_descriptor_system.py
@@ -4,6 +4,7 @@
 import sys
 import weakref
 
+from crum import get_current_user
 from fs.osfs import OSFS
 from lazy import lazy
 from opaque_keys.edx.locator import BlockUsageLocator, DefinitionLocator, LocalId
@@ -74,7 +75,11 @@ def __init__(self, modulestore, course_entry, default_class, module_data, lazy,
         self.module_data = module_data
         self.default_class = default_class
         self.local_modules = {}
-        self._services['library_tools'] = LibraryToolsService(modulestore, user_id=None)
+
+        user = get_current_user()
+        user_id = user.id if user else None
+        self._services['library_tools'] = LibraryToolsService(modulestore, user_id=user_id)
+
         # Cache of block field datas, keyed by the XBlock instance (since the ScopeId changes!)
         self.block_field_datas = weakref.WeakKeyDictionary()
 
diff --git a/xmodule/seq_block.py b/xmodule/seq_block.py
index 1faa48780864..2b8eef56eaa8 100644
--- a/xmodule/seq_block.py
+++ b/xmodule/seq_block.py
@@ -471,6 +471,11 @@ def public_view(self, context):
         return self._student_or_public_view(context or {}, prereq_met, prereq_meta_info, None, PUBLIC_VIEW)
 
     def author_view(self, context):  # lint-amnesty, pylint: disable=missing-function-docstring
+        print('@@@@@@@@@@@@@@@@@@@@@@@@@@@')
+        print(self.__dict__)
+        print(context)
+        print('@@@@@@@@@@@@@@@@@@@@@@@@@@@')
+
         context = context or {}
         context['exclude_units'] = True
         if 'position' in context:
diff --git a/xmodule/tasks.py b/xmodule/tasks.py
new file mode 100644
index 000000000000..c5d23ac9e5f0
--- /dev/null
+++ b/xmodule/tasks.py
@@ -0,0 +1,319 @@
+"""
+This module contains tasks for asynchronous execution of library xblocks.
+"""
+import hashlib
+
+from celery import shared_task
+from celery.utils.log import get_task_logger
+from django.contrib.auth.models import User  # lint-amnesty, pylint: disable=imported-auth-user
+from django.core.exceptions import PermissionDenied
+from opaque_keys.edx.keys import UsageKey
+from opaque_keys.edx.locator import (
+    BlockUsageLocator,
+    LibraryLocatorV2,
+    LibraryUsageLocator,
+    LibraryUsageLocatorV2
+)
+from search.search_engine_base import SearchEngine
+from user_tasks.models import UserTaskStatus
+from user_tasks.tasks import UserTask
+from xblock.fields import Scope
+
+from common.djangoapps.student.auth import has_studio_write_access
+from openedx.core.djangoapps.content_libraries import api as library_api
+from openedx.core.djangoapps.content_libraries.models import ContentLibrary
+from openedx.core.djangoapps.xblock.api import load_block
+from openedx.core.lib import blockstore_api
+from xmodule.capa_block import ProblemBlock
+from xmodule.library_content_block import ANY_CAPA_TYPE_VALUE
+from xmodule.modulestore import ModuleStoreEnum
+from xmodule.modulestore.django import modulestore
+from xmodule.modulestore.exceptions import ItemNotFoundError
+
+LOGGER = get_task_logger(__name__)
+
+
+def normalize_key_for_search(library_key):
+    """ Normalizes library key for use with search indexing """
+    return library_key.replace(version_guid=None, branch=None)
+
+
+def _import_block(store, user_id, source_block, dest_parent_key):
+    """
+    Recursively import a blockstore block and its children. See import_from_blockstore above.
+    """
+    def generate_block_key(source_key, dest_parent_key):
+        """
+        Deterministically generate an ID for the new block and return the key
+        """
+        block_id = (
+            dest_parent_key.block_id[:10] +
+            '-' +
+            hashlib.sha1(str(source_key).encode('utf-8')).hexdigest()[:10]
+        )
+        return dest_parent_key.context_key.make_usage_key(source_key.block_type, block_id)
+
+    source_key = source_block.scope_ids.usage_id
+    new_block_key = generate_block_key(source_key, dest_parent_key)
+    try:
+        new_block = store.get_item(new_block_key)
+        if new_block.parent.block_id != dest_parent_key.block_id:
+            raise ValueError(
+                "Expected existing block {} to be a child of {} but instead it's a child of {}".format(
+                    new_block_key, dest_parent_key, new_block.parent,
+                )
+            )
+    except ItemNotFoundError:
+        new_block = store.create_child(
+            user_id,
+            dest_parent_key,
+            source_key.block_type,
+            block_id=new_block_key.block_id,
+        )
+
+    # Prepare a list of this block's static assets; any assets that are referenced as /static/{path} (the
+    # recommended way for referencing them) will stop working, and so we rewrite the url when importing.
+    # Copying assets not advised because modulestore doesn't namespace assets to each block like blockstore, which
+    # might cause conflicts when the same filename is used across imported blocks.
+    if isinstance(source_key, LibraryUsageLocatorV2):
+        all_assets = library_api.get_library_block_static_asset_files(source_key)
+    else:
+        all_assets = []
+
+    for field_name, field in source_block.fields.items():
+        if field.scope not in (Scope.settings, Scope.content):
+            continue  # Only copy authored field data
+        if field.is_set_on(source_block) or field.is_set_on(new_block):
+            field_value = getattr(source_block, field_name)
+            if isinstance(field_value, str):
+                # If string field (which may also be JSON/XML data), rewrite /static/... URLs to point to blockstore
+                for asset in all_assets:
+                    field_value = field_value.replace(f'/static/{asset.path}', asset.url)
+                    # Make sure the URL is one that will work from the user's browser when using the docker devstack
+                    field_value = blockstore_api.force_browser_url(field_value)
+            setattr(new_block, field_name, field_value)
+    new_block.save()
+    store.update_item(new_block, user_id)
+
+    if new_block.has_children:
+        # Delete existing children in the new block, which can be reimported again if they still exist in the
+        # source library
+        for existing_child_key in new_block.children:
+            store.delete_item(existing_child_key, user_id)
+        # Now import the children
+        for child in source_block.get_children():
+            _import_block(store, user_id, child, new_block_key)
+
+    return new_block_key
+
+
+def _filter_child(store, usage_key, capa_type):
+    """
+    Filters children by CAPA problem type, if configured
+    """
+    if usage_key.block_type != "problem":
+        return False
+
+    descriptor = store.get_item(usage_key, depth=0)
+    assert isinstance(descriptor, ProblemBlock)
+    return capa_type in descriptor.problem_types
+
+
+def _get_library(store, library_key, is_v2_lib):
+    """
+    Helper method to get either V1 or V2 library.
+
+    Given a library key like "library-v1:ProblemX+PR0B" (V1) or "lib:RG:rg-1" (v2), return the 'library'.
+
+    is_v2_lib (bool) indicates which library storage should be requested:
+        True - blockstore (V2 library);
+        False - modulestore (V1 library).
+
+    Returns None on error.
+    """
+    if is_v2_lib:
+        try:
+            return library_api.get_library(library_key)
+        except ContentLibrary.DoesNotExist:
+            return None
+    else:
+        try:
+            return store.get_library(
+                library_key, remove_version=False, remove_branch=False, head_validation=False
+            )
+        except ItemNotFoundError:
+            return None
+
+
+def _problem_type_filter(store, library, capa_type):
+    """ Filters library children by capa type."""
+    try:
+        search_engine = SearchEngine.get_search_engine(index="library_index")
+    except:
+        search_engine = None
+    if search_engine:
+        filter_clause = {
+            "library": str(normalize_key_for_search(library.location.library_key)),
+            "content_type": ProblemBlock.INDEX_CONTENT_TYPE,
+            "problem_types": capa_type
+        }
+        search_result = search_engine.search(field_dictionary=filter_clause)
+        results = search_result.get('results', [])
+        return [LibraryUsageLocator.from_string(item['data']['id']) for item in results]
+    else:
+        return [key for key in library.children if _filter_child(store, key, capa_type)]
+
+
+def import_from_blockstore(user_id, store, dest_block, blockstore_block_ids):
+    """
+    Imports a block from a blockstore-based learning context (usually a
+    content library) into modulestore, as a new child of dest_block.
+    Any existing children of dest_block are replaced.
+    """
+    dest_key = dest_block.scope_ids.usage_id
+    if not isinstance(dest_key, BlockUsageLocator):
+        raise TypeError(f"Destination {dest_key} should be a modulestore course.")
+    if user_id is None:
+        raise ValueError("Cannot check user permissions - LibraryTools user_id is None")
+
+    if len(set(blockstore_block_ids)) != len(blockstore_block_ids):
+        # We don't support importing the exact same block twice because it would break the way we generate new IDs
+        # for each block and then overwrite existing copies of blocks when re-importing the same blocks.
+        raise ValueError("One or more library component IDs is a duplicate.")
+
+    dest_course_key = dest_key.context_key
+    user = User.objects.get(id=user_id)
+    if not has_studio_write_access(user, dest_course_key):
+        raise PermissionDenied()
+
+    # Read the source block; this will also confirm that user has permission to read it.
+    # (This could be slow and use lots of memory, except for the fact that LibrarySourcedBlock which calls this
+    # should be limiting the number of blocks to a reasonable limit. We load them all now instead of one at a
+    # time in order to raise any errors before we start actually copying blocks over.)
+    orig_blocks = [load_block(UsageKey.from_string(key), user) for key in blockstore_block_ids]
+
+    with store.bulk_operations(dest_course_key):
+        child_ids_updated = set()
+
+        for block in orig_blocks:
+            new_block_id = _import_block(store, user_id, block, dest_key)
+            child_ids_updated.add(new_block_id)
+
+        # Remove any existing children that are no longer used
+        for old_child_id in set(dest_block.children) - child_ids_updated:
+            store.delete_item(old_child_id, user_id)
+        # If this was called from a handler, it will save dest_block at the end, so we must update
+        # dest_block.children to avoid it saving the old value of children and deleting the new ones.
+        dest_block.children = store.get_item(dest_key).children
+
+
+class LibraryUpdateChildrenTask(UserTask):  # pylint: disable=abstract-method
+    """
+    Base class for course and library export tasks.
+    """
+
+    @staticmethod
+    def calculate_total_steps(arguments_dict):
+        """
+        Get the number of in-progress steps in the export process, as shown in the UI.
+
+        For reference, these are:
+
+        1. Importing
+        """
+        return 1
+
+    @classmethod
+    def generate_name(cls, arguments_dict):
+        """
+        Create a name for this particular import task instance.
+
+        Arguments:
+            arguments_dict (dict): The arguments given to the task function
+
+        Returns:
+            text_type: The generated name
+        """
+        key = arguments_dict['dest_block_key']
+        return f'Import of {key}'
+
+
+@shared_task(base=LibraryUpdateChildrenTask, bind=True)
+def update_children_task(self, user_id, dest_block_key, version=None):
+    """
+    Update xBlock's children.
+
+    Re-fetch all matching blocks from the libraries, and copy them as children of dest_block.
+    The children will be given new block_ids.
+
+    NOTE: V1 libraies blocks definition ID should be the
+    exact same definition ID used in the copy block.
+
+    This method will update dest_block's 'source_library_version' field to
+    store the version number of the libraries used, so we easily determine
+    if dest_block is up to date or not.
+    """
+    store = modulestore()
+    dest_block_id = BlockUsageLocator.from_string(dest_block_key)
+    dest_block = store.get_item(dest_block_id)
+    source_blocks = []
+    library_key = dest_block.source_library_key
+    is_v2_lib = isinstance(library_key, LibraryLocatorV2)
+
+    if version and not is_v2_lib:
+        library_key = library_key.replace(branch=ModuleStoreEnum.BranchName.library, version_guid=version)
+
+    library = _get_library(store, library_key, is_v2_lib)
+    if library is None:
+        self.status.fail(f"Requested library {library_key} not found.")
+        return
+
+    if hasattr(dest_block, 'capa_type'):
+        filter_children = (dest_block.capa_type != ANY_CAPA_TYPE_VALUE)
+    else:
+        filter_children = None
+    if not is_v2_lib:
+        if filter_children:
+            # Apply simple filtering based on CAPA problem types:
+            source_blocks.extend(_problem_type_filter(store, library, dest_block.capa_type))
+        else:
+            source_blocks.extend(library.children)
+        with store.bulk_operations(dest_block.location.course_key):
+            try:
+                dest_block.source_library_version = str(library.location.library_key.version_guid)
+                store.update_item(dest_block, user_id)
+                head_validation = not version
+                dest_block.children = store.copy_from_template(
+                    source_blocks, dest_block.location, user_id, head_validation=head_validation
+                )
+                # ^-- copy_from_template updates the children in the DB
+                # but we must also set .children here to avoid overwriting the DB again
+            except Exception as exception:  # pylint: disable=broad-except
+                LOGGER.exception('Error importing children for %s', dest_block_key, exc_info=True)
+                if self.status.state != UserTaskStatus.FAILED:
+                    self.status.fail({'raw_error_msg': str(exception)})
+                return
+    else:
+        # TODO: add filtering by capa_type when V2 library will support different problem types
+        try:
+            source_blocks = library_api.get_library_blocks(library_key, block_types=None)
+            source_block_ids = [str(block.usage_key) for block in source_blocks]
+            import_from_blockstore(user_id, store, dest_block, source_block_ids)
+            dest_block.source_library_version = str(library.version)
+            store.update_item(dest_block, user_id)
+        except Exception as exception:  # pylint: disable=broad-except
+            LOGGER.exception('Error importing children for %s', dest_block_key, exc_info=True)
+            if self.status.state != UserTaskStatus.FAILED:
+                self.status.fail({'raw_error_msg': str(exception)})
+            return
+
+
+def get_import_task_status(dest_block_key):
+    """
+    Return task status for LibraryUpdateChildrenTask
+    """
+    args = {'dest_block_key': dest_block_key}
+    name = LibraryUpdateChildrenTask.generate_name(args)
+    task_status = UserTaskStatus.objects.filter(name=name).order_by('-created').first()
+    if task_status:
+        return task_status.state
diff --git a/xmodule/templates/library-sourced-block-studio-view.html b/xmodule/templates/library-sourced-block-studio-view.html
deleted file mode 100644
index 08a2882b51c5..000000000000
--- a/xmodule/templates/library-sourced-block-studio-view.html
+++ /dev/null
@@ -1,19 +0,0 @@
-{% load i18n %}
-<div class="editor-with-buttons">
-  <div class="wrapper-comp-settings is-active editor-with-buttons" id="settings-tab">
-    <div class="list-input settings-list">
-      {{ react_content|safe }}
-    </div>
-  </div>
-  <div class="xblock-actions">
-    <ul>
-      <li class="action-item">
-        <a href="#" class="button action-primary save-button" data-submit-url="{{save_url}}">{% trans "Save and Import" as tmsg %} {{tmsg|force_escape}}</a>
-      </li>
-
-      <li class="action-item">
-        <a href="#" class="button cancel-button">{% trans "Cancel" as tmsg %} {{tmsg|force_escape}}</a>
-      </li>
-    </ul>
-  </div>
-</div>
diff --git a/xmodule/tests/test_library_content.py b/xmodule/tests/test_library_content.py
index 61c8e890760f..4cf85123027f 100644
--- a/xmodule/tests/test_library_content.py
+++ b/xmodule/tests/test_library_content.py
@@ -4,15 +4,16 @@
 Higher-level tests are in `cms/djangoapps/contentstore/tests/test_libraries.py`.
 """
 from unittest.mock import MagicMock, Mock, patch
-import ddt
 
+import ddt
 from bson.objectid import ObjectId
 from fs.memoryfs import MemoryFS
 from lxml import etree
+from opaque_keys.edx.locator import LibraryLocator, LibraryLocatorV2
+from rest_framework import status
 from search.search_engine_base import SearchEngine
 from web_fragments.fragment import Fragment
 from xblock.runtime import Runtime as VanillaRuntime
-from rest_framework import status
 
 from xmodule.library_content_block import ANY_CAPA_TYPE_VALUE, LibraryContentBlock
 from xmodule.library_tools import LibraryToolsService
@@ -23,12 +24,12 @@
 from xmodule.validation import StudioValidationMessage
 from xmodule.x_module import AUTHOR_VIEW
 from xmodule.capa_block import ProblemBlock
+from common.djangoapps.student.tests.factories import UserFactory
 
 from .test_course_block import DummySystem as TestImportSystem
 
 dummy_render = lambda block, _: Fragment(block.data)  # pylint: disable=invalid-name
 
-
 class LibraryContentTest(MixedSplitTestCase):
     """
     Base class for tests of LibraryContentBlock (library_content_block.py)
@@ -36,7 +37,7 @@ class LibraryContentTest(MixedSplitTestCase):
 
     def setUp(self):
         super().setUp()
-
+        self.user_id = UserFactory().id
         self.tools = LibraryToolsService(self.store, self.user_id)
         self.library = LibraryFactory.create(modulestore=self.store)
         self.lib_blocks = [
@@ -53,6 +54,7 @@ def setUp(self):
             max_count=1,
             source_library_id=str(self.library.location.library_key)
         )
+        self.lc_block.runtime._services.update({'library_tools': self.tools})
 
     def _bind_course_block(self, block):
         """
@@ -71,6 +73,84 @@ def get_block(descriptor):
         block.runtime.get_block_for_descriptor = get_block
 
 
+@ddt.ddt
+class LibraryContentGeneralTest(LibraryContentTest):
+    """
+    Test the base functionality of the LibraryContentBlock.
+    """
+
+    @ddt.data(
+        ('library-v1:ProblemX+PR0B', LibraryLocator),
+        ('lib:ORG:test-1', LibraryLocatorV2)
+    )
+    @ddt.unpack
+    def test_source_library_key(self, library_key, expected_locator_type):
+        """
+        Test the source_library_key property of the xblock.
+
+        The method should correctly work either with V1 or V2 libraries.
+        """
+        library = self.make_block(
+            "library_content",
+            self.vertical,
+            max_count=1,
+            source_library_id=library_key
+        )
+        assert isinstance(library.source_library_key, expected_locator_type)
+
+
+@ddt.ddt
+class LibraryContentGeneralTest(LibraryContentTest):
+    """
+    Test the base functionality of the LibraryContentBlock.
+    """
+
+    @ddt.data(
+        ('library-v1:ProblemX+PR0B', LibraryLocator),
+        ('lib:ORG:test-1', LibraryLocatorV2)
+    )
+    @ddt.unpack
+    def test_source_library_key(self, library_key, expected_locator_type):
+        """
+        Test the source_library_key property of the xblock.
+
+        The method should correctly work either with V1 or V2 libraries.
+        """
+        library = self.make_block(
+            "library_content",
+            self.vertical,
+            max_count=1,
+            source_library_id=library_key
+        )
+        assert isinstance(library.source_library_key, expected_locator_type)
+
+
+@ddt.ddt
+class LibraryContentGeneralTest(LibraryContentTest):
+    """
+    Test the base functionality of the LibraryContentBlock.
+    """
+
+    @ddt.data(
+        ('library-v1:ProblemX+PR0B', LibraryLocator),
+        ('lib:ORG:test-1', LibraryLocatorV2)
+    )
+    @ddt.unpack
+    def test_source_library_key(self, library_key, expected_locator_type):
+        """
+        Test the source_library_key property of the xblock.
+
+        The method should correctly work either with V1 or V2 libraries.
+        """
+        library = self.make_block(
+            "library_content",
+            self.vertical,
+            max_count=1,
+            source_library_id=library_key
+        )
+        assert isinstance(library.source_library_key, expected_locator_type)
+
+
 class TestLibraryContentExportImport(LibraryContentTest):
     """
     Export and import tests for LibraryContentBlock
@@ -236,7 +316,7 @@ def test_validation_of_course_libraries(self):
         self.lc_block.source_library_id = ""
         result = self.lc_block.validate()
         assert not result
-        # Validation fails due to at least one warning/message
+        # Validation fails due to the library not being configured
         assert result.summary
         assert StudioValidationMessage.NOT_CONFIGURED == result.summary.type
 
@@ -244,7 +324,7 @@ def test_validation_of_course_libraries(self):
         self.lc_block.source_library_id = "library-v1:BAD+WOLF"
         result = self.lc_block.validate()
         assert not result
-        # Validation fails due to at least one warning/message
+        # Validation fails due to the library being invalid
         assert result.summary
         assert StudioValidationMessage.ERROR == result.summary.type
         assert 'invalid' in result.summary.text
@@ -253,13 +333,17 @@ def test_validation_of_course_libraries(self):
         self.lc_block.source_library_id = str(self.library.location.library_key)
         result = self.lc_block.validate()
         assert not result
-        # Validation fails due to at least one warning/message
+        # Validation fails due to the library being out of date.
         assert result.summary
         assert StudioValidationMessage.WARNING == result.summary.type
         assert 'out of date' in result.summary.text
 
         # Now if we update the block, all validation should pass:
+        self._bind_course_block(self.lc_block)
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
+
         assert self.lc_block.validate()
 
     def test_validation_of_matching_blocks(self):
@@ -270,7 +354,9 @@ def test_validation_of_matching_blocks(self):
         # Set max_count to higher value than exists in library
         self.lc_block.max_count = 50
         # In the normal studio editing process, editor_saved() calls refresh_children at this point
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         result = self.lc_block.validate()
         assert not result
         # Validation fails due to at least one warning/message
@@ -282,21 +368,27 @@ def test_validation_of_matching_blocks(self):
         # Add some capa problems so we can check problem type validation messages
         self.lc_block.max_count = 1
         self._create_capa_problems()
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         assert self.lc_block.validate()
         assert len(self.lc_block.selected_children()) == 1
 
         # Existing problem type should pass validation
         self.lc_block.max_count = 1
         self.lc_block.capa_type = 'multiplechoiceresponse'
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         assert self.lc_block.validate()
         assert len(self.lc_block.selected_children()) == 1
 
         # ... unless requested more blocks than exists in library
         self.lc_block.max_count = 10
         self.lc_block.capa_type = 'multiplechoiceresponse'
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         result = self.lc_block.validate()
         assert not result
         # Validation fails due to at least one warning/message
@@ -308,19 +400,23 @@ def test_validation_of_matching_blocks(self):
         # Missing problem type should always fail validation
         self.lc_block.max_count = 1
         self.lc_block.capa_type = 'customresponse'
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         result = self.lc_block.validate()
         assert not result
         # Validation fails due to at least one warning/message
         assert result.summary
         assert StudioValidationMessage.WARNING == result.summary.type
-        assert 'no matching problem types' in result.summary.text
+        assert 'There are no problems in the specified library of type customresponse' in result.summary.text
         assert len(self.lc_block.selected_children()) == 0
 
         # -1 selects all blocks from the library.
         self.lc_block.max_count = -1
         self.lc_block.capa_type = ANY_CAPA_TYPE_VALUE
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         assert self.lc_block.validate()
         assert len(self.lc_block.selected_children()) == len(self.lc_block.children)
 
@@ -332,23 +428,33 @@ def test_capa_type_filtering(self):
         assert len(self.lc_block.children) == 0
         # precondition check
         self.lc_block.capa_type = "multiplechoiceresponse"
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         assert len(self.lc_block.children) == 1
 
         self.lc_block.capa_type = "optionresponse"
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         assert len(self.lc_block.children) == 3
 
         self.lc_block.capa_type = "coderesponse"
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         assert len(self.lc_block.children) == 2
 
         self.lc_block.capa_type = "customresponse"
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         assert len(self.lc_block.children) == 0
 
         self.lc_block.capa_type = ANY_CAPA_TYPE_VALUE
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
         assert len(self.lc_block.children) == (len(self.lib_blocks) + 4)
 
     def test_non_editable_settings(self):
@@ -414,6 +520,7 @@ def test_reset_selected_children_capa_blocks(self, allow_resetting_children, max
         self.lc_block.max_count = max_count
         # Add some capa blocks
         self._create_capa_problems()
+        self.store.update_item(self.lc_block, self.user_id)
         self.lc_block.refresh_children()
         self.lc_block = self.store.get_item(self.lc_block.location)
         # Mock the student view to return an empty dict to be returned as response
@@ -645,6 +752,7 @@ def test_removed_invalid(self):
         Test the "removed" event emitted when we un-assign blocks previously assigned to a student.
         We go from two blocks assigned, to one because the others have been deleted from the library.
         """
+
         # Start by assigning two blocks to the student:
         self.lc_block.get_child_blocks()  # This line is needed in the test environment or the change has no effect
         self.lc_block.max_count = 2
@@ -654,13 +762,19 @@ def test_removed_invalid(self):
         # Now make sure that one of the assigned blocks will have to be un-assigned.
         # To cause an "invalid" event, we delete all blocks from the content library
         # except for one of the two already assigned to the student:
+
         keep_block_key = initial_blocks_assigned[0].location
         keep_block_lib_usage_key, keep_block_lib_version = self.store.get_block_original_usage(keep_block_key)
         assert keep_block_lib_usage_key is not None
         deleted_block_key = initial_blocks_assigned[1].location
         self.library.children = [keep_block_lib_usage_key]
         self.store.update_item(self.library, self.user_id)
+        self.store.update_item(self.lc_block, self.user_id)
+        old_selected = self.lc_block.selected
         self.lc_block.refresh_children()
+        self.lc_block = self.store.get_item(self.lc_block.location)
+        self.lc_block.selected = old_selected
+        self.lc_block.runtime.publish = self.publisher
 
         # Check that the event says that one block was removed, leaving one block left:
         children = self.lc_block.get_child_blocks()
diff --git a/xmodule/tests/test_library_sourced_block.py b/xmodule/tests/test_library_sourced_block.py
index 5ec6291542cd..25281c31b677 100644
--- a/xmodule/tests/test_library_sourced_block.py
+++ b/xmodule/tests/test_library_sourced_block.py
@@ -2,63 +2,56 @@
 Tests for Source from Library XBlock
 """
 
-from openedx.core.djangoapps.content_libraries.tests.base import ContentLibrariesRestApiTest
-from common.djangoapps.student.roles import CourseInstructorRole
-from xmodule.modulestore.django import modulestore
-from xmodule.modulestore.tests.factories import CourseFactory, BlockFactory
-from xmodule.tests import prepare_block_runtime
+from xmodule.library_tools import LibraryToolsService
+from xmodule.modulestore.tests.factories import CourseFactory, LibraryFactory
+from xmodule.modulestore.tests.utils import MixedSplitTestCase
+from xmodule.tests import get_test_system
 from xmodule.x_module import STUDENT_VIEW  # lint-amnesty, pylint: disable=unused-import
 
+from openedx.core.djangoapps.content_libraries.tests.base import ContentLibrariesRestApiTest
+
 
-class LibrarySourcedBlockTestCase(ContentLibrariesRestApiTest):
+class LibrarySourcedBlockTestCase(MixedSplitTestCase, ContentLibrariesRestApiTest):
     """
-    Tests for LibraryToolsService which interact with blockstore-based content libraries
+    Tests for LibraryToolsService which interact with content libraries
     """
     def setUp(self):
         super().setUp()
-        self.store = modulestore()
+        self.tools = LibraryToolsService(self.store, self.user_id)
+        self.library = LibraryFactory.create(modulestore=self.store)
+        # Add content to the library
+        self.lib_blocks = [
+            self.make_block("html", self.library, data=f"Hello world from block {i}")
+            for i in range(1, 5)
+        ]
         # Create a modulestore course
-        course = CourseFactory.create(modulestore=self.store, user_id=self.user.id)
-        CourseInstructorRole(course.id).add_users(self.user)
-        # Add a "Source from Library" block to the course
-        self.source_block = BlockFactory.create(
-            category="library_sourced",
-            parent=course,
-            parent_location=course.location,
-            user_id=self.user.id,
-            modulestore=self.store
+        self.course = CourseFactory.create(modulestore=self.store)
+        self.chapter = self.make_block("chapter", self.course)
+        self.sequential = self.make_block("sequential", self.chapter)
+        self.vertical = self.make_block("vertical", self.sequential)
+        # Add a LibrarySourcedBlock to the course
+        self.source_block = self.make_block(
+            "library_sourced",
+            self.vertical,
+            source_library_id=str(self.library.location.library_key)
         )
         self.submit_url = f'/xblock/{self.source_block.scope_ids.usage_id}/handler/submit_studio_edits'
 
     def test_block_views(self):
-        # Create a blockstore content library
-        library = self._create_library(slug="testlib1_preview", title="Test Library 1", description="Testing XBlocks")
-        # Add content to the library
-        html_block_1 = self._add_block_to_library(library["id"], "html", "html_student_preview_1")["id"]
-        self._set_library_block_olx(html_block_1, '<html>Student Preview Test 1</html>')
-        html_block_2 = self._add_block_to_library(library["id"], "html", "html_student_preview_2")["id"]
-        self._set_library_block_olx(html_block_2, '<html>Student Preview Test 2</html>')
-
+        """
+        Check that all stored source_block_id's are displayed in the student view.
+        """
         # Import the html blocks from the library to the course
-        post_data = {"values": {"source_block_ids": [html_block_1, html_block_2]}, "defaults": ["display_name"]}
+        self.source_block.refresh_children()
+        # Save children block_ids as source_block_ids
+        source_block_ids = [str(child) for child in self.source_block.children]
+        post_data = {"values": {"source_block_ids": source_block_ids}}
         res = self.client.post(self.submit_url, data=post_data, format='json')
 
         # Check if student_view renders the children correctly
         res = self.get_block_view(self.source_block, STUDENT_VIEW)
-        assert 'Student Preview Test 1' in res
-        assert 'Student Preview Test 2' in res
-
-    def test_block_limits(self):
-        # Create a blockstore content library
-        library = self._create_library(slug="testlib2_preview", title="Test Library 2", description="Testing XBlocks")
-        # Add content to the library
-        blocks = [self._add_block_to_library(library["id"], "html", f"block_{i}")["id"] for i in range(11)]
-
-        # Import the html blocks from the library to the course
-        post_data = {"values": {"source_block_ids": blocks}, "defaults": ["display_name"]}
-        res = self.client.post(self.submit_url, data=post_data, format='json')
-        assert res.status_code == 400
-        assert res.json()['error']['messages'][0]['text'] == 'A maximum of 10 components may be added.'
+        for i in range(1, 5):
+            assert f"Hello world from block {i}" in res
 
     def get_block_view(self, block, view, context=None):
         """
diff --git a/xmodule/tests/test_library_tools.py b/xmodule/tests/test_library_tools.py
index 950307b6963d..0e5f59aac45a 100644
--- a/xmodule/tests/test_library_tools.py
+++ b/xmodule/tests/test_library_tools.py
@@ -1,35 +1,49 @@
 """
 Tests for library tools service.
 """
+
 from unittest.mock import patch
 
+import ddt
+from bson.objectid import ObjectId
 from opaque_keys.edx.keys import UsageKey
-from openedx.core.djangoapps.content_libraries import api as library_api
-from openedx.core.djangoapps.content_libraries.tests.base import ContentLibrariesRestApiTest
-from openedx.core.djangoapps.xblock.api import load_block
-from common.djangoapps.student.roles import CourseInstructorRole
+from opaque_keys.edx.locator import LibraryLocator, LibraryLocatorV2
 from xmodule.library_tools import LibraryToolsService
 from xmodule.modulestore.tests.factories import CourseFactory, LibraryFactory
 from xmodule.modulestore.tests.utils import MixedSplitTestCase
 
+from common.djangoapps.student.roles import CourseInstructorRole
+from common.djangoapps.student.tests.factories import UserFactory
+from openedx.core.djangoapps.content_libraries import api as library_api
+from openedx.core.djangoapps.content_libraries.tests.base import ContentLibrariesRestApiTest
+from openedx.core.djangoapps.xblock.api import load_block
+
 
-class LibraryToolsServiceTest(MixedSplitTestCase):
-    """
-    Tests for library service.
+@ddt.ddt
+class ContentLibraryToolsTest(MixedSplitTestCase, ContentLibrariesRestApiTest):
     """
+    Tests for LibraryToolsService.
 
+    Tests interaction with blockstore-based (V2) and mongo-based (V1) content libraries.
+    """
     def setUp(self):
         super().setUp()
+        UserFactory(is_staff=True, id=self.user_id)
         self.tools = LibraryToolsService(self.store, self.user_id)
 
     def test_list_available_libraries(self):
         """
         Test listing of libraries.
+
+        Should include either V1 or V2 libraries.
         """
+        # create V1 library
         _ = LibraryFactory.create(modulestore=self.store)
+        # create V2 library
+        self._create_library(slug="testlib1_preview", title="Test Library 1", description="Testing XBlocks")
         all_libraries = self.tools.list_available_libraries()
         assert all_libraries
-        assert len(all_libraries) == 1
+        assert len(all_libraries) == 2
 
     @patch('xmodule.modulestore.split_mongo.split.SplitMongoModuleStore.get_library_summaries')
     def test_list_available_libraries_fetch(self, mock_get_library_summaries):
@@ -39,15 +53,6 @@ def test_list_available_libraries_fetch(self, mock_get_library_summaries):
         _ = self.tools.list_available_libraries()
         assert mock_get_library_summaries.called
 
-
-class ContentLibraryToolsTest(MixedSplitTestCase, ContentLibrariesRestApiTest):
-    """
-    Tests for LibraryToolsService which interact with blockstore-based content libraries
-    """
-    def setUp(self):
-        super().setUp()
-        self.tools = LibraryToolsService(self.store, self.user.id)
-
     def test_import_from_blockstore(self):
         # Create a blockstore content library
         library = self._create_library(slug="testlib1_import", title="A Test Library", description="Testing XBlocks")
@@ -94,3 +99,105 @@ def test_import_from_blockstore(self):
         imported_html_block = self.store.get_item(imported_unit_block.children[0])
         assert 'Hello world' not in imported_html_block.data
         assert 'Foo bar' in imported_html_block.data
+
+    def test_get_v2_library_version(self):
+        """
+        Test get_library_version for V2 libraries.
+
+        Covers getting results for either library key as a string or LibraryLocatorV2.
+
+        NOTE:
+            We don't publish library updates so the library version will always be 0.
+        """
+        lib = self._create_library(slug="testlib1-slug", title="Test Library 1", description="Testing Library 1")
+        # use library key as a string for getting the library version
+        result = self.tools.get_library_version(lib['id'])
+        assert isinstance(result, int)
+        assert result == 0
+        # now do the same but use library key as a LibraryLocatorV2
+        result2 = self.tools.get_library_version(LibraryLocatorV2.from_string(lib['id']))
+        assert isinstance(result, int)
+        assert result2 == 0
+
+    def test_get_v1_library_version(self):
+        """
+        Test get_library_version for V1 libraries.
+
+        Covers getting results for either string library key or LibraryLocator.
+        """
+        lib_key = LibraryFactory.create(modulestore=self.store).location.library_key
+        # Re-load the library from the modulestore, explicitly including version information:
+        lib = self.store.get_library(lib_key, remove_version=False, remove_branch=False)
+        # check the result using the LibraryLocator
+        assert isinstance(lib_key, LibraryLocator)
+        result = self.tools.get_library_version(lib_key)
+        assert result
+        assert isinstance(result, ObjectId)
+        assert result == lib.location.library_key.version_guid
+        # the same check for string representation of the LibraryLocator
+        str_key = str(lib_key)
+        result = self.tools.get_library_version(str_key)
+        assert result
+        assert isinstance(result, ObjectId)
+        assert result == lib.location.library_key.version_guid
+
+    @ddt.data(
+        'library-v1:Fake+Key',  # V1 library key
+        'lib:Fake:V-2',         # V2 library key
+        LibraryLocator.from_string('library-v1:Fake+Key'),
+        LibraryLocatorV2.from_string('lib:Fake:V-2'),
+    )
+    def test_get_library_version_no_library(self, lib_key):
+        """
+        Test get_library_version result when the library does not exist.
+
+        Provided lib_key's are valid V1 or V2 keys.
+        """
+        assert self.tools.get_library_version(lib_key) is None
+
+    def test_update_children_for_v2_lib(self):
+        """
+        Test update_children with V2 library as a source.
+
+        As for now, covers usage of update_children for the library content module only.
+        """
+        library = self._create_library(
+            slug="cool-v2-lib", title="The best Library", description="Spectacular description"
+        )
+        self._add_block_to_library(library["id"], "unit", "unit1_id")["id"]  # pylint: disable=expression-not-assigned
+
+        course = CourseFactory.create(modulestore=self.store, user_id=self.user.id)
+        CourseInstructorRole(course.id).add_users(self.user)
+
+        content_block = self.make_block(
+            "library_content",
+            course,
+            max_count=1,
+            source_library_id=library['id']
+        )
+
+        assert len(content_block.children) == 0
+        self.tools.update_children(content_block)
+        content_block = self.store.get_item(content_block.location)
+        assert len(content_block.children) == 1
+
+    def test_update_children_for_v1_lib(self):
+        """
+        Test update_children with V1 library as a source.
+
+        As for now, covers usage of update_children for the library content module only.
+        """
+        library = LibraryFactory.create(modulestore=self.store)
+        self.make_block("html", library, data="Hello world from the block")
+        course = CourseFactory.create(modulestore=self.store)
+        content_block = self.make_block(
+            "library_content",
+            course,
+            max_count=1,
+            source_library_id=str(library.location.library_key)
+        )
+
+        assert len(content_block.children) == 0
+        self.tools.update_children(content_block)
+        content_block = self.store.get_item(content_block.location)
+        assert len(content_block.children) == 1