diff --git a/crates/oxc_formatter/src/print/jsx/element.rs b/crates/oxc_formatter/src/print/jsx/element.rs
index 1f7295b4e3524..dcb6f2a8a7789 100644
--- a/crates/oxc_formatter/src/print/jsx/element.rs
+++ b/crates/oxc_formatter/src/print/jsx/element.rs
@@ -229,15 +229,18 @@ impl<'a> Format<'a> for AnyJsxTagWithChildren<'a, '_> {
 
 /// This is a very special situation where we're returning a JsxElement
 /// from an arrow function that's passed as an argument to a function,
-/// which is itself inside a JSX expression child.
+/// which is itself inside a JSX expression container.
 ///
-/// If you're wondering why this is the only other case, it's because
-/// Prettier defines it to be that way.
+/// This matches Prettier's `shouldBreakJsxElement` behavior.
 ///
 /// ```jsx
-///  let bar = <div>
-///    {foo(() => <div> the quick brown fox jumps over the lazy dog </div>)}
-///  </div>;
+/// // As JSX child:
+/// let bar = <div>
+///   {foo(() => <div> the quick brown fox jumps over the lazy dog </div>)}
+/// </div>;
+///
+/// // As JSX attribute:
+/// <Tooltip title={[].map(name => (<Foo>{name}</Foo>))} />;
 /// ```
 pub fn should_expand(mut parent: &AstNodes<'_>) -> bool {
     if let AstNodes::ExpressionStatement(stmt) = parent {
@@ -245,7 +248,7 @@ pub fn should_expand(mut parent: &AstNodes<'_>) -> bool {
         // to determine if it should expand.
         parent = stmt.grand_parent();
     }
-    let maybe_jsx_expression_child = match parent {
+    let maybe_jsx_expression_container = match parent {
         AstNodes::ArrowFunctionExpression(arrow) if arrow.expression => match arrow.parent() {
             AstNodes::CallExpression(call) => call.parent(),
             _ => return false,
@@ -253,9 +256,8 @@ pub fn should_expand(mut parent: &AstNodes<'_>) -> bool {
         _ => return false,
     };
     matches!(
-        maybe_jsx_expression_child.without_chain_expression(),
-        AstNodes::JSXExpressionContainer(container)
-        if matches!(container.parent(), AstNodes::JSXElement(_) | AstNodes::JSXFragment(_))
+        maybe_jsx_expression_container.without_chain_expression(),
+        AstNodes::JSXExpressionContainer(_)
     )
 }
 
diff --git a/crates/oxc_formatter/tests/fixtures/js/jsx/arrow-callback.jsx b/crates/oxc_formatter/tests/fixtures/js/jsx/arrow-callback.jsx
new file mode 100644
index 0000000000000..fda4a1fbd4e00
--- /dev/null
+++ b/crates/oxc_formatter/tests/fixtures/js/jsx/arrow-callback.jsx
@@ -0,0 +1,53 @@
+// Arrow functions returning JSX inside JSX expression containers
+// The multiline structure should be preserved when the arrow body is JSX
+
+// https://github.com/oxc-project/oxc/issues/18738
+// Arrow returning JSX in attribute callback
+[
+  {
+    baz: () => {
+      return <Tooltip
+        title={[].map(name => (
+          <Foo>{name}</Foo>
+        ))}
+      >
+        Foo
+      </Tooltip>
+    }
+  }
+];
+
+// Simpler attribute case
+<Component
+  items={data.map(item => (
+    <Item key={item.id}>{item.name}</Item>
+  ))}
+/>;
+
+// JSX as child
+<div>
+  {items.map(item => (
+    <Item key={item.id}>{item.name}</Item>
+  ))}
+</div>;
+
+// Multiple attributes with callback returning JSX
+<DataGrid
+  columns={columns.map(col => (
+    <Column key={col.id}>{col.label}</Column>
+  ))}
+  rows={rows.map(row => (
+    <Row key={row.id}>{row.data}</Row>
+  ))}
+/>;
+
+// Nested JSX in attribute
+<Outer
+  render={items.map(item => (
+    <Inner
+      content={subitems.map(sub => (
+        <Leaf>{sub.name}</Leaf>
+      ))}
+    />
+  ))}
+/>;
diff --git a/crates/oxc_formatter/tests/fixtures/js/jsx/arrow-callback.jsx.snap b/crates/oxc_formatter/tests/fixtures/js/jsx/arrow-callback.jsx.snap
new file mode 100644
index 0000000000000..36552d9320d26
--- /dev/null
+++ b/crates/oxc_formatter/tests/fixtures/js/jsx/arrow-callback.jsx.snap
@@ -0,0 +1,178 @@
+---
+source: crates/oxc_formatter/tests/fixtures/mod.rs
+---
+==================== Input ====================
+// Arrow functions returning JSX inside JSX expression containers
+// The multiline structure should be preserved when the arrow body is JSX
+
+// https://github.com/oxc-project/oxc/issues/18738
+// Arrow returning JSX in attribute callback
+[
+  {
+    baz: () => {
+      return <Tooltip
+        title={[].map(name => (
+          <Foo>{name}</Foo>
+        ))}
+      >
+        Foo
+      </Tooltip>
+    }
+  }
+];
+
+// Simpler attribute case
+<Component
+  items={data.map(item => (
+    <Item key={item.id}>{item.name}</Item>
+  ))}
+/>;
+
+// JSX as child
+<div>
+  {items.map(item => (
+    <Item key={item.id}>{item.name}</Item>
+  ))}
+</div>;
+
+// Multiple attributes with callback returning JSX
+<DataGrid
+  columns={columns.map(col => (
+    <Column key={col.id}>{col.label}</Column>
+  ))}
+  rows={rows.map(row => (
+    <Row key={row.id}>{row.data}</Row>
+  ))}
+/>;
+
+// Nested JSX in attribute
+<Outer
+  render={items.map(item => (
+    <Inner
+      content={subitems.map(sub => (
+        <Leaf>{sub.name}</Leaf>
+      ))}
+    />
+  ))}
+/>;
+
+==================== Output ====================
+------------------
+{ printWidth: 80 }
+------------------
+// Arrow functions returning JSX inside JSX expression containers
+// The multiline structure should be preserved when the arrow body is JSX
+
+// https://github.com/oxc-project/oxc/issues/18738
+// Arrow returning JSX in attribute callback
+[
+  {
+    baz: () => {
+      return (
+        <Tooltip
+          title={[].map((name) => (
+            <Foo>{name}</Foo>
+          ))}
+        >
+          Foo
+        </Tooltip>
+      );
+    },
+  },
+];
+
+// Simpler attribute case
+<Component
+  items={data.map((item) => (
+    <Item key={item.id}>{item.name}</Item>
+  ))}
+/>;
+
+// JSX as child
+<div>
+  {items.map((item) => (
+    <Item key={item.id}>{item.name}</Item>
+  ))}
+</div>;
+
+// Multiple attributes with callback returning JSX
+<DataGrid
+  columns={columns.map((col) => (
+    <Column key={col.id}>{col.label}</Column>
+  ))}
+  rows={rows.map((row) => (
+    <Row key={row.id}>{row.data}</Row>
+  ))}
+/>;
+
+// Nested JSX in attribute
+<Outer
+  render={items.map((item) => (
+    <Inner
+      content={subitems.map((sub) => (
+        <Leaf>{sub.name}</Leaf>
+      ))}
+    />
+  ))}
+/>;
+
+-------------------
+{ printWidth: 100 }
+-------------------
+// Arrow functions returning JSX inside JSX expression containers
+// The multiline structure should be preserved when the arrow body is JSX
+
+// https://github.com/oxc-project/oxc/issues/18738
+// Arrow returning JSX in attribute callback
+[
+  {
+    baz: () => {
+      return (
+        <Tooltip
+          title={[].map((name) => (
+            <Foo>{name}</Foo>
+          ))}
+        >
+          Foo
+        </Tooltip>
+      );
+    },
+  },
+];
+
+// Simpler attribute case
+<Component
+  items={data.map((item) => (
+    <Item key={item.id}>{item.name}</Item>
+  ))}
+/>;
+
+// JSX as child
+<div>
+  {items.map((item) => (
+    <Item key={item.id}>{item.name}</Item>
+  ))}
+</div>;
+
+// Multiple attributes with callback returning JSX
+<DataGrid
+  columns={columns.map((col) => (
+    <Column key={col.id}>{col.label}</Column>
+  ))}
+  rows={rows.map((row) => (
+    <Row key={row.id}>{row.data}</Row>
+  ))}
+/>;
+
+// Nested JSX in attribute
+<Outer
+  render={items.map((item) => (
+    <Inner
+      content={subitems.map((sub) => (
+        <Leaf>{sub.name}</Leaf>
+      ))}
+    />
+  ))}
+/>;
+
+===================== End =====================