diff --git a/.changeset/cold-schools-relate.md b/.changeset/cold-schools-relate.md
new file mode 100644
index 0000000000..d45d6f8fb1
--- /dev/null
+++ b/.changeset/cold-schools-relate.md
@@ -0,0 +1,5 @@
+---
+"react-router": patch
+---
+
+Fix clientLoader.hydrate when an ancestor route is also hydrating a clientLoader
diff --git a/packages/react-router/__tests__/dom/partial-hydration-test.tsx b/packages/react-router/__tests__/dom/partial-hydration-test.tsx
index 9b61ac66ba..6ec3501380 100644
--- a/packages/react-router/__tests__/dom/partial-hydration-test.tsx
+++ b/packages/react-router/__tests__/dom/partial-hydration-test.tsx
@@ -66,9 +66,6 @@ describe("Partial Hydration Behavior", () => {
           },
         ],
         {
-          future: {
-            v7_partialHydration: true,
-          },
           patchRoutesOnNavigation({ path, patch }) {
             if (path === "/parent/child") {
               patch("parent", [
@@ -155,9 +152,6 @@ describe("Partial Hydration Behavior", () => {
           },
         ],
         {
-          future: {
-            v7_partialHydration: true,
-          },
           patchRoutesOnNavigation({ path, patch }) {
             if (path === "/parent/child") {
               patch("parent", [
@@ -248,9 +242,6 @@ describe("Partial Hydration Behavior", () => {
           },
         ],
         {
-          future: {
-            v7_partialHydration: true,
-          },
           async patchRoutesOnNavigation({ path, patch }) {
             await patchDfd.promise;
             if (path === "/parent/child") {
@@ -853,4 +844,76 @@ function testPartialHydration(
     expect(rootSpy).toHaveBeenCalledTimes(1);
     expect(indexSpy).not.toHaveBeenCalled();
   });
+
+  it("renders child fallback when ancestor route has hydration data and a hydrating loader", async () => {
+    let rootDfd = createDeferred();
+    let rootLoader: LoaderFunction = () => rootDfd.promise;
+    rootLoader.hydrate = true;
+    let indexDfd = createDeferred();
+    let indexLoader: LoaderFunction = () => indexDfd.promise;
+    indexLoader.hydrate = true;
+    let router = createTestRouter(
+      [
+        {
+          id: "root",
+          path: "/",
+          loader: rootLoader,
+          Component() {
+            let data = useLoaderData() as string;
+            return (
+              <>
+                <h1>{`Home - ${data}`}</h1>
+                <Outlet />
+              </>
+            );
+          },
+          children: [
+            {
+              id: "index",
+              index: true,
+              loader: indexLoader,
+              HydrateFallback: () => <p>Index Loading...</p>,
+              Component() {
+                let data = useLoaderData() as string;
+                return <h2>{`Index - ${data}`}</h2>;
+              },
+            },
+          ],
+        },
+      ],
+      {
+        hydrationData: {
+          loaderData: {
+            root: "HYDRATED ROOT",
+          },
+        },
+      },
+    );
+    let { container } = render(<RouterProvider router={router} />);
+
+    expect(getHtml(container)).toMatchInlineSnapshot(`
+      "<div>
+        <h1>
+          Home - HYDRATED ROOT
+        </h1>
+        <p>
+          Index Loading...
+        </p>
+      </div>"
+    `);
+
+    rootDfd.resolve("ROOT UPDATED");
+    indexDfd.resolve("INDEX UPDATED");
+    await waitFor(() => screen.getByText(/INDEX UPDATED/));
+    expect(getHtml(container)).toMatchInlineSnapshot(`
+      "<div>
+        <h1>
+          Home - ROOT UPDATED
+        </h1>
+        <h2>
+          Index - INDEX UPDATED
+        </h2>
+      </div>"
+    `);
+  });
 }
diff --git a/packages/react-router/lib/router/router.ts b/packages/react-router/lib/router/router.ts
index b2348c0c6b..42479c0940 100644
--- a/packages/react-router/lib/router/router.ts
+++ b/packages/react-router/lib/router/router.ts
@@ -1024,11 +1024,14 @@ export function createRouter(init: RouterInit): Router {
       }
 
       // Toggle renderFallback based on per-route values
+      // Using a `.forEach` is important instead of something like an `.every`
+      // here because we need to evaluate renderFallback for all matches
       renderFallback = false;
-      initialized = relevantMatches.every((m) => {
+      initialized = true;
+      relevantMatches.forEach((m) => {
         let status = getRouteHydrationStatus(m.route, loaderData, errors);
         renderFallback = renderFallback || status.renderFallback;
-        return !status.shouldLoad;
+        initialized = initialized && !status.shouldLoad;
       });
     }
   }