diff --git a/src/markdown/ir.nested-lists.test.ts b/src/markdown/ir.nested-lists.test.ts
index 5914d063d55..851e41391f9 100644
--- a/src/markdown/ir.nested-lists.test.ts
+++ b/src/markdown/ir.nested-lists.test.ts
@@ -331,6 +331,21 @@ second paragraph
 2. next`);
   });
 
+  it("preserves paragraph breaks inside loose blockquoted list items", () => {
+    const input = `> - first paragraph
+>
+>   second paragraph
+> - next`;
+
+    const result = markdownToIR(input);
+
+    expect(result.text).toBe(`• first paragraph
+
+second paragraph
+
+• next`);
+  });
+
   it("does not add triple newlines before loose nested bullet lists", () => {
     const input = `- parent
 
diff --git a/src/markdown/ir.ts b/src/markdown/ir.ts
index 7e6445dd379..7f012b31520 100644
--- a/src/markdown/ir.ts
+++ b/src/markdown/ir.ts
@@ -5,6 +5,7 @@ import type { MarkdownTableMode } from "../config/types.base.js";
 type ListState = {
   type: "bullet" | "ordered";
   index: number;
+  openLevel: number;
 };
 
 type LinkState = {
@@ -269,7 +270,8 @@ function appendParagraphSeparator(state: RenderState, token?: MarkdownToken) {
     return;
   } // Don't add paragraph separators inside tables
   if (state.env.listStack.length > 0) {
-    const directListParagraphLevel = state.env.listStack.length * 2;
+    const currentList = state.env.listStack[state.env.listStack.length - 1];
+    const directListParagraphLevel = (currentList?.openLevel ?? 0) + 2;
     if (
       token?.type !== "paragraph_close" ||
       token.hidden ||
@@ -685,7 +687,7 @@ function renderTokens(tokens: MarkdownToken[], state: RenderState): void {
         if (state.env.listStack.length > 0) {
           appendNestedListSeparator(state);
         }
-        state.env.listStack.push({ type: "bullet", index: 0 });
+        state.env.listStack.push({ type: "bullet", index: 0, openLevel: token.level ?? 0 });
         break;
       case "bullet_list_close":
         state.env.listStack.pop();
@@ -699,7 +701,11 @@ function renderTokens(tokens: MarkdownToken[], state: RenderState): void {
           appendNestedListSeparator(state);
         }
         const start = Number(getAttr(token, "start") ?? "1");
-        state.env.listStack.push({ type: "ordered", index: start - 1 });
+        state.env.listStack.push({
+          type: "ordered",
+          index: start - 1,
+          openLevel: token.level ?? 0,
+        });
         break;
       }
       case "ordered_list_close":