diff --git a/.changeset/forty-dolls-wave.md b/.changeset/forty-dolls-wave.md
new file mode 100644
index 0000000000..6fccd773c0
--- /dev/null
+++ b/.changeset/forty-dolls-wave.md
@@ -0,0 +1,5 @@
+---
+'svelte': patch
+---
+
+fix: insert empty text nodes while hydrating, if necessary
diff --git a/packages/svelte/src/compiler/phases/3-transform/client/visitors/template.js b/packages/svelte/src/compiler/phases/3-transform/client/visitors/template.js
index e196a09370..a3555aabb9 100644
--- a/packages/svelte/src/compiler/phases/3-transform/client/visitors/template.js
+++ b/packages/svelte/src/compiler/phases/3-transform/client/visitors/template.js
@@ -1099,50 +1099,58 @@ function create_block(parent, name, nodes, context) {
 		body.push(...state.init);
 	} else if (trimmed.length > 0) {
 		const id = b.id(context.state.scope.generate('fragment'));
-		const node_id = b.id(context.state.scope.generate('node'));
 
-		process_children(trimmed, node_id, {
-			...context,
-			state
-		});
+		const use_space_template =
+			trimmed.some((node) => node.type === 'ExpressionTag') &&
+			trimmed.every((node) => node.type === 'Text' || node.type === 'ExpressionTag');
+
+		if (use_space_template) {
+			// special case — we can use `$.space` instead of creating a unique template
+			const id = b.id(context.state.scope.generate('text'));
+
+			process_children(trimmed, () => id, false, {
+				...context,
+				state
+			});
+
+			body.push(b.var(id, b.call('$.space', b.id('$$anchor'))), ...state.init);
+			close = b.stmt(b.call('$.close', b.id('$$anchor'), id));
+		} else {
+			/** @type {(is_text: boolean) => import('estree').Expression} */
+			const expression = (is_text) =>
+				is_text ? b.call('$.child_frag', id, b.true) : b.call('$.child_frag', id);
+
+			process_children(trimmed, expression, false, { ...context, state });
 
-		const template = state.template[0];
+			const use_comment_template = state.template.length === 1 && state.template[0] === '<!>';
 
-		if (state.template.length === 1 && (template === ' ' || template === '<!>')) {
-			if (template === ' ') {
-				body.push(b.var(node_id, b.call('$.space', b.id('$$anchor'))), ...state.init);
-				close = b.stmt(b.call('$.close', b.id('$$anchor'), node_id));
+			if (use_comment_template) {
+				// special case — we can use `$.comment` instead of creating a unique template
+				body.push(b.var(id, b.call('$.comment', b.id('$$anchor'))));
 			} else {
+				const callee = namespace === 'svg' ? '$.svg_template' : '$.template';
+
+				state.hoisted.push(
+					b.var(
+						template_name,
+						b.call(callee, b.template([b.quasi(state.template.join(''), true)], []), b.true)
+					)
+				);
+
 				body.push(
-					b.var(id, b.call('$.comment', b.id('$$anchor'))),
-					b.var(node_id, b.call('$.child_frag', id)),
-					...state.init
+					b.var(
+						id,
+						b.call(
+							'$.open_frag',
+							b.id('$$anchor'),
+							b.literal(!state.metadata.template_needs_import_node),
+							template_name
+						)
+					)
 				);
-				close = b.stmt(b.call('$.close_frag', b.id('$$anchor'), id));
 			}
-		} else {
-			const callee = namespace === 'svg' ? '$.svg_template' : '$.template';
 
-			state.hoisted.push(
-				b.var(
-					template_name,
-					b.call(callee, b.template([b.quasi(state.template.join(''), true)], []), b.true)
-				)
-			);
-
-			body.push(
-				b.var(
-					id,
-					b.call(
-						'$.open_frag',
-						b.id('$$anchor'),
-						b.literal(!state.metadata.template_needs_import_node),
-						template_name
-					)
-				),
-				b.var(node_id, b.call('$.child_frag', id)),
-				...state.init
-			);
+			body.push(...state.init);
 
 			close = b.stmt(b.call('$.close_frag', b.id('$$anchor'), id));
 		}
@@ -1418,10 +1426,11 @@ function serialize_event_attribute(node, context) {
  * (e.g. `{a} b {c}`) into a single update function. Along the way it creates
  * corresponding template node references these updates are applied to.
  * @param {import('#compiler').SvelteNode[]} nodes
- * @param {import('estree').Expression} parent
+ * @param {(is_text: boolean) => import('estree').Expression} expression
+ * @param {boolean} is_element
  * @param {import('../types.js').ComponentContext} context
  */
-function process_children(nodes, parent, { visit, state }) {
+function process_children(nodes, expression, is_element, { visit, state }) {
 	const within_bound_contenteditable = state.metadata.bound_contenteditable;
 
 	/** @typedef {Array<import('#compiler').Text | import('#compiler').ExpressionTag>} Sequence */
@@ -1429,28 +1438,24 @@ function process_children(nodes, parent, { visit, state }) {
 	/** @type {Sequence} */
 	let sequence = [];
 
-	let expression = parent;
-
 	/**
 	 * @param {Sequence} sequence
-	 * @param {boolean} in_fragment
 	 */
-	function flush_sequence(sequence, in_fragment) {
+	function flush_sequence(sequence) {
 		if (sequence.length === 1) {
 			const node = sequence[0];
 
-			if ((in_fragment && node.type === 'ExpressionTag') || node.type === 'Text') {
-				expression = b.call('$.sibling', expression);
-			}
-
 			if (node.type === 'Text') {
+				let prev = expression;
+				expression = () => b.call('$.sibling', prev(true));
 				state.template.push(node.raw);
 				return;
 			}
 
 			state.template.push(' ');
 
-			const text_id = get_node_id(expression, state, 'text');
+			const text_id = get_node_id(expression(true), state, 'text');
+
 			const singular = b.stmt(
 				b.call(
 					'$.text_effect',
@@ -1487,37 +1492,39 @@ function process_children(nodes, parent, { visit, state }) {
 				);
 			}
 
-			return;
-		}
+			expression = (is_text) =>
+				is_text ? b.call('$.sibling', text_id, b.true) : b.call('$.sibling', text_id);
+		} else {
+			const text_id = get_node_id(expression(true), state, 'text');
 
-		state.template.push(' ');
+			state.template.push(' ');
 
-		const text_id = get_node_id(expression, state, 'text');
-		const contains_call_expression = sequence.some(
-			(n) => n.type === 'ExpressionTag' && n.metadata.contains_call_expression
-		);
-		const assignment = serialize_template_literal(sequence, visit, state)[1];
-		const init = b.stmt(b.assignment('=', b.member(text_id, b.id('nodeValue')), assignment));
-		const singular = b.stmt(b.call('$.text_effect', text_id, b.thunk(assignment)));
+			const contains_call_expression = sequence.some(
+				(n) => n.type === 'ExpressionTag' && n.metadata.contains_call_expression
+			);
+			const assignment = serialize_template_literal(sequence, visit, state)[1];
+			const init = b.stmt(b.assignment('=', b.member(text_id, b.id('nodeValue')), assignment));
+			const singular = b.stmt(b.call('$.text_effect', text_id, b.thunk(assignment)));
 
-		if (contains_call_expression && !within_bound_contenteditable) {
-			state.update_effects.push(singular);
-		} else if (
-			sequence.some((node) => node.type === 'ExpressionTag' && node.metadata.dynamic) &&
-			!within_bound_contenteditable
-		) {
-			state.update.push({
-				singular,
-				grouped: b.stmt(b.call('$.text', text_id, assignment))
-			});
-		} else {
-			state.init.push(init);
-		}
+			if (contains_call_expression && !within_bound_contenteditable) {
+				state.update_effects.push(singular);
+			} else if (
+				sequence.some((node) => node.type === 'ExpressionTag' && node.metadata.dynamic) &&
+				!within_bound_contenteditable
+			) {
+				state.update.push({
+					singular,
+					grouped: b.stmt(b.call('$.text', text_id, assignment))
+				});
+			} else {
+				state.init.push(init);
+			}
 
-		expression = b.call('$.sibling', text_id);
+			expression = (is_text) =>
+				is_text ? b.call('$.sibling', text_id, b.true) : b.call('$.sibling', text_id);
+		}
 	}
 
-	let is_fragment = false;
 	for (let i = 0; i < nodes.length; i += 1) {
 		const node = nodes[i];
 
@@ -1525,12 +1532,7 @@ function process_children(nodes, parent, { visit, state }) {
 			sequence.push(node);
 		} else {
 			if (sequence.length > 0) {
-				flush_sequence(sequence, is_fragment);
-				// Ensure we move to the next sibling for the case where we move reference within a fragment
-				if (!is_fragment && sequence.length === 1 && sequence[0].type === 'ExpressionTag') {
-					expression = b.call('$.sibling', expression);
-					is_fragment = true;
-				}
+				flush_sequence(sequence);
 				sequence = [];
 			}
 
@@ -1544,23 +1546,18 @@ function process_children(nodes, parent, { visit, state }) {
 				// get hoisted inside clean_nodes?
 				visit(node, state);
 			} else {
-				if (
-					node.type === 'EachBlock' &&
-					nodes.length === 1 &&
-					parent.type === 'CallExpression' &&
-					parent.callee.type === 'Identifier' &&
-					parent.callee.name === '$.child'
-				) {
+				if (node.type === 'EachBlock' && nodes.length === 1 && is_element) {
 					node.metadata.is_controlled = true;
 					visit(node, state);
 				} else {
 					const id = get_node_id(
-						expression,
+						expression(false),
 						state,
 						node.type === 'RegularElement' ? node.name : 'node'
 					);
 
-					expression = b.call('$.sibling', id);
+					expression = (is_text) =>
+						is_text ? b.call('$.sibling', id, b.true) : b.call('$.sibling', id);
 
 					visit(node, {
 						...state,
@@ -1572,7 +1569,7 @@ function process_children(nodes, parent, { visit, state }) {
 	}
 
 	if (sequence.length > 0) {
-		flush_sequence(sequence, false);
+		flush_sequence(sequence);
 	}
 }
 
@@ -2041,12 +2038,14 @@ export const template_visitors = {
 
 		process_children(
 			trimmed,
-			b.call(
-				'$.child',
-				node.name === 'template'
-					? b.member(context.state.node, b.id('content'))
-					: context.state.node
-			),
+			() =>
+				b.call(
+					'$.child',
+					node.name === 'template'
+						? b.member(context.state.node, b.id('content'))
+						: context.state.node
+				),
+			true,
 			{ ...context, state }
 		);
 
diff --git a/packages/svelte/src/compiler/phases/3-transform/server/transform-server.js b/packages/svelte/src/compiler/phases/3-transform/server/transform-server.js
index b6e53a739b..1f0dcc9e1b 100644
--- a/packages/svelte/src/compiler/phases/3-transform/server/transform-server.js
+++ b/packages/svelte/src/compiler/phases/3-transform/server/transform-server.js
@@ -167,7 +167,7 @@ function process_children(nodes, parent, { visit, state }) {
 			}
 
 			const expression = b.call(
-				'$.escape_text',
+				'$.escape',
 				/** @type {import('estree').Expression} */ (visit(node.expression))
 			);
 			state.template.push(t_expression(expression));
diff --git a/packages/svelte/src/internal/client/operations.js b/packages/svelte/src/internal/client/operations.js
index e8cbe22718..372b1e510a 100644
--- a/packages/svelte/src/internal/client/operations.js
+++ b/packages/svelte/src/internal/client/operations.js
@@ -182,30 +182,63 @@ export function child(node) {
 /**
  * @template {Node | Node[]} N
  * @param {N} node
+ * @param {boolean} is_text
  * @returns {Node | null}
  */
 /*#__NO_SIDE_EFFECTS__*/
-export function child_frag(node) {
+export function child_frag(node, is_text) {
 	if (current_hydration_fragment !== null) {
 		const first_node = /** @type {Node[]} */ (node)[0];
-		if (current_hydration_fragment !== null && first_node !== null) {
+
+		// if an {expression} is empty during SSR, there might be no
+		// text node to hydrate — we must therefore create one
+		if (is_text && first_node?.nodeType !== 3) {
+			const text = document.createTextNode('');
+			current_hydration_fragment.unshift(text);
+			if (first_node) {
+				/** @type {DocumentFragment} */ (first_node.parentNode).insertBefore(text, first_node);
+			}
+			return text;
+		}
+
+		if (first_node !== null) {
 			return capture_fragment_from_node(first_node);
 		}
+
 		return first_node;
 	}
+
 	return first_child_get.call(/** @type {Node} */ (node));
 }
 
 /**
  * @template {Node} N
  * @param {N} node
+ * @param {boolean} is_text
  * @returns {Node | null}
  */
 /*#__NO_SIDE_EFFECTS__*/
-export function sibling(node) {
+export function sibling(node, is_text = false) {
 	const next_sibling = next_sibling_get.call(node);
-	if (current_hydration_fragment !== null && next_sibling !== null) {
-		return capture_fragment_from_node(next_sibling);
+	if (current_hydration_fragment !== null) {
+		if (is_text && next_sibling?.nodeType !== 3) {
+			const text = document.createTextNode('');
+			if (next_sibling) {
+				const index = current_hydration_fragment.indexOf(
+					/** @type {Text | Comment | Element} */ (next_sibling)
+				);
+				current_hydration_fragment.splice(index, 0, text);
+				/** @type {DocumentFragment} */ (next_sibling.parentNode).insertBefore(text, next_sibling);
+			} else {
+				current_hydration_fragment.push(text);
+			}
+
+			return text;
+		}
+
+		if (next_sibling !== null) {
+			return capture_fragment_from_node(next_sibling);
+		}
 	}
 	return next_sibling;
 }
diff --git a/packages/svelte/src/internal/server/index.js b/packages/svelte/src/internal/server/index.js
index aafbd8252a..12d9a3c130 100644
--- a/packages/svelte/src/internal/server/index.js
+++ b/packages/svelte/src/internal/server/index.js
@@ -149,17 +149,6 @@ export function escape(value, is_attr = false) {
 	return escaped + str.substring(last);
 }
 
-/**
- * @template V
- * @param {V} value
- * @returns {string}
- */
-export function escape_text(value) {
-	const escaped = escape(value);
-	// If the value is empty, then ensure we put a space so that it creates a text node on the client
-	return escaped === '' ? ' ' : escaped;
-}
-
 /**
  * @param {Payload} payload
  * @param {(head_payload: Payload['head']) => void} fn
diff --git a/packages/svelte/tests/hydration/samples/dynamic-text-nil/_before.html b/packages/svelte/tests/hydration/samples/dynamic-text-nil/_before.html
index d3ae0ab9f1..7508e31db6 100644
--- a/packages/svelte/tests/hydration/samples/dynamic-text-nil/_before.html
+++ b/packages/svelte/tests/hydration/samples/dynamic-text-nil/_before.html
@@ -1,2 +1 @@
-<!--ssr:0--><p></p>
-<p></p><!--ssr:0-->
+<!--ssr:0--><hr><hr> <p></p> <p></p><!--ssr:0-->
diff --git a/packages/svelte/tests/hydration/samples/dynamic-text-nil/main.svelte b/packages/svelte/tests/hydration/samples/dynamic-text-nil/main.svelte
index 853faa635c..5e5fc5c82b 100644
--- a/packages/svelte/tests/hydration/samples/dynamic-text-nil/main.svelte
+++ b/packages/svelte/tests/hydration/samples/dynamic-text-nil/main.svelte
@@ -3,5 +3,6 @@
 	let maybeUndefined = undefined;
 </script>
 
+{maybeNull}<hr>{maybeUndefined}<hr>
 <p>{maybeNull}</p>
 <p>{maybeUndefined}</p>
diff --git a/packages/svelte/tests/runtime-runes/samples/event-attribute-template/_config.js b/packages/svelte/tests/runtime-runes/samples/event-attribute-template/_config.js
index c8d797b1a6..550fd05b47 100644
--- a/packages/svelte/tests/runtime-runes/samples/event-attribute-template/_config.js
+++ b/packages/svelte/tests/runtime-runes/samples/event-attribute-template/_config.js
@@ -1,20 +1,16 @@
 import { flushSync } from 'svelte';
 import { test } from '../../test';
-import { log } from './log.js';
 
 export default test({
-	before_test() {
-		log.length = 0;
-	},
+	html: `<button>0</button><button>0</button>`,
 
 	async test({ assert, target }) {
-		const [b1] = target.querySelectorAll('button');
+		const [b1, b2] = target.querySelectorAll('button');
 
-		flushSync(() => {
-			b1?.click();
-		});
+		flushSync(() => b1?.click());
+		assert.htmlEqual(target.innerHTML, `<button>1</button><button>0</button>`);
 
-		await Promise.resolve();
-		assert.deepEqual(log, ['onclick']);
+		flushSync(() => b2?.click());
+		assert.htmlEqual(target.innerHTML, `<button>1</button><button>1</button>`);
 	}
 });
diff --git a/packages/svelte/tests/runtime-runes/samples/event-attribute-template/log.js b/packages/svelte/tests/runtime-runes/samples/event-attribute-template/log.js
deleted file mode 100644
index d3df521f4d..0000000000
--- a/packages/svelte/tests/runtime-runes/samples/event-attribute-template/log.js
+++ /dev/null
@@ -1,2 +0,0 @@
-/** @type {any[]} */
-export const log = [];
diff --git a/packages/svelte/tests/runtime-runes/samples/event-attribute-template/main.svelte b/packages/svelte/tests/runtime-runes/samples/event-attribute-template/main.svelte
index 5976ab15f8..08f5f17d04 100644
--- a/packages/svelte/tests/runtime-runes/samples/event-attribute-template/main.svelte
+++ b/packages/svelte/tests/runtime-runes/samples/event-attribute-template/main.svelte
@@ -1,10 +1,6 @@
 <script>
-	import { log } from './log.js';
-
-	function send() {
-		log.push("onclick")
-	}
+	let a = $state(0);
+	let b = $state(0);
 </script>
 
-{undefined}<hr/>
-<button onclick={send}>Send Event</button>
+{undefined}<button onclick={() => a += 1}>{a}</button>{undefined}<button onclick={() => b += 1}>{b}</button>
diff --git a/packages/svelte/tests/snapshot/samples/dynamic-attributes-casing/_expected/client/main.svelte.js b/packages/svelte/tests/snapshot/samples/dynamic-attributes-casing/_expected/client/main.svelte.js
index f0960dc93d..6494d2436a 100644
--- a/packages/svelte/tests/snapshot/samples/dynamic-attributes-casing/_expected/client/main.svelte.js
+++ b/packages/svelte/tests/snapshot/samples/dynamic-attributes-casing/_expected/client/main.svelte.js
@@ -13,25 +13,25 @@ export default function Main($$anchor, $$props) {
 	let y = () => 'test';
 	/* Init */
 	var fragment = $.open_frag($$anchor, false, frag);
-	var node = $.child_frag(fragment);
-	var svg = $.sibling($.sibling(node));
-	var custom_element = $.sibling($.sibling(svg));
-	var div = $.sibling($.sibling(custom_element));
-	var svg_1 = $.sibling($.sibling(div));
-	var custom_element_1 = $.sibling($.sibling(svg_1));
+	var div = $.child_frag(fragment);
+	var svg = $.sibling($.sibling(div, true));
+	var custom_element = $.sibling($.sibling(svg, true));
+	var div_1 = $.sibling($.sibling(custom_element, true));
+	var svg_1 = $.sibling($.sibling(div_1, true));
+	var custom_element_1 = $.sibling($.sibling(svg_1, true));
 
 	/* Update */
-	$.attr_effect(div, "foobar", y);
+	$.attr_effect(div_1, "foobar", y);
 	$.attr_effect(svg_1, "viewBox", y);
 	$.set_custom_element_data_effect(custom_element_1, "fooBar", y);
 
-	var node_foobar;
+	var div_foobar;
 	var svg_viewBox;
 	var custom_element_fooBar;
 
 	$.render_effect(() => {
-		if (node_foobar !== (node_foobar = x)) {
-			$.attr(node, "foobar", node_foobar);
+		if (div_foobar !== (div_foobar = x)) {
+			$.attr(div, "foobar", div_foobar);
 		}
 
 		if (svg_viewBox !== (svg_viewBox = x)) {
diff --git a/packages/svelte/tests/snapshot/samples/each-string-template/_expected/client/index.svelte.js b/packages/svelte/tests/snapshot/samples/each-string-template/_expected/client/index.svelte.js
index 5680d12e63..70746bcb36 100644
--- a/packages/svelte/tests/snapshot/samples/each-string-template/_expected/client/index.svelte.js
+++ b/packages/svelte/tests/snapshot/samples/each-string-template/_expected/client/index.svelte.js
@@ -16,11 +16,11 @@ export default function Each_string_template($$anchor, $$props) {
 		1,
 		($$anchor, thing, $$index) => {
 			/* Init */
-			var node_1 = $.space($$anchor);
+			var text = $.space($$anchor);
 
 			/* Update */
-			$.text_effect(node_1, () => `${$.stringify($.unwrap(thing))}, `);
-			$.close($$anchor, node_1);
+			$.text_effect(text, () => `${$.stringify($.unwrap(thing))}, `);
+			$.close($$anchor, text);
 		},
 		null
 	);
diff --git a/packages/svelte/tests/snapshot/samples/function-prop-no-getter/_expected/client/index.svelte.js b/packages/svelte/tests/snapshot/samples/function-prop-no-getter/_expected/client/index.svelte.js
index b53ee2523d..2e984c1ff8 100644
--- a/packages/svelte/tests/snapshot/samples/function-prop-no-getter/_expected/client/index.svelte.js
+++ b/packages/svelte/tests/snapshot/samples/function-prop-no-getter/_expected/client/index.svelte.js
@@ -23,11 +23,11 @@ export default function Function_prop_no_getter($$anchor, $$props) {
 		onmouseenter: () => $.set(count, $.proxy(plusOne($.get(count)))),
 		children: ($$anchor, $$slotProps) => {
 			/* Init */
-			var node_1 = $.space($$anchor);
+			var text = $.space($$anchor);
 
 			/* Update */
-			$.text_effect(node_1, () => `clicks: ${$.stringify($.get(count))}`);
-			$.close($$anchor, node_1);
+			$.text_effect(text, () => `clicks: ${$.stringify($.get(count))}`);
+			$.close($$anchor, text);
 		}
 	});
 
diff --git a/packages/svelte/tests/snapshot/samples/state-proxy-literal/_expected/client/index.svelte.js b/packages/svelte/tests/snapshot/samples/state-proxy-literal/_expected/client/index.svelte.js
index 321496e20b..3da681ea53 100644
--- a/packages/svelte/tests/snapshot/samples/state-proxy-literal/_expected/client/index.svelte.js
+++ b/packages/svelte/tests/snapshot/samples/state-proxy-literal/_expected/client/index.svelte.js
@@ -19,18 +19,18 @@ export default function State_proxy_literal($$anchor, $$props) {
 	let tpl = $.source(``);
 	/* Init */
 	var fragment = $.open_frag($$anchor, true, frag);
-	var node = $.child_frag(fragment);
+	var input = $.child_frag(fragment);
 
-	$.remove_input_attr_defaults(node);
+	$.remove_input_attr_defaults(input);
 
-	var input = $.sibling($.sibling(node));
+	var input_1 = $.sibling($.sibling(input, true));
 
-	$.remove_input_attr_defaults(input);
+	$.remove_input_attr_defaults(input_1);
 
-	var button = $.sibling($.sibling(input));
+	var button = $.sibling($.sibling(input_1, true));
 
-	$.bind_value(node, () => $.get(str), ($$value) => $.set(str, $$value));
-	$.bind_value(input, () => $.get(tpl), ($$value) => $.set(tpl, $$value));
+	$.bind_value(input, () => $.get(str), ($$value) => $.set(str, $$value));
+	$.bind_value(input_1, () => $.get(tpl), ($$value) => $.set(tpl, $$value));
 	button.__click = [reset, str, tpl];
 	$.close_frag($$anchor, fragment);
 	$.pop();