diff --git a/tests/phpunit/tests/blocks/wpApplyBlockContentFilters.php b/tests/phpunit/tests/blocks/wpApplyBlockContentFilters.php
new file mode 100644
index 0000000000000..56ee579dab8ff
--- /dev/null
+++ b/tests/phpunit/tests/blocks/wpApplyBlockContentFilters.php
@@ -0,0 +1,262 @@
+<?php
+/**
+ * Tests for _wp_apply_block_content_filters().
+ *
+ * @package WordPress
+ * @subpackage Blocks
+ *
+ * @group blocks
+ *
+ * @covers ::_wp_apply_block_content_filters
+ */
+class Tests_Blocks_WpApplyBlockContentFilters extends WP_UnitTestCase {
+	const TEST_BLOCK_NAME           = 'tests/apply-block-content-filters';
+	const TEST_EXCEPTION_BLOCK_NAME = 'tests/apply-block-content-filters-exception';
+	const TEST_EMBED_HANDLER        = 'apply_block_content_filters_embed';
+	const TEST_SHORTCODE            = 'apply_block_content_filters_shortcode';
+
+	/**
+	 * The original use_smilies option value.
+	 *
+	 * @var string
+	 */
+	private $original_use_smilies;
+
+	/**
+	 * Context received by the wp_content_img_tag filter.
+	 *
+	 * @var string|null
+	 */
+	private $filtered_image_context;
+
+	public function set_up() {
+		parent::set_up();
+
+		$this->original_use_smilies   = get_option( 'use_smilies' );
+		$this->filtered_image_context = null;
+
+		update_option( 'use_smilies', 1 );
+		smilies_init();
+
+		register_block_type(
+			self::TEST_BLOCK_NAME,
+			array(
+				'render_callback' => static function ( $attributes ) {
+					return sprintf(
+						'<div class="apply-block-content-filters-block">%s</div>',
+						esc_html( $attributes['label'] )
+					);
+				},
+			)
+		);
+
+		register_block_type(
+			self::TEST_EXCEPTION_BLOCK_NAME,
+			array(
+				'render_callback' => static function () {
+					throw new Exception( 'Block rendering failed.' );
+				},
+			)
+		);
+	}
+
+	public function tear_down() {
+		remove_shortcode( self::TEST_SHORTCODE );
+		wp_embed_unregister_handler( self::TEST_EMBED_HANDLER );
+		remove_filter( 'wp_content_img_tag', array( $this, 'filter_content_image_tag' ) );
+
+		if ( WP_Block_Type_Registry::get_instance()->is_registered( self::TEST_BLOCK_NAME ) ) {
+			unregister_block_type( self::TEST_BLOCK_NAME );
+		}
+
+		if ( WP_Block_Type_Registry::get_instance()->is_registered( self::TEST_EXCEPTION_BLOCK_NAME ) ) {
+			unregister_block_type( self::TEST_EXCEPTION_BLOCK_NAME );
+		}
+
+		update_option( 'use_smilies', $this->original_use_smilies );
+
+		parent::tear_down();
+	}
+
+	/**
+	 * Filters content image tags.
+	 *
+	 * @param string $filtered_image Full img tag with attributes.
+	 * @param string $context        Context for the image tag.
+	 * @return string Filtered image tag.
+	 */
+	public function filter_content_image_tag( $filtered_image, $context ) {
+		$this->filtered_image_context = $context;
+
+		if ( str_contains( $filtered_image, 'class="content-image"' ) ) {
+			return str_replace( '<img ', '<img data-filtered="yes" ', $filtered_image );
+		}
+
+		return $filtered_image;
+	}
+
+	/**
+	 * Renders the test embed handler.
+	 *
+	 * @return string Embed markup.
+	 */
+	public function render_test_embed() {
+		return '<div class="apply-block-content-filters-embed">Embedded content</div>';
+	}
+
+	/**
+	 * Tests that each expected content filter is applied.
+	 *
+	 * @ticket 65586
+	 */
+	public function test_applies_content_filters() {
+		add_filter( 'wp_content_img_tag', array( $this, 'filter_content_image_tag' ), 10, 2 );
+
+		wp_embed_register_handler(
+			self::TEST_EMBED_HANDLER,
+			'#https?://example\.com/apply-block-content-filters#i',
+			array( $this, 'render_test_embed' )
+		);
+
+		add_shortcode(
+			self::TEST_SHORTCODE,
+			static function () {
+				return '<!-- wp:tests/apply-block-content-filters {"label":"Shortcode block output"} /-->';
+			}
+		);
+
+		$content = sprintf(
+			"This shouldn't use a straight apostrophe, and this should become a smilie: :mrgreen:\n\n<p>[%s]</p>\n\n<!-- wp:tests/apply-block-content-filters {\"label\":\"Direct block output\"} /-->\n\n<img src=\"https://example.org/image.jpg\" alt=\"\" class=\"content-image\" />\n\nhttps://example.com/apply-block-content-filters",
+			self::TEST_SHORTCODE
+		);
+
+		$output = _wp_apply_block_content_filters( $content, 'test-context' );
+
+		$this->assertStringContainsString(
+			'This shouldn&#8217;t use a straight apostrophe',
+			$output,
+			'wptexturize() should convert straight apostrophes to curly apostrophe entities.'
+		);
+		$this->assertStringContainsString(
+			'class="wp-smiley"',
+			$output,
+			'convert_smilies() should process smilies in the filtered content.'
+		);
+		$this->assertStringContainsString(
+			'<div class="apply-block-content-filters-block">Shortcode block output</div>',
+			$output,
+			'do_shortcode() should run before do_blocks() so block markup returned by a shortcode is rendered.'
+		);
+		$this->assertStringNotContainsString(
+			'<p><div class="apply-block-content-filters-block">Shortcode block output</div></p>',
+			$output,
+			'shortcode_unautop() should remove paragraph wrappers around standalone shortcodes.'
+		);
+		$this->assertStringContainsString(
+			'<div class="apply-block-content-filters-block">Direct block output</div>',
+			$output,
+			'do_blocks() should render block markup in the filtered content.'
+		);
+		$this->assertStringNotContainsString(
+			'<!-- wp:tests/apply-block-content-filters',
+			$output,
+			'do_blocks() should remove block comments from rendered output.'
+		);
+		$this->assertStringContainsString(
+			'data-filtered="yes"',
+			$output,
+			'wp_filter_content_tags() should filter image tags in the filtered content.'
+		);
+		$this->assertSame(
+			'test-context',
+			$this->filtered_image_context,
+			'wp_filter_content_tags() should receive the context passed to _wp_apply_block_content_filters().'
+		);
+		$this->assertStringContainsString(
+			'<div class="apply-block-content-filters-embed">Embedded content</div>',
+			$output,
+			'WP_Embed::autoembed() should process URLs on their own line.'
+		);
+		$this->assertStringNotContainsString(
+			'https://example.com/apply-block-content-filters',
+			$output,
+			'WP_Embed::autoembed() should replace the original URL with embed markup.'
+		);
+	}
+
+	/**
+	 * Tests that seen IDs are set during block rendering and cleared afterward.
+	 *
+	 * @ticket 65586
+	 */
+	public function test_marks_and_clears_seen_id() {
+		$seen_ids               = array();
+		$seen_ids_during_render = null;
+
+		unregister_block_type( self::TEST_BLOCK_NAME );
+		register_block_type(
+			self::TEST_BLOCK_NAME,
+			array(
+				'render_callback' => static function () use ( &$seen_ids, &$seen_ids_during_render ) {
+					$seen_ids_during_render = $seen_ids;
+
+					return '<div class="apply-block-content-filters-block">Nested block rendered while recursion guard was active</div>';
+				},
+			)
+		);
+
+		$output = _wp_apply_block_content_filters(
+			'<!-- wp:tests/apply-block-content-filters /-->',
+			'test-context',
+			$seen_ids,
+			'test-id'
+		);
+
+		$this->assertStringContainsString(
+			'Nested block rendered while recursion guard was active',
+			$output,
+			'The test block should render while the ID is marked as seen.'
+		);
+		$this->assertSame(
+			array( 'test-id' => true ),
+			$seen_ids_during_render,
+			'The ID should be marked as seen while do_blocks() renders nested blocks.'
+		);
+		$this->assertSame(
+			array(),
+			$seen_ids,
+			'The seen ID should be cleared after do_blocks() completes.'
+		);
+	}
+
+	/**
+	 * Tests that seen IDs are cleared when block rendering throws an exception.
+	 *
+	 * @ticket 65586
+	 */
+	public function test_clears_seen_id_when_block_rendering_throws() {
+		$seen_ids = array();
+
+		try {
+			_wp_apply_block_content_filters(
+				'<!-- wp:tests/apply-block-content-filters-exception /-->',
+				'test-context',
+				$seen_ids,
+				'test-id'
+			);
+			$this->fail( 'Expected block rendering to throw an exception.' );
+		} catch ( Exception $exception ) {
+			$this->assertSame(
+				'Block rendering failed.',
+				$exception->getMessage(),
+				'The exception from the nested block render callback should be rethrown.'
+			);
+		}
+
+		$this->assertSame(
+			array(),
+			$seen_ids,
+			'The seen ID should be cleared when do_blocks() throws.'
+		);
+	}
+}