diff --git a/packages/compiler-vapor/src/generators/template.ts b/packages/compiler-vapor/src/generators/template.ts
index 5a066b09e..9e2b81061 100644
--- a/packages/compiler-vapor/src/generators/template.ts
+++ b/packages/compiler-vapor/src/generators/template.ts
@@ -24,10 +24,10 @@ export function genSelf(
   context: CodegenContext,
 ): CodeFragment[] {
   const [frag, push] = buildCodeFragment()
-  const { id, template, operation } = dynamic
+  const { id, template, operation, dynamicChildOffset } = dynamic
 
   if (id !== undefined && template !== undefined) {
-    push(NEWLINE, `const n${id} = t${template}()`)
+    push(NEWLINE, `const n${id} = t${template}(${dynamicChildOffset || ''})`)
     push(...genDirectivesForElement(id, context))
   }
 
diff --git a/packages/compiler-vapor/src/ir/index.ts b/packages/compiler-vapor/src/ir/index.ts
index 5af12457b..0e499c040 100644
--- a/packages/compiler-vapor/src/ir/index.ts
+++ b/packages/compiler-vapor/src/ir/index.ts
@@ -266,6 +266,7 @@ export interface IRDynamicInfo {
   children: IRDynamicInfo[]
   template?: number
   hasDynamicChild?: boolean
+  dynamicChildOffset?: number
   operation?: OperationNode
   needsKey?: boolean
 }
diff --git a/packages/compiler-vapor/src/transforms/transformChildren.ts b/packages/compiler-vapor/src/transforms/transformChildren.ts
index da47438c2..1baf7a942 100644
--- a/packages/compiler-vapor/src/transforms/transformChildren.ts
+++ b/packages/compiler-vapor/src/transforms/transformChildren.ts
@@ -59,7 +59,7 @@ export const transformChildren: NodeTransform = (node, context) => {
 
 function processDynamicChildren(context: TransformContext<ElementNode>) {
   let prevDynamics: IRDynamicInfo[] = []
-  let hasStaticTemplate = false
+  let staticCount = 0
   const children = context.dynamic.children
 
   for (const [index, child] of children.entries()) {
@@ -69,7 +69,7 @@ function processDynamicChildren(context: TransformContext<ElementNode>) {
 
     if (!(child.flags & DynamicFlag.NON_TEMPLATE)) {
       if (prevDynamics.length) {
-        if (hasStaticTemplate) {
+        if (staticCount) {
           // each dynamic child gets its own placeholder node.
           // this makes it easier to locate the corresponding node during hydration.
           for (let i = 0; i < prevDynamics.length; i++) {
@@ -92,12 +92,13 @@ function processDynamicChildren(context: TransformContext<ElementNode>) {
         }
         prevDynamics = []
       }
-      hasStaticTemplate = true
+      staticCount++
     }
   }
 
   if (prevDynamics.length) {
-    registerInsertion(prevDynamics, context)
+    registerInsertion(prevDynamics, context, undefined)
+    context.dynamic.dynamicChildOffset = staticCount
   }
 }
 
diff --git a/packages/runtime-vapor/__tests__/hydration.spec.ts b/packages/runtime-vapor/__tests__/hydration.spec.ts
index fbc27f1d4..bef7a1082 100644
--- a/packages/runtime-vapor/__tests__/hydration.spec.ts
+++ b/packages/runtime-vapor/__tests__/hydration.spec.ts
@@ -476,6 +476,34 @@ describe('Vapor Mode hydration', () => {
       )
     })
 
+    test('consecutive components with insertion parent', async () => {
+      const data = reactive({ foo: 'foo', bar: 'bar' })
+      const { container } = await testHydration(
+        `<template>
+        <div>
+          <components.Child1/>
+          <components.Child2/>
+        </div>
+      </template>
+      `,
+        {
+          Child1: `<template><span>{{ data.foo }}</span></template>`,
+          Child2: `<template><span>{{ data.bar }}</span></template>`,
+        },
+        data,
+      )
+      expect(container.innerHTML).toBe(
+        `<div><span>foo</span><span>bar</span></div>`,
+      )
+
+      data.foo = 'foo1'
+      data.bar = 'bar1'
+      await nextTick()
+      expect(container.innerHTML).toBe(
+        `<div><span>foo1</span><span>bar1</span></div>`,
+      )
+    })
+
     test('nested consecutive components with anchor insertion', async () => {
       const { container, data } = await testHydration(
         `
@@ -1314,6 +1342,38 @@ describe('Vapor Mode hydration', () => {
       )
     })
 
+    test('consecutive component with insertion parent', async () => {
+      const data = reactive({
+        show: true,
+        foo: 'foo',
+        bar: 'bar',
+      })
+      const { container } = await testHydration(
+        `<template>
+          <div v-if="data.show">
+            <components.Child/>
+            <components.Child2/>
+          </div>
+        </template>`,
+        {
+          Child: `<template><span>{{data.foo}}</span></template>`,
+          Child2: `<template><span>{{data.bar}}</span></template>`,
+        },
+        data,
+      )
+      expect(container.innerHTML).toBe(
+        `<div>` +
+          `<span>foo</span>` +
+          `<span>bar</span>` +
+          `</div>` +
+          `<!--${anchorLabel}-->`,
+      )
+
+      data.show = false
+      await nextTick()
+      expect(container.innerHTML).toBe(`<!--${anchorLabel}-->`)
+    })
+
     test('consecutive v-if on component with anchor insertion', async () => {
       const data = ref(true)
       const { container } = await testHydration(
@@ -2354,6 +2414,31 @@ describe('Vapor Mode hydration', () => {
           `</div>`,
       )
     })
+
+    test('slot fallback', async () => {
+      const data = reactive({
+        foo: 'foo',
+      })
+      const { container } = await testHydration(
+        `<template>
+          <components.Child>
+          </components.Child>
+        </template>`,
+        {
+          Child: `<template><slot><span>{{data.foo}}</span></slot></template>`,
+        },
+        data,
+      )
+      expect(container.innerHTML).toBe(
+        `<!--[--><span>foo</span><!--]--><!--${slotAnchorLabel}-->`,
+      )
+
+      data.foo = 'bar'
+      await nextTick()
+      expect(container.innerHTML).toBe(
+        `<!--[--><span>bar</span><!--]--><!--${slotAnchorLabel}-->`,
+      )
+    })
   })
 
   describe.todo('transition', async () => {
@@ -3912,6 +3997,79 @@ describe('VDOM hydration interop', () => {
     expect(container.innerHTML).toMatchInlineSnapshot(`"false"`)
   })
 
+  test('nested components (VDOM -> Vapor -> VDOM (with slot fallback))', async () => {
+    const data = ref(true)
+    const { container } = await testHydrationInterop(
+      `<script setup>const data = _data; const components = _components;</script>
+      <template>
+        <components.VaporChild/>
+      </template>`,
+      {
+        VaporChild: {
+          code: `<template><components.VdomChild/></template>`,
+          vapor: true,
+        },
+        VdomChild: {
+          code: `<script setup>const data = _data;</script>
+            <template><slot><span>{{data}}</span></slot></template>`,
+          vapor: false,
+        },
+      },
+      data,
+    )
+
+    expect(container.innerHTML).toMatchInlineSnapshot(
+      `"<!--[--><span>true</span><!--]--><!--slot-->"`,
+    )
+
+    data.value = false
+    await nextTick()
+    expect(container.innerHTML).toMatchInlineSnapshot(
+      `"<!--[--><span>false</span><!--]--><!--slot-->"`,
+    )
+  })
+
+  test.todo(
+    'nested components (VDOM -> Vapor(with slot fallback) -> VDOM)',
+    async () => {
+      const data = ref(true)
+      const { container } = await testHydrationInterop(
+        `<script setup>const data = _data; const components = _components;</script>
+      <template>
+        <components.VaporChild/>
+      </template>`,
+        {
+          VaporChild: {
+            code: `<template>
+            <components.VdomChild>
+              <template #default>
+                <span>{{data}} vapor fallback</span>
+              </template>
+            </components.VdomChild>
+          </template>`,
+            vapor: true,
+          },
+          VdomChild: {
+            code: `<script setup>const data = _data;</script>
+            <template><slot><span>vdom fallback</span></slot></template>`,
+            vapor: false,
+          },
+        },
+        data,
+      )
+
+      expect(container.innerHTML).toMatchInlineSnapshot(
+        `"<!--[--><span>true vapor fallback</span><!--]--><!--slot-->"`,
+      )
+
+      data.value = false
+      await nextTick()
+      expect(container.innerHTML).toMatchInlineSnapshot(
+        `"<!--[--><span>false vapor fallback</span><!--]--><!--slot-->"`,
+      )
+    },
+  )
+
   test('vapor slot render vdom component', async () => {
     const data = ref(true)
     const { container } = await testHydrationInterop(
diff --git a/packages/runtime-vapor/src/apiCreateFor.ts b/packages/runtime-vapor/src/apiCreateFor.ts
index b6c142967..3a24ba829 100644
--- a/packages/runtime-vapor/src/apiCreateFor.ts
+++ b/packages/runtime-vapor/src/apiCreateFor.ts
@@ -86,7 +86,7 @@ export const createFor = (
   const _insertionParent = insertionParent
   const _insertionAnchor = insertionAnchor
   if (isHydrating) {
-    locateHydrationNode(true)
+    locateHydrationNode()
   } else {
     resetInsertionState()
   }
diff --git a/packages/runtime-vapor/src/dom/hydration.ts b/packages/runtime-vapor/src/dom/hydration.ts
index e3f666b5b..b1ac013cf 100644
--- a/packages/runtime-vapor/src/dom/hydration.ts
+++ b/packages/runtime-vapor/src/dom/hydration.ts
@@ -6,11 +6,12 @@ import {
   setInsertionState,
 } from '../insertionState'
 import {
+  _nthChild,
   disableHydrationNodeLookup,
   enableHydrationNodeLookup,
   next,
 } from './node'
-import { isVaporAnchors, isVaporFragmentAnchor } from '@vue/shared'
+import { isVaporAnchors } from '@vue/shared'
 
 export let isHydrating = false
 export let currentHydrationNode: Node | null = null
@@ -29,9 +30,9 @@ function performHydration<T>(
   if (!isOptimized) {
     adoptTemplate = adoptTemplateImpl
     locateHydrationNode = locateHydrationNodeImpl
-
     // optimize anchor cache lookup
-    ;(Comment.prototype as any).$fs = undefined
+    ;(Comment.prototype as any).$fe = undefined
+    ;(Node.prototype as any).$dp = undefined
     isOptimized = true
   }
   enableHydrationNodeLookup()
@@ -58,12 +59,20 @@ export function hydrateNode(node: Node, fn: () => void): void {
 }
 
 export let adoptTemplate: (node: Node, template: string) => Node | null
-export let locateHydrationNode: (hasFragmentAnchor?: boolean) => void
+export let locateHydrationNode: () => void
+
+let inVNodeHydration = 0
+export function setInVNodeHydration(): void {
+  inVNodeHydration++
+}
+export function unsetInVNodeHydration(): void {
+  inVNodeHydration--
+}
 
 type Anchor = Comment & {
-  // cached matching fragment start to avoid repeated traversal
+  // cached matching fragment end to avoid repeated traversal
   // on nested fragments
-  $fs?: Anchor
+  $fe?: Anchor
 }
 
 export const isComment = (node: Node, data: string): node is Anchor =>
@@ -99,9 +108,9 @@ function adoptTemplateImpl(node: Node, template: string): Node | null {
   return node
 }
 
-const hydrationPositionMap = new WeakMap<ParentNode, Node>()
+const nextHydrationNodeMap = new WeakMap<ParentNode, Node>()
 
-function locateHydrationNodeImpl(hasFragmentAnchor?: boolean) {
+function locateHydrationNodeImpl() {
   let node: Node | null
   // prepend / firstChild
   if (insertionAnchor === 0) {
@@ -113,51 +122,31 @@ function locateHydrationNodeImpl(hasFragmentAnchor?: boolean) {
     node = insertionAnchor
   } else {
     node = insertionParent
-      ? hydrationPositionMap.get(insertionParent) || insertionParent.lastChild
+      ? nextHydrationNodeMap.get(insertionParent) ||
+        (insertionParent.$dp !== undefined
+          ? _nthChild(insertionParent, insertionParent.$dp)
+          : currentHydrationNode)
       : currentHydrationNode
 
-    // if node is a vapor fragment anchor, find the previous one
-    if (hasFragmentAnchor && node && isVaporFragmentAnchor(node)) {
-      node = node.previousSibling
-      if (__DEV__ && !node) {
-        // this should not happen
-        throw new Error(`vapor fragment anchor previous node was not found.`)
-      }
-    }
-
-    if (node && isComment(node, ']')) {
-      // fragment backward search
-      if (node.$fs) {
-        // already cached matching fragment start
-        node = node.$fs
+    let nextNode: Node | null = null
+    while (node) {
+      const isFragStart = isComment(node, '[')
+      if (isFragStart)
+        nextNode = locateEndAnchor(node as Anchor, '[', ']')!.nextSibling
+      if (
+        isNonHydrationNode(node) ||
+        // don't skip fragment start for vnode hydration
+        (!inVNodeHydration && isFragStart)
+      ) {
+        node = node.nextSibling!
       } else {
-        let cur: Node | null = node
-        let curFragEnd = node
-        let fragDepth = 0
-        node = null
-        while (cur) {
-          cur = cur.previousSibling
-          if (cur) {
-            if (isComment(cur, '[')) {
-              curFragEnd.$fs = cur
-              if (!fragDepth) {
-                node = cur
-                break
-              } else {
-                fragDepth--
-              }
-            } else if (isComment(cur, ']')) {
-              curFragEnd = cur
-              fragDepth++
-            }
-          }
-        }
+        break
       }
     }
 
     if (insertionParent && node) {
-      const prev = node.previousSibling
-      if (prev) hydrationPositionMap.set(insertionParent, prev)
+      const next = nextNode || node.nextSibling
+      if (next) nextHydrationNodeMap.set(insertionParent, next)
     }
   }
 
@@ -171,24 +160,28 @@ function locateHydrationNodeImpl(hasFragmentAnchor?: boolean) {
 }
 
 export function locateEndAnchor(
-  node: Node | null,
+  node: Anchor,
   open = '[',
   close = ']',
 ): Node | null {
-  let match = 0
-  while (node) {
-    node = node.nextSibling
-    if (node && node.nodeType === 8) {
-      if ((node as Comment).data === open) match++
-      if ((node as Comment).data === close) {
-        if (match === 0) {
-          return node
-        } else {
-          match--
-        }
+  // already cached matching end
+  if (node.$fe) {
+    return node.$fe
+  }
+
+  const stack: Anchor[] = [node]
+  while ((node = node.nextSibling as Anchor) && stack.length > 0) {
+    if (node.nodeType === 8) {
+      if (node.data === open) {
+        stack.push(node)
+      } else if (node.data === close) {
+        const matchingOpen = stack.pop()!
+        matchingOpen.$fe = node
+        if (stack.length === 0) return node
       }
     }
   }
+
   return null
 }
 
diff --git a/packages/runtime-vapor/src/dom/template.ts b/packages/runtime-vapor/src/dom/template.ts
index f6cdc3ff4..809314111 100644
--- a/packages/runtime-vapor/src/dom/template.ts
+++ b/packages/runtime-vapor/src/dom/template.ts
@@ -6,13 +6,16 @@ let t: HTMLTemplateElement
 /*! #__NO_SIDE_EFFECTS__ */
 export function template(html: string, root?: boolean) {
   let node: Node
-  return (): Node & { $root?: true } => {
+  return (n?: number): Node & { $root?: true } => {
     if (isHydrating) {
       if (__DEV__ && !currentHydrationNode) {
         // TODO this should not happen
         throw new Error('No current hydration node')
       }
-      return adoptTemplate(currentHydrationNode!, html)!
+      node = adoptTemplate(currentHydrationNode!, html)!
+      // dynamic node position, default is 0
+      ;(node as any).$dp = n || 0
+      return node
     }
     // fast path for text nodes
     if (html[0] !== '<') {
diff --git a/packages/runtime-vapor/src/fragment.ts b/packages/runtime-vapor/src/fragment.ts
index 1e4328ac7..d595eb641 100644
--- a/packages/runtime-vapor/src/fragment.ts
+++ b/packages/runtime-vapor/src/fragment.ts
@@ -60,7 +60,7 @@ export class DynamicFragment extends VaporFragment {
   constructor(anchorLabel?: string) {
     super([])
     if (isHydrating) {
-      locateHydrationNode(true)
+      locateHydrationNode()
       this.hydrate(anchorLabel!)
     } else {
       this.anchor =
diff --git a/packages/runtime-vapor/src/insertionState.ts b/packages/runtime-vapor/src/insertionState.ts
index c8c7ffbcd..5c4c41fe2 100644
--- a/packages/runtime-vapor/src/insertionState.ts
+++ b/packages/runtime-vapor/src/insertionState.ts
@@ -1,4 +1,16 @@
-export let insertionParent: ParentNode | undefined
+export let insertionParent:
+  | (ParentNode & {
+      // dynamic node position - hydration only
+      // indicates the position where dynamic nodes begin within the parent
+      // during hydration, static nodes before this index are skipped
+      //
+      // Example:
+      // const t0 = _template("<div><span></span><span></span></div>", true)
+      // const n4 = t0(2) // n4.$dp = 2
+      // The first 2 nodes are static, dynamic nodes start from index 2
+      $dp?: number
+    })
+  | undefined
 export let insertionAnchor: Node | 0 | undefined
 
 /**
diff --git a/packages/runtime-vapor/src/vdomInterop.ts b/packages/runtime-vapor/src/vdomInterop.ts
index 5d6d9ebb2..d8a8c09a1 100644
--- a/packages/runtime-vapor/src/vdomInterop.ts
+++ b/packages/runtime-vapor/src/vdomInterop.ts
@@ -55,6 +55,9 @@ import {
   currentHydrationNode,
   isHydrating,
   locateHydrationNode,
+  setCurrentHydrationNode,
+  setInVNodeHydration,
+  unsetInVNodeHydration,
   hydrateNode as vaporHydrateNode,
 } from './dom/hydration'
 import { DynamicFragment, VaporFragment, isFragment } from './fragment'
@@ -170,7 +173,11 @@ const vaporInteropImpl: Omit<
     setVaporTransitionHooks(component as any, hooks as VaporTransitionHooks)
   },
 
-  hydrate: vaporHydrateNode,
+  hydrate(node: Node, fn: () => void) {
+    setInVNodeHydration()
+    vaporHydrateNode(node, fn)
+    unsetInVNodeHydration()
+  },
 }
 
 const vaporSlotPropsProxyHandler: ProxyHandler<
@@ -261,17 +268,7 @@ function createVDOMComponent(
       if (transition) setVNodeTransitionHooks(vnode, transition)
 
       if (isHydrating) {
-        ;(
-          vdomHydrateNode ||
-          (vdomHydrateNode = ensureHydrationRenderer().hydrateNode!)
-        )(
-          currentHydrationNode!,
-          vnode,
-          parentInstance as any,
-          null,
-          null,
-          false,
-        )
+        hydrateVNode(vnode, parentInstance as any)
       } else {
         internals.mt(
           vnode,
@@ -344,42 +341,33 @@ function renderVDOMSlot(
           ensureVaporSlotFallback(children, fallback as any)
           isValidSlot = children.length > 0
         }
-
         if (isValidSlot) {
           if (isHydrating) {
-            locateHydrationNode(true)
-            ;(
-              vdomHydrateNode ||
-              (vdomHydrateNode = ensureHydrationRenderer().hydrateNode!)
-            )(
-              currentHydrationNode!,
+            hydrateVNode(vnode!, parentComponent as any)
+          } else {
+            if (fallbackNodes) {
+              remove(fallbackNodes, parentNode)
+              fallbackNodes = undefined
+            }
+            internals.p(
+              oldVNode,
               vnode!,
+              parentNode,
+              anchor,
               parentComponent as any,
               null,
+              undefined,
               null,
               false,
             )
-          } else if (fallbackNodes) {
-            remove(fallbackNodes, parentNode)
-            fallbackNodes = undefined
           }
-          internals.p(
-            oldVNode,
-            vnode!,
-            parentNode,
-            anchor,
-            parentComponent as any,
-            null,
-            undefined,
-            null,
-            false,
-          )
           oldVNode = vnode!
         } else {
           // for forwarded slot without its own fallback, use the fallback
           // provided by the slot outlet.
           // re-fetch `frag.fallback` as it may have been updated at `createSlot`
           fallback = frag.fallback
+
           if (fallback && !fallbackNodes) {
             // mount fallback
             if (oldVNode) {
@@ -451,7 +439,12 @@ const createFallback =
       const frag = new VaporFragment([])
       frag.insert = (parentNode, anchor) => {
         fallbackNodes.forEach(vnode => {
-          internals.p(null, vnode, parentNode, anchor, parentComponent)
+          // hydrate fallback
+          if (isHydrating) {
+            hydrateVNode(vnode, parentComponent as any)
+          } else {
+            internals.p(null, vnode, parentNode, anchor, parentComponent)
+          }
         })
       }
       frag.remove = parentNode => {
@@ -465,3 +458,24 @@ const createFallback =
     // vapor slot
     return fallbackNodes as Block
   }
+
+function hydrateVNode(
+  vnode: VNode,
+  parentComponent: ComponentInternalInstance | null,
+) {
+  // keep fragment start anchor, hydrateNode uses it to
+  // determine if node is a fragmentStart
+  setInVNodeHydration()
+  locateHydrationNode()
+  if (!vdomHydrateNode) vdomHydrateNode = ensureHydrationRenderer().hydrateNode!
+  const nextNode = vdomHydrateNode(
+    currentHydrationNode!,
+    vnode,
+    parentComponent,
+    null,
+    null,
+    false,
+  )
+  unsetInVNodeHydration()
+  setCurrentHydrationNode(nextNode)
+}