diff --git a/src/browser/Frame.zig b/src/browser/Frame.zig
index 6adba3bbf..de20542e2 100644
--- a/src/browser/Frame.zig
+++ b/src/browser/Frame.zig
@@ -2558,14 +2558,13 @@ pub fn _insertNodeRelative(self: *Frame, comptime from_parser: bool, parent: *No
         }
     }
 
-    // The parser path does its own (limited) notification and connected-callback
-    // work, then returns.
+    // The parser path does its own (limited) connected-callback work, then
+    // returns.
     if (comptime from_parser) {
-        // Of the parser insertions, only fragment parses (innerHTML) mutate a
-        // live tree; the initial document parse suppresses notifications.
-        if (self._parse_mode == .fragment) {
-            self.notifyChildInserted(parent, child);
-        }
+        // No mutation records from parser insertions: the initial document
+        // parse never notifies, and fragment parses (innerHTML et al.) queue
+        // one combined "replace all" record at the call site (Node.setHTML)
+        // instead of one per inserted child.
 
         if (child.is(Element)) |el| {
             // Invoke connectedCallback for custom elements during parsing.
@@ -2821,21 +2820,11 @@ fn parseHtmlAsChildrenInner(self: *Frame, node: *Node, html: []const u8, opts: F
     }
     node._children = first._children;
 
-    if (observers.hasMutationObservers(self)) {
-        var it = node.childrenIterator();
-        while (it.next()) |child| {
-            child._parent = node;
-            // Notify mutation observers for each unwrapped child
-            const previous_sibling = child.previousSibling();
-            const next_sibling = child.nextSibling();
-            const added = [_]*Node{child};
-            observers.notifyChildListChange(self, node, &added, &.{}, previous_sibling, next_sibling);
-        }
-    } else {
-        var it = node.childrenIterator();
-        while (it.next()) |child| {
-            child._parent = node;
-        }
+    // No mutation records for the unwrapped children either; see the comment
+    // about fragment parses in _insertNodeRelative.
+    var it = node.childrenIterator();
+    while (it.next()) |child| {
+        child._parent = node;
     }
 }
 
diff --git a/src/browser/tests/mutation_observer/childlist.html b/src/browser/tests/mutation_observer/childlist.html
index 77decbe08..ea93718f3 100644
--- a/src/browser/tests/mutation_observer/childlist.html
+++ b/src/browser/tests/mutation_observer/childlist.html
@@ -269,41 +269,18 @@
   innerHtmlParent.innerHTML = '<span>New 1</span><span>New 2</span><span>New 3</span>';
 
   await state.done((mutations) => {
-    // innerHTML triggers mutations for both removals and additions
-    // With tri-state: from_parser=true + parse_mode=fragment -> mutations fire
-    // HTML wrapper element is filtered out, so: 3 removals + 3 additions = 6
-    testing.expectEqual(6, mutations.length);
+    // Per the "replace all" algorithm, innerHTML queues a single mutation
+    // record combining all removed and added nodes.
+    testing.expectEqual(1, mutations.length);
 
-    // First 3: removals
     testing.expectEqual('childList', mutations[0].type);
-    testing.expectEqual(1, mutations[0].removedNodes.length);
+    testing.expectEqual(3, mutations[0].removedNodes.length);
     testing.expectEqual(oldChildren[0], mutations[0].removedNodes[0]);
-    testing.expectEqual(0, mutations[0].addedNodes.length);
-
-    testing.expectEqual('childList', mutations[1].type);
-    testing.expectEqual(1, mutations[1].removedNodes.length);
-    testing.expectEqual(oldChildren[1], mutations[1].removedNodes[0]);
-    testing.expectEqual(0, mutations[1].addedNodes.length);
-
-    testing.expectEqual('childList', mutations[2].type);
-    testing.expectEqual(1, mutations[2].removedNodes.length);
-    testing.expectEqual(oldChildren[2], mutations[2].removedNodes[0]);
-    testing.expectEqual(0, mutations[2].addedNodes.length);
-
-    // Last 3: additions (unwrapped span elements)
-    testing.expectEqual('childList', mutations[3].type);
-    testing.expectEqual(0, mutations[3].removedNodes.length);
-    testing.expectEqual(1, mutations[3].addedNodes.length);
-    testing.expectEqual('SPAN', mutations[3].addedNodes[0].nodeName);
-
-    testing.expectEqual('childList', mutations[4].type);
-    testing.expectEqual(0, mutations[4].removedNodes.length);
-    testing.expectEqual(1, mutations[4].addedNodes.length);
-    testing.expectEqual('SPAN', mutations[4].addedNodes[0].nodeName);
-
-    testing.expectEqual('childList', mutations[5].type);
-    testing.expectEqual(0, mutations[5].removedNodes.length);
-    testing.expectEqual(1, mutations[5].addedNodes.length);
-    testing.expectEqual('SPAN', mutations[5].addedNodes[0].nodeName);
+    testing.expectEqual(oldChildren[1], mutations[0].removedNodes[1]);
+    testing.expectEqual(oldChildren[2], mutations[0].removedNodes[2]);
+    testing.expectEqual(3, mutations[0].addedNodes.length);
+    testing.expectEqual('SPAN', mutations[0].addedNodes[0].nodeName);
+    testing.expectEqual('SPAN', mutations[0].addedNodes[1].nodeName);
+    testing.expectEqual('SPAN', mutations[0].addedNodes[2].nodeName);
   });
 </script>
diff --git a/src/browser/webapi/Element.zig b/src/browser/webapi/Element.zig
index aeee38879..efcc7aaff 100644
--- a/src/browser/webapi/Element.zig
+++ b/src/browser/webapi/Element.zig
@@ -472,13 +472,34 @@ pub fn setOuterHTML(self: *Element, html: []const u8, frame: *Frame) !void {
     }
 
     frame.domChanged();
+
+    // Observers of the parent must see a single mutation record replacing
+    // this node with the parsed nodes.
+    const notify = Frame.observers.hasMutationObservers(frame);
+    const previous_sibling = node.previousSibling();
+    const next_sibling = node.nextSibling();
+    var added: std.ArrayList(*Node) = .empty;
+
     if (html.len > 0) {
         const fragment = (try Node.DocumentFragment.init(frame)).asNode();
         try frame.parseHtmlAsChildren(fragment, html);
-        try frame.insertAllChildrenBefore(fragment, parent, node);
+        const dest_connected = parent.isConnected();
+        var it = fragment.childrenIterator();
+        while (it.next()) |child| {
+            if (notify) {
+                try added.append(frame.call_arena, child);
+            }
+            frame.removeNode(fragment, child, .{ .will_be_reconnected = dest_connected, .notify_observers = false });
+            try frame.insertNodeRelative(parent, child, .{ .before = node }, .{ .notify_observers = false });
+        }
     }
 
-    frame.removeNode(parent, node, .{ .will_be_reconnected = false });
+    frame.removeNode(parent, node, .{ .will_be_reconnected = false, .notify_observers = false });
+
+    if (notify) {
+        const removed = [_]*Node{node};
+        Frame.observers.notifyChildListChange(frame, parent, added.items, &removed, previous_sibling, next_sibling);
+    }
 }
 
 pub fn getInnerHTML(self: *Element, writer: *std.Io.Writer, frame: *Frame) !void {
diff --git a/src/browser/webapi/Node.zig b/src/browser/webapi/Node.zig
index bbe5d1f9e..c5d2d3a26 100644
--- a/src/browser/webapi/Node.zig
+++ b/src/browser/webapi/Node.zig
@@ -1316,19 +1316,38 @@ pub fn replaceChildren(self: *Node, nodes: []const NodeOrText, frame: *Frame) !v
 /// Shared implementation in Element and DocumentFragment
 pub fn setHTML(self: *Node, html: []const u8, allow_declarative_shadow: bool, frame: *Frame) !void {
     frame.domChanged();
+
+    // Observers of this subtree get one combined "replace all" mutation
+    // record; per-node notification is suppressed for the removals here and
+    // for the parser insertions (fragment parsing never notifies).
+    const notify = Frame.observers.hasMutationObservers(frame);
+    var removed: std.ArrayList(*Node) = .empty;
+
     var it = self.childrenIterator();
     while (it.next()) |child| {
-        frame.removeNode(self, child, .{ .will_be_reconnected = false });
+        if (notify) {
+            try removed.append(frame.call_arena, child);
+        }
+        frame.removeNode(self, child, .{ .will_be_reconnected = false, .notify_observers = false });
     }
 
-    if (html.len == 0) {
-        return;
+    if (html.len > 0) {
+        if (allow_declarative_shadow) {
+            try frame.parseHtmlUnsafeAsChildren(self, html);
+        } else {
+            try frame.parseHtmlAsChildren(self, html);
+        }
     }
 
-    if (allow_declarative_shadow) {
-        try frame.parseHtmlUnsafeAsChildren(self, html);
-    } else {
-        try frame.parseHtmlAsChildren(self, html);
+    if (notify) {
+        var added: std.ArrayList(*Node) = .empty;
+        var child_it = self.childrenIterator();
+        while (child_it.next()) |child| {
+            try added.append(frame.call_arena, child);
+        }
+        if (removed.items.len > 0 or added.items.len > 0) {
+            Frame.observers.notifyChildListChange(frame, self, added.items, removed.items, null, null);
+        }
     }
 }