diff --git a/src/Runtime/InheritanceRuntime.php b/src/Runtime/InheritanceRuntime.php
index 74ea85440..60cf79803 100644
--- a/src/Runtime/InheritanceRuntime.php
+++ b/src/Runtime/InheritanceRuntime.php
@@ -69,8 +69,12 @@ class InheritanceRuntime {
 	 * @param array $blockNames outer level block name
 	 */
 	public function init(Template $tpl, $initChild, $blockNames = []) {
-		// if called while executing parent template it must be a sub-template with new inheritance root
-		if ($initChild && $this->state === 3 && (strpos($tpl->template_resource, 'extendsall') === false)) {
+		// if called while executing parent template it must be a sub-template with new inheritance root.
+		// A new root is started either by a child template ($initChild) or by a sub-template included
+		// outside of any block rendering (empty source stack); the latter must not inherit the leftover
+		// block overrides of a previously completed inheritance tree (see issue #1189).
+		if (($initChild || empty($this->sourceStack)) && $this->state === 3
+			&& (strpos($tpl->template_resource, 'extendsall') === false)) {
 			$tpl->setInheritance(clone $tpl->getSmarty()->getRuntime('Inheritance'));
 			$tpl->getInheritance()->init($tpl, $initChild, $blockNames);
 			return;
diff --git a/tests/UnitTests/TemplateSource/_Issues/1189/IncludeExtendsBlockLeakIssue1189Test.php b/tests/UnitTests/TemplateSource/_Issues/1189/IncludeExtendsBlockLeakIssue1189Test.php
new file mode 100644
index 000000000..ca6178bcf
--- /dev/null
+++ b/tests/UnitTests/TemplateSource/_Issues/1189/IncludeExtendsBlockLeakIssue1189Test.php
@@ -0,0 +1,33 @@
+<?php
+/**
+ * Smarty PHPunit test reproducing issue #1189.
+ *
+ * When a parent template is {include}d, then a child template that {extends}
+ * the parent overrides a {block}, a subsequent {include} of the parent in the
+ * same render must still show the parent's block content.
+ *
+ * The block override from the extending child must not leak into the later
+ * include of the parent template.
+ *
+ * @see https://github.com/smarty-php/smarty/issues/1189
+ *
+ * @preserveGlobalState    disabled
+ */
+class IncludeExtendsBlockLeakIssue1189Test extends PHPUnit_Smarty
+{
+    public function setUp(): void
+    {
+        $this->setUpSmarty(__DIR__);
+    }
+
+    /**
+     * Sequence: include parent -> include child(extends parent) -> include parent.
+     * Expected: PARENT CHILD PARENT
+     * Bug (#1189): PARENT CHILD CHILD
+     */
+    public function testBlockOverrideDoesNotLeakIntoLaterParentInclude()
+    {
+        $result = $this->smarty->fetch('top.tpl');
+        $this->assertSame('PARENT CHILD PARENT', preg_replace('/\s+/', ' ', trim($result)));
+    }
+}
diff --git a/tests/UnitTests/TemplateSource/_Issues/1189/templates/child.tpl b/tests/UnitTests/TemplateSource/_Issues/1189/templates/child.tpl
new file mode 100644
index 000000000..7e4bc0169
--- /dev/null
+++ b/tests/UnitTests/TemplateSource/_Issues/1189/templates/child.tpl
@@ -0,0 +1,2 @@
+{extends file="parent.tpl"}
+{block name=message}CHILD{/block}
\ No newline at end of file
diff --git a/tests/UnitTests/TemplateSource/_Issues/1189/templates/parent.tpl b/tests/UnitTests/TemplateSource/_Issues/1189/templates/parent.tpl
new file mode 100644
index 000000000..3729d1728
--- /dev/null
+++ b/tests/UnitTests/TemplateSource/_Issues/1189/templates/parent.tpl
@@ -0,0 +1 @@
+{block name=message}PARENT{/block}
\ No newline at end of file
diff --git a/tests/UnitTests/TemplateSource/_Issues/1189/templates/top.tpl b/tests/UnitTests/TemplateSource/_Issues/1189/templates/top.tpl
new file mode 100644
index 000000000..9033de37a
--- /dev/null
+++ b/tests/UnitTests/TemplateSource/_Issues/1189/templates/top.tpl
@@ -0,0 +1 @@
+{include file="parent.tpl"} {include file="child.tpl"} {include file="parent.tpl"}
\ No newline at end of file