diff --git a/php-transformer/composer.json b/php-transformer/composer.json
index 49d97cf82..e38553efd 100644
--- a/php-transformer/composer.json
+++ b/php-transformer/composer.json
@@ -365,6 +365,7 @@
       "php tests/unit/layout-boundary-excludes-shell.php",
       "php tests/unit/navigation-nested-authored-anchor.php",
       "php tests/unit/navigation-anchor-cluster-submenu.php",
+      "php tests/unit/navigation-peer-item-wrappers.php",
       "php tests/unit/navigation-button-dropdown-submenu.php",
       "php tests/unit/paragraph-label-desktop-menu.php",
       "php tests/unit/button-signal-classifier.php",
diff --git a/php-transformer/src/HtmlToBlocks/Patterns/NavigationPattern.php b/php-transformer/src/HtmlToBlocks/Patterns/NavigationPattern.php
index 7738fe6a8..f27e12853 100644
--- a/php-transformer/src/HtmlToBlocks/Patterns/NavigationPattern.php
+++ b/php-transformer/src/HtmlToBlocks/Patterns/NavigationPattern.php
@@ -2426,7 +2426,9 @@ private function replacedAncestorWrapperClassNames(DOMElement $anchor, DOMElemen
         $depth   = 0;
         while ( $node instanceof DOMElement && ! $node->isSameNode($navigation) && $depth < 6 ) {
             ++$depth;
-            if ( 'li' === strtolower($node->tagName) ) {
+            // A wrapper that also holds another item's link is the list (or a
+            // panel of it), not a wrapper core collapsed between item and link.
+            if ( 'li' === strtolower($node->tagName) || $this->holdsAnotherLabelledAnchor($node, $anchor) ) {
                 break;
             }
             foreach ( preg_split('/\s+/', trim($this->attr($node, 'class'))) ?: array() as $candidate ) {
@@ -2440,6 +2442,17 @@ private function replacedAncestorWrapperClassNames(DOMElement $anchor, DOMElemen
         return $classes;
     }
 
+    private function holdsAnotherLabelledAnchor(DOMElement $wrapper, DOMElement $anchor): bool
+    {
+        foreach ( $wrapper->getElementsByTagName('a') as $candidate ) {
+            if ( ! $candidate->isSameNode($anchor) && '' !== trim($candidate->textContent ?? '') ) {
+                return true;
+            }
+        }
+
+        return false;
+    }
+
     /**
      * A single class token safe to carry from a replaced wrapper onto the
      * generated navigation item. HTML class tokens are whitespace-delimited;
@@ -2873,8 +2886,9 @@ private function primaryNavigationAnchor(DOMElement $element): ?DOMElement
             }
 
             // A cluster of child links that follows the item's own anchor is its
-            // submenu, not a second anchor carrier.
-            if ( array() !== $anchors && $this->isAnchorOnlyCluster($child) ) {
+            // submenu, not a second anchor carrier. An anchor found inside a
+            // sibling wrapper is a peer item's, so the next wrapper is a peer too.
+            if ( array() !== $anchors && $element->isSameNode($anchors[0]->parentNode) && $this->isAnchorOnlyCluster($child) ) {
                 continue;
             }
 
@@ -2943,7 +2957,7 @@ private function collectSubmenuContainers(DOMElement $element, DOMElement $prima
             $tagName = strtolower($child->tagName);
             if ( in_array($tagName, array( 'nav', 'ul', 'ol' ), true)
                 || $this->hasSubmenuSignal($child)
-                || $this->isAnchorOnlyCluster($child)
+                || ( $element->isSameNode($primaryAnchor->parentNode) && $this->isAnchorOnlyCluster($child) )
                 || ( $this->isNavigationWrapperElement($child)
                     && ( 0 < $child->getElementsByTagName('ul')->length || 0 < $child->getElementsByTagName('ol')->length ) )
             ) {
@@ -3084,7 +3098,9 @@ private function buttonDropdownItem(DOMElement $element): ?array
      * list semantics or a `dropdown`-style name still express it this way:
      * `<div><a>Parent</a><div><a>Child</a><a>Child</a></div></div>`. Structure
      * alone carries the parent/child relationship, so no class vocabulary is
-     * needed to read the wrapper as the item's submenu.
+     * needed to read the wrapper as the item's submenu. Only an anchor that is
+     * the wrapper's own direct child owns it: in `<div><div><a>One</a></div>
+     * <div><a>Two</a></div></div>` the wrappers are peer items of one list.
      */
     private function isAnchorOnlyCluster(DOMElement $element): bool
     {
diff --git a/php-transformer/tests/unit/navigation-peer-item-wrappers.php b/php-transformer/tests/unit/navigation-peer-item-wrappers.php
new file mode 100644
index 000000000..63f53db32
--- /dev/null
+++ b/php-transformer/tests/unit/navigation-peer-item-wrappers.php
@@ -0,0 +1,73 @@
+<?php
+declare(strict_types=1);
+
+/**
+ * A list-less menu of wrapped items stays one flat list of peers.
+ *
+ * Squarespace renders its phone menu as panels ("folders") of item wrappers:
+ * `nav > div.folder > div.content > div.item > a`. Two readings broke it:
+ * - each `div.item` after the first was read as the first item's submenu
+ *   cluster, so the whole panel became one "Home" submenu with every other
+ *   link hidden inside it;
+ * - the classes of the panel and its content wrapper, which hold every item,
+ *   were carried onto each item as if core had collapsed them between item
+ *   and link. The panel's off-canvas rule (`translateX(100%)`) then moved
+ *   every item off screen.
+ */
+
+require dirname(__DIR__, 2) . '/vendor/autoload.php';
+
+use Automattic\BlocksEngine\PhpTransformer\HtmlToBlocks\HtmlTransformer;
+
+$failures = 0;
+$passes = 0;
+$assert = static function (bool $ok, string $message, string $detail = '') use (&$failures, &$passes): void {
+    if ( $ok ) {
+        ++$passes;
+        return;
+    }
+    ++$failures;
+    fwrite(STDERR, 'FAIL: ' . $message . ( '' !== $detail ? ' - ' . $detail : '' ) . PHP_EOL);
+};
+
+$item = static fn (string $label, string $href): string => '<div class="nav-item"><a href="' . $href . '"><div class="nav-item-content">' . $label . '</div></a></div>';
+$serialized = (string) (( new HtmlTransformer() )->transform(
+    '<style>.nav-folder{position:absolute;top:0;left:0;width:100%;transform:translateX(100%)}.nav-folder--active{transform:translateX(0)}'
+    . '.nav-folder-content{display:flex;flex-direction:column}</style>'
+    . '<header><div class="menu"><nav class="menu-list"><div class="nav-folder nav-folder--active"><div class="nav-folder-content"><div class="nav-wrapper">'
+    . $item('Home', '/') . $item('Services', '/services') . $item('Careers', '/careers') . $item('Contact', '/contact')
+    . '</div></div></div></nav></div></header>',
+    array()
+)->toArray()['serialized_blocks'] ?? '');
+
+preg_match_all('/<!-- wp:navigation-(link|submenu) (\{.*?\}) (?:\/)?-->/', $serialized, $matches, PREG_SET_ORDER);
+$labels = array();
+$classes = array();
+foreach ( $matches as $match ) {
+    $attrs = json_decode($match[2], true);
+    $labels[] = $match[1] . ':' . ($attrs['label'] ?? '');
+    $classes[] = (string) ($attrs['className'] ?? '');
+}
+
+$assert(
+    array( 'link:Home', 'link:Services', 'link:Careers', 'link:Contact' ) === $labels,
+    'every wrapped item is a peer link, with no submenu',
+    json_encode($labels)
+);
+$assert(
+    array() !== $classes && array() === array_filter($classes, static fn (string $class): bool => 1 === preg_match('/(?:^|\s)(?:nav-folder|nav-folder--active|nav-folder-content|nav-wrapper)(?:\s|$)/', $class)),
+    'classes of the wrappers that hold every item stay off the items',
+    json_encode($classes)
+);
+$assert(
+    array() !== $classes && array() === array_filter($classes, static fn (string $class): bool => 1 !== preg_match('/(?:^|\s)nav-item(?:\s|$)/', $class)),
+    'the per-item wrapper core collapses still carries its class',
+    json_encode($classes)
+);
+
+if ( 0 < $failures ) {
+    fwrite(STDERR, "Navigation peer item wrappers: {$failures} failed, {$passes} passed\n");
+    exit(1);
+}
+
+echo "Navigation peer item wrappers passed: {$passes} assertions\n";