diff --git a/integration/ivy-i18n/scripts/update-xlf-translation-file.js b/integration/ivy-i18n/scripts/update-xlf-translation-file.js
index 79a0001a3b4bb..10e778a0b697b 100644
--- a/integration/ivy-i18n/scripts/update-xlf-translation-file.js
+++ b/integration/ivy-i18n/scripts/update-xlf-translation-file.js
@@ -14,7 +14,7 @@ fs.writeFileSync(filePath + '.bak', contents, 'utf8');
 
 // Write translated file
 const updated =
-    contents.replace(/source>/g, 'target>')
+    contents.replace(/<(\/)?source([^>]*)>/g, '<$1target$2>')
         .replace(/Hello/g, 'Bonjour')
         .replace(/source-language="([^"]+)"/g, 'source-language="$1" target-language="legacy"');
 fs.writeFileSync(filePath, updated, 'utf8');
diff --git a/packages/localize/src/tools/src/extract/translation_files/xliff1_translation_serializer.ts b/packages/localize/src/tools/src/extract/translation_files/xliff1_translation_serializer.ts
index c44f8f9d21315..d84823454a6ed 100644
--- a/packages/localize/src/tools/src/extract/translation_files/xliff1_translation_serializer.ts
+++ b/packages/localize/src/tools/src/extract/translation_files/xliff1_translation_serializer.ts
@@ -54,7 +54,7 @@ export class Xliff1TranslationSerializer implements TranslationSerializer {
       ids.add(id);
 
       xml.startTag('trans-unit', {id, datatype: 'html'});
-      xml.startTag('source', {}, {preserveWhitespace: true});
+      xml.startTag('source', {'xml:space': 'preserve'}, {preserveWhitespace: true});
       this.serializeMessage(xml, message);
       xml.endTag('source', {preserveWhitespace: false});
       if (message.location) {
diff --git a/packages/localize/src/tools/src/extract/translation_files/xliff2_translation_serializer.ts b/packages/localize/src/tools/src/extract/translation_files/xliff2_translation_serializer.ts
index 4dd7e4f4a2824..2351b2d4f82b1 100644
--- a/packages/localize/src/tools/src/extract/translation_files/xliff2_translation_serializer.ts
+++ b/packages/localize/src/tools/src/extract/translation_files/xliff2_translation_serializer.ts
@@ -70,7 +70,7 @@ export class Xliff2TranslationSerializer implements TranslationSerializer {
         xml.endTag('notes');
       }
       xml.startTag('segment');
-      xml.startTag('source', {}, {preserveWhitespace: true});
+      xml.startTag('source', {'xml:space': 'preserve'}, {preserveWhitespace: true});
       this.serializeMessage(xml, message);
       xml.endTag('source', {preserveWhitespace: false});
       xml.endTag('segment');
diff --git a/packages/localize/src/tools/test/extract/translation_files/xliff1_translation_serializer_spec.ts b/packages/localize/src/tools/test/extract/translation_files/xliff1_translation_serializer_spec.ts
index f421850a3270e..55ee27f6e8cf2 100644
--- a/packages/localize/src/tools/test/extract/translation_files/xliff1_translation_serializer_spec.ts
+++ b/packages/localize/src/tools/test/extract/translation_files/xliff1_translation_serializer_spec.ts
@@ -77,7 +77,7 @@ runInEachFileSystem(() => {
             `      <trans-unit id="${
                 useLegacyIds ? '1234567890ABCDEF1234567890ABCDEF12345678' :
                                '12345'}" datatype="html">`,
-            `        <source>a<x id="PH"/>b<x id="PH_1"/>c</source>`,
+            `        <source xml:space="preserve">a<x id="PH"/>b<x id="PH_1"/>c</source>`,
             `        <context-group purpose="location">`,
             `          <context context-type="sourcefile">file.ts</context>`,
             `          <context context-type="linenumber">6</context>`,
@@ -85,32 +85,32 @@ runInEachFileSystem(() => {
             `        <note priority="1" from="meaning">some meaning</note>`,
             `      </trans-unit>`,
             `      <trans-unit id="someId" datatype="html">`,
-            `        <source>a<x id="PH" equiv-text="placeholder + 1"/>b<x id="PH_1"/>c</source>`,
+            `        <source xml:space="preserve">a<x id="PH" equiv-text="placeholder + 1"/>b<x id="PH_1"/>c</source>`,
             `      </trans-unit>`,
             `      <trans-unit id="67890" datatype="html">`,
-            `        <source>a<x id="START_TAG_SPAN"/><x id="CLOSE_TAG_SPAN"/>c</source>`,
+            `        <source xml:space="preserve">a<x id="START_TAG_SPAN"/><x id="CLOSE_TAG_SPAN"/>c</source>`,
             `        <note priority="1" from="description">some description</note>`,
             `      </trans-unit>`,
             `      <trans-unit id="13579" datatype="html">`,
-            `        <source><x id="START_BOLD_TEXT"/>b<x id="CLOSE_BOLD_TEXT"/></source>`,
+            `        <source xml:space="preserve"><x id="START_BOLD_TEXT"/>b<x id="CLOSE_BOLD_TEXT"/></source>`,
             `      </trans-unit>`,
             `      <trans-unit id="24680" datatype="html">`,
-            `        <source>a</source>`,
+            `        <source xml:space="preserve">a</source>`,
             `        <note priority="1" from="description">and description</note>`,
             `        <note priority="1" from="meaning">meaning</note>`,
             `      </trans-unit>`,
             `      <trans-unit id="80808" datatype="html">`,
-            `        <source>multi`,
+            `        <source xml:space="preserve">multi`,
             `lines</source>`,
             `      </trans-unit>`,
             `      <trans-unit id="90000" datatype="html">`,
-            `        <source>&lt;escape<x id="double-quotes-&quot;"/>me&gt;</source>`,
+            `        <source xml:space="preserve">&lt;escape<x id="double-quotes-&quot;"/>me&gt;</source>`,
             `      </trans-unit>`,
             `      <trans-unit id="100000" datatype="html">`,
-            `        <source>pre-ICU {VAR_SELECT, select, a {a} b {<x id="INTERPOLATION"/>} c {pre <x id="INTERPOLATION_1"/> post}} post-ICU</source>`,
+            `        <source xml:space="preserve">pre-ICU {VAR_SELECT, select, a {a} b {<x id="INTERPOLATION"/>} c {pre <x id="INTERPOLATION_1"/> post}} post-ICU</source>`,
             `      </trans-unit>`,
             `      <trans-unit id="100001" datatype="html">`,
-            `        <source>{VAR_PLURAL, plural, one {<x id="START_BOLD_TEXT"/>something bold<x id="CLOSE_BOLD_TEXT"/>} other {pre <x id="START_TAG_SPAN"/>middle<x id="CLOSE_TAG_SPAN"/> post}}</source>`,
+            `        <source xml:space="preserve">{VAR_PLURAL, plural, one {<x id="START_BOLD_TEXT"/>something bold<x id="CLOSE_BOLD_TEXT"/>} other {pre <x id="START_TAG_SPAN"/>middle<x id="CLOSE_TAG_SPAN"/> post}}</source>`,
             `      </trans-unit>`,
             `    </body>`,
             `  </file>`,
diff --git a/packages/localize/src/tools/test/extract/translation_files/xliff2_translation_serializer_spec.ts b/packages/localize/src/tools/test/extract/translation_files/xliff2_translation_serializer_spec.ts
index d783e0ce9f914..f15fc87dd429f 100644
--- a/packages/localize/src/tools/test/extract/translation_files/xliff2_translation_serializer_spec.ts
+++ b/packages/localize/src/tools/test/extract/translation_files/xliff2_translation_serializer_spec.ts
@@ -84,12 +84,12 @@ runInEachFileSystem(() => {
             `        <note category="meaning">some meaning</note>`,
             `      </notes>`,
             `      <segment>`,
-            `        <source>a<ph id="0" equiv="PH"/>b<ph id="1" equiv="PH_1"/>c</source>`,
+            `        <source xml:space="preserve">a<ph id="0" equiv="PH"/>b<ph id="1" equiv="PH_1"/>c</source>`,
             `      </segment>`,
             `    </unit>`,
             `    <unit id="someId">`,
             `      <segment>`,
-            `        <source>a<ph id="0" equiv="PH" disp="placeholder + 1"/>b<ph id="1" equiv="PH_1"/>c</source>`,
+            `        <source xml:space="preserve">a<ph id="0" equiv="PH" disp="placeholder + 1"/>b<ph id="1" equiv="PH_1"/>c</source>`,
             `      </segment>`,
             `    </unit>`,
             `    <unit id="67890">`,
@@ -98,12 +98,12 @@ runInEachFileSystem(() => {
             `        <note category="description">some description</note>`,
             `      </notes>`,
             `      <segment>`,
-            `        <source>a<pc id="0" equivStart="START_TAG_SPAN" equivEnd="CLOSE_TAG_SPAN"></pc>c</source>`,
+            `        <source xml:space="preserve">a<pc id="0" equivStart="START_TAG_SPAN" equivEnd="CLOSE_TAG_SPAN"></pc>c</source>`,
             `      </segment>`,
             `    </unit>`,
             `    <unit id="13579">`,
             `      <segment>`,
-            `        <source><pc id="0" equivStart="START_BOLD_TEXT" equivEnd="CLOSE_BOLD_TEXT">b</pc></source>`,
+            `        <source xml:space="preserve"><pc id="0" equivStart="START_BOLD_TEXT" equivEnd="CLOSE_BOLD_TEXT">b</pc></source>`,
             `      </segment>`,
             `    </unit>`,
             `    <unit id="24680">`,
@@ -112,28 +112,28 @@ runInEachFileSystem(() => {
             `        <note category="meaning">meaning</note>`,
             `      </notes>`,
             `      <segment>`,
-            `        <source>a</source>`,
+            `        <source xml:space="preserve">a</source>`,
             `      </segment>`,
             `    </unit>`,
             `    <unit id="80808">`,
             `      <segment>`,
-            `        <source>multi`,
+            `        <source xml:space="preserve">multi`,
             `lines</source>`,
             `      </segment>`,
             `    </unit>`,
             `    <unit id="90000">`,
             `      <segment>`,
-            `        <source>&lt;escape<ph id="0" equiv="double-quotes-&quot;"/>me&gt;</source>`,
+            `        <source xml:space="preserve">&lt;escape<ph id="0" equiv="double-quotes-&quot;"/>me&gt;</source>`,
             `      </segment>`,
             `    </unit>`,
             `    <unit id="100000">`,
             `      <segment>`,
-            `        <source>pre-ICU {VAR_SELECT, select, a {a} b {<ph id="0" equiv="INTERPOLATION"/>} c {pre <ph id="1" equiv="INTERPOLATION_1"/> post}} post-ICU</source>`,
+            `        <source xml:space="preserve">pre-ICU {VAR_SELECT, select, a {a} b {<ph id="0" equiv="INTERPOLATION"/>} c {pre <ph id="1" equiv="INTERPOLATION_1"/> post}} post-ICU</source>`,
             `      </segment>`,
             `    </unit>`,
             `    <unit id="100001">`,
             `      <segment>`,
-            `        <source>{VAR_PLURAL, plural, one {<pc id="0" equivStart="START_BOLD_TEXT" equivEnd="CLOSE_BOLD_TEXT">something bold</pc>} other {pre <pc id="1" equivStart="START_TAG_SPAN" equivEnd="CLOSE_TAG_SPAN">middle</pc> post}}</source>`,
+            `        <source xml:space="preserve">{VAR_PLURAL, plural, one {<pc id="0" equivStart="START_BOLD_TEXT" equivEnd="CLOSE_BOLD_TEXT">something bold</pc>} other {pre <pc id="1" equivStart="START_TAG_SPAN" equivEnd="CLOSE_TAG_SPAN">middle</pc> post}}</source>`,
             `      </segment>`,
             `    </unit>`,
             `  </file>`,