diff --git a/.gitignore b/.gitignore
index 5ea5861993a..b0c874e5d16 100644
--- a/.gitignore
+++ b/.gitignore
@@ -39,6 +39,10 @@ jspm_packages
 # macOS finder cache file
 .DS_Store
 
+# Intellij
+.idea
+*.iml
+
 # VS Code settings
 /.vscode
 
diff --git a/packages/@sanity/block-tools/src/HtmlDeserializer/rules/html.ts b/packages/@sanity/block-tools/src/HtmlDeserializer/rules/html.ts
index 5f967504de2..9caf4ce55de 100644
--- a/packages/@sanity/block-tools/src/HtmlDeserializer/rules/html.ts
+++ b/packages/@sanity/block-tools/src/HtmlDeserializer/rules/html.ts
@@ -111,7 +111,7 @@ export default function createHTMLRules(
           return undefined
         }
         // Don't add blocks into list items
-        if (el.parentNode && tagName(el) === 'li') {
+        if (el.parentNode && tagName(el.parentNode) === 'li') {
           return next(el.childNodes)
         }
         // If style is not supported, return a defaultBlockType
diff --git a/packages/@sanity/block-tools/test/tests/HtmlDeserializer/lists/input.html b/packages/@sanity/block-tools/test/tests/HtmlDeserializer/lists/input.html
index 9898b0379c5..7b2fa783bdb 100644
--- a/packages/@sanity/block-tools/test/tests/HtmlDeserializer/lists/input.html
+++ b/packages/@sanity/block-tools/test/tests/HtmlDeserializer/lists/input.html
@@ -22,6 +22,10 @@
         <li>
           <a href="/">Link</a>
         </li>
+        <li>
+          <p>p in li.</p>
+          <h1>block children are still <strong>processed.</strong></h1>
+        </li>
       </ul>
   </body>
 </html>
diff --git a/packages/@sanity/block-tools/test/tests/HtmlDeserializer/lists/output.json b/packages/@sanity/block-tools/test/tests/HtmlDeserializer/lists/output.json
index 81f4fd8325f..2f2f8193666 100644
--- a/packages/@sanity/block-tools/test/tests/HtmlDeserializer/lists/output.json
+++ b/packages/@sanity/block-tools/test/tests/HtmlDeserializer/lists/output.json
@@ -126,5 +126,27 @@
       }
     ],
     "style": "normal"
+  },
+  {
+    "_key": "randomKey8",
+    "_type": "block",
+    "children": [
+      {
+        "_key": "randomKey80",
+        "_type": "span",
+        "marks": [],
+        "text": "p in li. block children are still "
+      },
+      {
+        "_key": "randomKey81",
+        "_type": "span",
+        "marks": ["strong"],
+        "text": "processed."
+      }
+    ],
+    "level": 1,
+    "listItem": "bullet",
+    "markDefs": [],
+    "style": "normal"
   }
-]
\ No newline at end of file
+]