diff --git a/lib/view_component/compiler.rb b/lib/view_component/compiler.rb
index d535cfa7e..ffdf9fd7a 100644
--- a/lib/view_component/compiler.rb
+++ b/lib/view_component/compiler.rb
@@ -43,15 +43,41 @@ def compile(raise_errors: false, force: false)
         component_class.validate_collection_parameter!
       end
 
+      unique_superclass_name = methodize(component_class.superclass.name)
+
       if has_inline_template?
         template = component_class.inline_template
+        unique_method_name = "call__#{methodize(component_class.name)}"
 
         redefinition_lock.synchronize do
           component_class.silence_redefinition_of_method("call")
           # rubocop:disable Style/EvalWithLocation
-          component_class.class_eval <<-RUBY, template.path, template.lineno
+          component_class.class_eval <<-RUBY, template.path, template.lineno - 1
+          private def #{unique_method_name}
+            if block_given?
+              #{compiled_inline_template(template)}
+            else
+              #{unique_method_name} do |msg|
+                case msg
+                when :parent
+                  super_method_name = if @__vc_variant
+                    super_variant_method_name = :"call_\#{@__vc_variant}__#{unique_superclass_name}"
+                    respond_to?(super_variant_method_name, true) ? super_variant_method_name : nil
+                  end
+
+                  super_method_name ||= :call__#{unique_superclass_name}
+                  send(super_method_name)
+
+                  nil
+                else
+                  raise UnexpectedTemplateYield.new(msg)
+                end
+              end
+            end
+          end
+
           def call
-            #{compiled_inline_template(template)}
+            #{unique_method_name}
           end
           RUBY
           # rubocop:enable Style/EvalWithLocation
@@ -75,17 +101,32 @@ def render_template_for(variant = nil)
             component_class.silence_redefinition_of_method(unique_method_name)
 
             # rubocop:disable Style/EvalWithLocation
-            component_class.class_eval <<-RUBY, template[:path], 0
+            component_class.class_eval <<-RUBY, template[:path], -1
             private def #{unique_method_name}
-              #{compiled_template(template[:path])}
+              if block_given?
+                #{compiled_template(template[:path])}
+              else
+                #{unique_method_name} do |msg|
+                  case msg
+                  when :parent
+                    super_method_name = if @__vc_variant
+                      super_variant_method_name = :"call_\#{@__vc_variant}__#{unique_superclass_name}"
+                      respond_to?(super_variant_method_name, true) ? super_variant_method_name : nil
+                    end
+
+                    super_method_name ||= :call__#{unique_superclass_name}
+                    send(super_method_name)
+
+                    nil
+                  else
+                    raise UnexpectedTemplateYield.new(msg)
+                  end
+                end
+              end
             end
 
             def #{method_name}
-              #{unique_method_name} do |msg|
-                if msg == :parent
-                  capture { super }
-                end
-              end
+              #{unique_method_name}
             end
             RUBY
             # rubocop:enable Style/EvalWithLocation
diff --git a/lib/view_component/errors.rb b/lib/view_component/errors.rb
index 36f9ee570..49575c930 100644
--- a/lib/view_component/errors.rb
+++ b/lib/view_component/errors.rb
@@ -220,4 +220,12 @@ def initialize(setter_method_name, setter_name)
       super(MESSAGE.gsub("SETTER_METHOD_NAME", setter_method_name.to_s).gsub("SETTER_NAME", setter_name.to_s))
     end
   end
+
+  class UnexpectedTemplateYield < StandardError
+    MESSAGE = "An unexpected value 'YIELDED_VALUE' was yielded inside a component template. Only :parent is allowed."
+
+    def initialize(yielded_value)
+      super(MESSAGE.gsub("YIELDED_VALUE", yielded_value.inspect))
+    end
+  end
 end
diff --git a/test/sandbox/app/components/bad_yield_value_component.html.erb b/test/sandbox/app/components/bad_yield_value_component.html.erb
new file mode 100644
index 000000000..fdeb28d3a
--- /dev/null
+++ b/test/sandbox/app/components/bad_yield_value_component.html.erb
@@ -0,0 +1 @@
+<%= yield :foo %>
diff --git a/test/sandbox/app/components/bad_yield_value_component.rb b/test/sandbox/app/components/bad_yield_value_component.rb
new file mode 100644
index 000000000..fe2144221
--- /dev/null
+++ b/test/sandbox/app/components/bad_yield_value_component.rb
@@ -0,0 +1,4 @@
+# frozen_string_literal: true
+
+class BadYieldValueComponent < ViewComponent::Base
+end
diff --git a/test/sandbox/app/components/level2_component.html.erb b/test/sandbox/app/components/level2_component.html.erb
index 86af3fe9a..2a7a4c490 100644
--- a/test/sandbox/app/components/level2_component.html.erb
+++ b/test/sandbox/app/components/level2_component.html.erb
@@ -1,3 +1,3 @@
-<div class="level2-component">
+<div class="level2-component base">
   <%= yield :parent %>
 </div>
diff --git a/test/sandbox/app/components/level3_component.html.erb b/test/sandbox/app/components/level3_component.html.erb
index 90c9c8d29..695db1105 100644
--- a/test/sandbox/app/components/level3_component.html.erb
+++ b/test/sandbox/app/components/level3_component.html.erb
@@ -1,3 +1,3 @@
-<div class="level3-component">
+<div class="level3-component base">
   <%= yield :parent %>
 </div>
diff --git a/test/sandbox/test/inline_template_test.rb b/test/sandbox/test/inline_template_test.rb
index 76ce0877b..53366411b 100644
--- a/test/sandbox/test/inline_template_test.rb
+++ b/test/sandbox/test/inline_template_test.rb
@@ -30,6 +30,9 @@ def initialize(name)
   class InlineErbSubclassComponent < InlineErbComponent
     erb_template <<~ERB
       <h1>Hey, <%= name %>!</h1>
+      <div class="parent">
+        <%= yield :parent %>
+      </div>
     ERB
   end
 
@@ -76,6 +79,20 @@ def initialize(name)
     end
   end
 
+  class InlineBadYieldComponent < ViewComponent::Base
+    erb_template <<~ERB
+      <%= yield :foo %>
+    ERB
+  end
+
+  class InlineComponentDerivedFromComponentSupportingVariants < Level2Component
+    erb_template <<~ERB
+      <div class="inline-template">
+        <%= yield :parent %>
+      </div>
+    ERB
+  end
+
   test "renders inline templates" do
     render_inline(InlineErbComponent.new("Fox Mulder"))
 
@@ -112,6 +129,28 @@ def initialize(name)
     assert_selector("h1", text: "Hey, Fox Mulder!")
   end
 
+  test "child components can render their parent" do
+    render_inline(InlineErbSubclassComponent.new("Fox Mulder"))
+
+    assert_selector(".parent h1", text: "Hello, Fox Mulder!")
+  end
+
+  test "inline child component propagates variant to parent" do
+    with_variant :variant do
+      render_inline(InlineComponentDerivedFromComponentSupportingVariants.new)
+    end
+
+    assert_selector ".inline-template .level2-component.variant .level1-component"
+  end
+
+  test "yielding unexpected value raises error" do
+    error = assert_raises(ViewComponent::UnexpectedTemplateYield) do
+      render_inline(InlineBadYieldComponent.new)
+    end
+
+    assert_equal "An unexpected value ':foo' was yielded inside a component template. Only :parent is allowed.", error.message
+  end
+
   test "calling template methods multiple times raises an exception" do
     error = assert_raises ViewComponent::MultipleInlineTemplatesError do
       Class.new(InlineErbComponent) do
diff --git a/test/sandbox/test/rendering_test.rb b/test/sandbox/test/rendering_test.rb
index bb2a29731..96bdb5b02 100644
--- a/test/sandbox/test/rendering_test.rb
+++ b/test/sandbox/test/rendering_test.rb
@@ -960,14 +960,34 @@ def test_inherited_component_renders_when_lazy_loading
     assert_selector("div", text: "hello, my own template")
   end
 
-  def test_inherited_component_calls_super
+  def test_child_components_can_render_parent
     render_inline(Level3Component.new)
 
-    assert_selector(".level3-component", count: 1) do |level3|
-      level3.assert_selector(".level2-component", count: 1) do |level2|
-        level2.assert_selector(".level1-component", count: 1)
-      end
+    assert_selector(".level3-component.base .level2-component.base .level1-component")
+  end
+
+  def test_variant_propagates_to_parent
+    with_variant :variant do
+      render_inline(Level3Component.new)
+    end
+
+    assert_selector ".level3-component.variant .level2-component.variant .level1-component"
+  end
+
+  def test_child_components_fall_back_to_default_variant
+    with_variant :non_existent_variant do
+      render_inline(Level3Component.new)
+    end
+
+    assert_selector ".level3-component.base .level2-component.base .level1-component"
+  end
+
+  def test_yielding_unexpected_value_raises_error
+    error = assert_raises(ViewComponent::UnexpectedTemplateYield) do
+      render_inline(BadYieldValueComponent.new)
     end
+
+    assert_equal "An unexpected value ':foo' was yielded inside a component template. Only :parent is allowed.", error.message
   end
 
   def test_component_renders_without_trailing_whitespace