diff --git a/packages/interactivity/CHANGELOG.md b/packages/interactivity/CHANGELOG.md
index d35dfa7c81ae4..f4431d108dc36 100644
--- a/packages/interactivity/CHANGELOG.md
+++ b/packages/interactivity/CHANGELOG.md
@@ -2,6 +2,10 @@
 
 ## Unreleased
 
+### Bug Fixes
+
+-   Correctly handle lazily added, deeply nested properties with `deepMerge()` ([#65465](https://github.com/WordPress/gutenberg/pull/65465)).
+
 ## 6.9.0 (2024-10-03)
 
 ## 6.8.0 (2024-09-19)
diff --git a/packages/interactivity/src/proxies/state.ts b/packages/interactivity/src/proxies/state.ts
index c91d8f6ab90a5..f63c84738bcb1 100644
--- a/packages/interactivity/src/proxies/state.ts
+++ b/packages/interactivity/src/proxies/state.ts
@@ -300,50 +300,57 @@ const deepMergeRecursive = (
 	source: any,
 	override: boolean = true
 ) => {
-	if ( isPlainObject( target ) && isPlainObject( source ) ) {
-		let hasNewKeys = false;
-		for ( const key in source ) {
-			const isNew = ! ( key in target );
-			hasNewKeys = hasNewKeys || isNew;
+	if ( ! ( isPlainObject( target ) && isPlainObject( source ) ) ) {
+		return;
+	}
 
-			const desc = Object.getOwnPropertyDescriptor( source, key );
-			if (
-				typeof desc?.get === 'function' ||
-				typeof desc?.set === 'function'
-			) {
-				if ( override || isNew ) {
-					Object.defineProperty( target, key, {
-						...desc,
-						configurable: true,
-						enumerable: true,
-					} );
-
-					const proxy = getProxyFromObject( target );
-					if ( desc?.get && proxy && hasPropSignal( proxy, key ) ) {
-						const propSignal = getPropSignal( proxy, key );
-						propSignal.setGetter( desc.get );
-					}
-				}
-			} else if ( isPlainObject( source[ key ] ) ) {
-				if ( isNew ) {
-					target[ key ] = {};
-				}
+	let hasNewKeys = false;
 
-				deepMergeRecursive( target[ key ], source[ key ], override );
-			} else if ( override || isNew ) {
-				Object.defineProperty( target, key, desc! );
+	for ( const key in source ) {
+		const isNew = ! ( key in target );
+		hasNewKeys = hasNewKeys || isNew;
 
-				const proxy = getProxyFromObject( target );
-				if ( desc?.value && proxy && hasPropSignal( proxy, key ) ) {
-					const propSignal = getPropSignal( proxy, key );
-					propSignal.setValue( desc.value );
+		const desc = Object.getOwnPropertyDescriptor( source, key )!;
+		const proxy = getProxyFromObject( target );
+		const propSignal =
+			!! proxy &&
+			hasPropSignal( proxy, key ) &&
+			getPropSignal( proxy, key );
+
+		if (
+			typeof desc.get === 'function' ||
+			typeof desc.set === 'function'
+		) {
+			if ( override || isNew ) {
+				Object.defineProperty( target, key, {
+					...desc,
+					configurable: true,
+					enumerable: true,
+				} );
+				if ( desc.get && propSignal ) {
+					propSignal.setGetter( desc.get );
+				}
+			}
+		} else if ( isPlainObject( source[ key ] ) ) {
+			if ( isNew || ( override && ! isPlainObject( target[ key ] ) ) ) {
+				target[ key ] = {};
+				if ( propSignal ) {
+					propSignal.setValue( target[ key ] );
 				}
 			}
+			if ( isPlainObject( target[ key ] ) ) {
+				deepMergeRecursive( target[ key ], source[ key ], override );
+			}
+		} else if ( override || isNew ) {
+			Object.defineProperty( target, key, desc );
+			if ( propSignal ) {
+				propSignal.setValue( desc.value );
+			}
 		}
+	}
 
-		if ( hasNewKeys && objToIterable.has( target ) ) {
-			objToIterable.get( target )!.value++;
-		}
+	if ( hasNewKeys && objToIterable.has( target ) ) {
+		objToIterable.get( target )!.value++;
 	}
 };
 
diff --git a/packages/interactivity/src/proxies/test/context-proxy.ts b/packages/interactivity/src/proxies/test/context-proxy.ts
index 306b3e4a8aa94..1e4a969d0f9dc 100644
--- a/packages/interactivity/src/proxies/test/context-proxy.ts
+++ b/packages/interactivity/src/proxies/test/context-proxy.ts
@@ -6,7 +6,7 @@ import { effect } from '@preact/signals';
 /**
  * Internal dependencies
  */
-import { proxifyContext, proxifyState } from '../';
+import { proxifyContext, proxifyState, deepMerge } from '../';
 
 describe( 'Interactivity API', () => {
 	describe( 'context proxy', () => {
@@ -277,6 +277,66 @@ describe( 'Interactivity API', () => {
 					'fromFallback',
 				] );
 			} );
+
+			it( 'should handle deeply nested properties that are initially undefined', () => {
+				const fallback: any = proxifyContext(
+					proxifyState( 'test', {} ),
+					{}
+				);
+				const context: any = proxifyContext(
+					proxifyState( 'test', {} ),
+					fallback
+				);
+
+				let deepValue: any;
+				const spy = jest.fn( () => {
+					deepValue = context.a?.b?.c?.d;
+				} );
+				effect( spy );
+
+				// Initial call, the deep value is undefined
+				expect( spy ).toHaveBeenCalledTimes( 1 );
+				expect( deepValue ).toBeUndefined();
+
+				// Add a deeply nested object to the context
+				context.a = { b: { c: { d: 'test value' } } };
+
+				// The effect should be called again
+				expect( spy ).toHaveBeenCalledTimes( 2 );
+				expect( deepValue ).toBe( 'test value' );
+
+				// Reading the value directly should also work
+				expect( context.a.b.c.d ).toBe( 'test value' );
+			} );
+
+			it( 'should handle deeply nested properties that are initially undefined and merged with deepMerge', () => {
+				const fallbackState = proxifyState( 'test', {} );
+				const fallback: any = proxifyContext( fallbackState, {} );
+				const contextState = proxifyState( 'test', {} );
+				const context: any = proxifyContext( contextState, fallback );
+
+				let deepValue: any;
+				const spy = jest.fn( () => {
+					deepValue = context.a?.b?.c?.d;
+				} );
+				effect( spy );
+
+				// Initial call, the deep value is undefined
+				expect( spy ).toHaveBeenCalledTimes( 1 );
+				expect( deepValue ).toBeUndefined();
+
+				// Use deepMerge to add a deeply nested object to the context
+				deepMerge( contextState, {
+					a: { b: { c: { d: 'test value' } } },
+				} );
+
+				// The effect should be called again
+				expect( spy ).toHaveBeenCalledTimes( 2 );
+				expect( deepValue ).toBe( 'test value' );
+
+				// Reading the value directly should also work
+				expect( context.a.b.c.d ).toBe( 'test value' );
+			} );
 		} );
 
 		describe( 'proxifyContext', () => {
diff --git a/packages/interactivity/src/proxies/test/deep-merge.ts b/packages/interactivity/src/proxies/test/deep-merge.ts
index bf31c4b552133..f475385a43787 100644
--- a/packages/interactivity/src/proxies/test/deep-merge.ts
+++ b/packages/interactivity/src/proxies/test/deep-merge.ts
@@ -389,5 +389,78 @@ describe( 'Interactivity API', () => {
 			expect( spy ).toHaveBeenCalledTimes( 2 );
 			expect( spy ).toHaveLastReturnedWith( [ 'a', 'b', 'c' ] );
 		} );
+
+		it( 'should handle deeply nested properties that are initially undefined', () => {
+			const target: any = proxifyState( 'test', {} );
+
+			let deepValue: any;
+			const spy = jest.fn( () => {
+				deepValue = target.a?.b?.c?.d;
+			} );
+			effect( spy );
+
+			// Initial call, the deep value is undefined
+			expect( spy ).toHaveBeenCalledTimes( 1 );
+			expect( deepValue ).toBeUndefined();
+
+			// Use deepMerge to add a deeply nested object to the target
+			deepMerge( target, { a: { b: { c: { d: 'test value' } } } } );
+
+			// The effect should be called again
+			expect( spy ).toHaveBeenCalledTimes( 2 );
+			expect( deepValue ).toBe( 'test value' );
+
+			// Reading the value directly should also work
+			expect( target.a.b.c.d ).toBe( 'test value' );
+		} );
+
+		it( 'should overwrite values that become objects', () => {
+			const target: any = proxifyState( 'test', { message: 'hello' } );
+
+			let message: any;
+			const spy = jest.fn( () => ( message = target.message ) );
+			effect( spy );
+
+			expect( spy ).toHaveBeenCalledTimes( 1 );
+			expect( message ).toBe( 'hello' );
+
+			deepMerge( target, {
+				message: { content: 'hello', fontStyle: 'italic' },
+			} );
+
+			expect( spy ).toHaveBeenCalledTimes( 2 );
+			expect( message ).toEqual( {
+				content: 'hello',
+				fontStyle: 'italic',
+			} );
+
+			expect( target.message ).toEqual( {
+				content: 'hello',
+				fontStyle: 'italic',
+			} );
+		} );
+
+		it( 'should not overwrite values that become objects if `override` is false', () => {
+			const target: any = proxifyState( 'test', { message: 'hello' } );
+
+			let message: any;
+			const spy = jest.fn( () => ( message = target.message ) );
+			effect( spy );
+
+			expect( spy ).toHaveBeenCalledTimes( 1 );
+			expect( message ).toBe( 'hello' );
+
+			deepMerge(
+				target,
+				{ message: { content: 'hello', fontStyle: 'italic' } },
+				false
+			);
+
+			expect( spy ).toHaveBeenCalledTimes( 1 );
+			expect( message ).toBe( 'hello' );
+			expect( target.message ).toBe( 'hello' );
+			expect( target.message.content ).toBeUndefined();
+			expect( target.message.fontStyle ).toBeUndefined();
+		} );
 	} );
 } );