diff --git a/packages/wordpress-playground-block/src/components/playground-preview/download-zipped-plugin.ts b/packages/wordpress-playground-block/src/components/playground-preview/download-zipped-package.ts
similarity index 80%
rename from packages/wordpress-playground-block/src/components/playground-preview/download-zipped-plugin.ts
rename to packages/wordpress-playground-block/src/components/playground-preview/download-zipped-package.ts
index 07b24f32..e77ae3db 100644
--- a/packages/wordpress-playground-block/src/components/playground-preview/download-zipped-plugin.ts
+++ b/packages/wordpress-playground-block/src/components/playground-preview/download-zipped-package.ts
@@ -4,12 +4,23 @@ import {
 	// @ts-ignore
 } from 'https://playground.wordpress.net/client/index.js';
 
-export default async function downloadZippedPlugin(client: PlaygroundClient) {
+export default async function downloadZippedPackage(
+	client: PlaygroundClient,
+	codeEditorMode
+) {
 	const docroot = await client.documentRoot;
-	const pluginPath = docroot + '/wp-content/plugins/demo-plugin';
+
+	let pluginPath = docroot + '/wp-content/plugins/demo-plugin';
+	let fileName = 'wordpress-playground-plugin.zip';
+
+	if (codeEditorMode == 'theme') {
+		pluginPath = docroot + '/wp-content/themes/demo-theme';
+		fileName = 'wordpress-playground-theme.zip';
+	}
+
 	const zipFile = new File(
 		[await zipPlaygroundFiles(client, pluginPath)],
-		'wordpress-playground-plugin.zip',
+		fileName,
 		{
 			type: 'application/zip',
 		}
diff --git a/packages/wordpress-playground-block/src/components/playground-preview/index.tsx b/packages/wordpress-playground-block/src/components/playground-preview/index.tsx
index b6776464..105d8419 100644
--- a/packages/wordpress-playground-block/src/components/playground-preview/index.tsx
+++ b/packages/wordpress-playground-block/src/components/playground-preview/index.tsx
@@ -32,7 +32,8 @@ import {
 import useEditorFiles, { isErrorLogFile } from './use-editor-files';
 import { LanguageSupport } from '@codemirror/language';
 import { writePluginFiles } from './write-plugin-files';
-import downloadZippedPlugin from './download-zipped-plugin';
+import { writeThemeFiles } from './write-theme-files';
+import downloadZippedPackage from './download-zipped-package';
 import classnames from 'classnames';
 import FileManagementModals, { FileManagerRef } from './file-management-modals';
 import {
@@ -90,6 +91,7 @@ function PlaygroundPreview({
 	blueprintUrl,
 	configurationSource,
 	codeEditor,
+	codeEditorMode,
 	codeEditorSideBySide,
 	codeEditorReadOnly,
 	codeEditorTranspileJsx,
@@ -277,7 +279,7 @@ function PlaygroundPreview({
 				500
 			);
 
-			await reinstallEditedPlugin();
+			await reinstallEditedCode();
 
 			if (configurationSource === 'block-attributes') {
 				let postId = 0;
@@ -363,7 +365,7 @@ function PlaygroundPreview({
 	const [transpilationFailures, setTranspilationFailures] = useState<
 		TranspilationFailure[]
 	>([]);
-	async function reinstallEditedPlugin() {
+	async function reinstallEditedCode() {
 		if (!playgroundClientRef.current || !codeEditor) {
 			return;
 		}
@@ -372,6 +374,7 @@ function PlaygroundPreview({
 
 		const client = playgroundClientRef.current;
 		let finalFiles = files;
+
 		if (codeEditorTranspileJsx) {
 			const { failures, transpiledFiles } = await transpilePluginFiles(
 				finalFiles
@@ -388,12 +391,17 @@ function PlaygroundPreview({
 			}
 			finalFiles = transpiledFiles;
 		}
-		await writePluginFiles(client, finalFiles);
+
+		if (codeEditorMode === 'theme') {
+			await writeThemeFiles(client, finalFiles);
+		} else {
+			await writePluginFiles(client, finalFiles);
+		}
 	}
 
 	const handleReRunCode = useCallback(() => {
 		async function doHandleRun() {
-			await reinstallEditedPlugin();
+			await reinstallEditedCode();
 
 			// Refresh Playground iframe
 			const lastPath = await playgroundClientRef.current!.getCurrentURL();
@@ -406,7 +414,7 @@ function PlaygroundPreview({
 		} else {
 			doHandleRun();
 		}
-	}, [reinstallEditedPlugin]);
+	}, [reinstallEditedCode]);
 
 	const keymapExtension = useMemo(
 		() =>
@@ -552,8 +560,9 @@ function PlaygroundPreview({
 								className="file-tab file-tab-extra"
 								onClick={() => {
 									if (playgroundClientRef.current) {
-										downloadZippedPlugin(
-											playgroundClientRef.current
+										downloadZippedPackage(
+											playgroundClientRef.current,
+											codeEditorMode
 										);
 									}
 								}}
diff --git a/packages/wordpress-playground-block/src/components/playground-preview/write-theme-files.ts b/packages/wordpress-playground-block/src/components/playground-preview/write-theme-files.ts
new file mode 100644
index 00000000..5d331f00
--- /dev/null
+++ b/packages/wordpress-playground-block/src/components/playground-preview/write-theme-files.ts
@@ -0,0 +1,36 @@
+import type { EditorFile } from '../../index';
+import {
+	PlaygroundClient,
+	activateTheme,
+	// @ts-ignore
+} from 'https://playground.wordpress.net/client/index.js';
+
+export const writeThemeFiles = async (
+	client: PlaygroundClient,
+	files: EditorFile[]
+) => {
+	const docroot = await client.documentRoot;
+	const themeFolderName = 'demo-theme';
+	const themePath = docroot + '/wp-content/themes/' + themeFolderName;
+	if (await client.fileExists(themePath)) {
+		await client.rmdir(themePath, {
+			recursive: true,
+		});
+	}
+	await client.mkdir(themePath);
+
+	for (const file of files) {
+		const filePath = `${themePath}/${file.name}`;
+		const parentDir = filePath.split('/').slice(0, -1).join('/');
+		await client.mkdir(parentDir);
+		await client.writeFile(filePath, file.contents);
+	}
+
+	try {
+		await activateTheme(client, {
+			themeFolderName,
+		});
+	} catch (e) {
+		console.error(e);
+	}
+};
diff --git a/packages/wordpress-playground-block/src/edit.tsx b/packages/wordpress-playground-block/src/edit.tsx
index 8b5d0ba4..e82d633d 100644
--- a/packages/wordpress-playground-block/src/edit.tsx
+++ b/packages/wordpress-playground-block/src/edit.tsx
@@ -6,6 +6,7 @@ import { useState, useRef } from '@wordpress/element';
 import {
 	ToggleControl,
 	SelectControl,
+	RadioControl,
 	TextareaControl,
 	Panel,
 	PanelBody,
@@ -143,6 +144,8 @@ export default withBase64Attrs(function Edit({
 		requireLivePreviewActivation,
 	} = attributes;
 
+	const showJSXTranspileOption = codeEditorMode === 'plugin';
+
 	return (
 		<div {...useBlockProps()}>
 			<PlaygroundPreview
@@ -222,21 +225,43 @@ export default withBase64Attrs(function Edit({
 										});
 									}}
 								/>
-								<ToggleControl
-									label={__('Transpile JSX to JS')}
-									help={__(
-										`Transpiles JSX syntax to JS using esbuild. Only the JSX tags are ` +
-											`transpiled. Imports and other advanced ES module syntax features are ` +
-											`preserved.`
-									)}
-									checked={codeEditorTranspileJsx}
-									onChange={() => {
-										setAttributes({
-											codeEditorTranspileJsx:
-												!codeEditorTranspileJsx,
-										});
+								<RadioControl
+									label="Code editor mode"
+									selected={codeEditorMode}
+									options={[
+										{ label: 'Plugin', value: 'plugin' },
+										{ label: 'Theme', value: 'theme' },
+									]}
+									onChange={(value) => {
+										if (value === 'theme') {
+											setAttributes({
+												codeEditorMode: value,
+												codeEditorTranspileJsx: false,
+											});
+										} else {
+											setAttributes({
+												codeEditorMode: value,
+											});
+										}
 									}}
 								/>
+								{showJSXTranspileOption && (
+									<ToggleControl
+										label={__('Transpile JSX to JS')}
+										help={__(
+											`Transpiles JSX syntax to JS using esbuild. Only the JSX tags are ` +
+												`transpiled. Imports and other advanced ES module syntax features are ` +
+												`preserved.`
+										)}
+										checked={codeEditorTranspileJsx}
+										onChange={() => {
+											setAttributes({
+												codeEditorTranspileJsx:
+													!codeEditorTranspileJsx,
+											});
+										}}
+									/>
+								)}
 								<ToggleControl
 									label={__('Multiple files')}
 									help={