diff --git a/packages/edit-site/src/components/sync-state-with-url/use-init-edited-entity-from-url.js b/packages/edit-site/src/components/sync-state-with-url/use-init-edited-entity-from-url.js
index 3498bed4c99a5..2dbd143766e67 100644
--- a/packages/edit-site/src/components/sync-state-with-url/use-init-edited-entity-from-url.js
+++ b/packages/edit-site/src/components/sync-state-with-url/use-init-edited-entity-from-url.js
@@ -96,7 +96,32 @@ function useResolveEditedEntityAndContext( { postId, postType } ) {
 					postTypeToResolve === 'page' &&
 					homepageId === postIdToResolve
 				) {
-					return getDefaultTemplateId( { slug: 'front-page' } );
+					// The /lookup endpoint cannot currently handle a lookup
+					// when a page is set as the front page, so specifically in
+					// that case, we want to check if there is a front page
+					// template, and instead of falling back to the home
+					// template, we want to fall back to the page template.
+					const templates = getEntityRecords(
+						'postType',
+						TEMPLATE_POST_TYPE,
+						{
+							per_page: -1,
+						}
+					);
+					if ( templates ) {
+						const id = templates?.find(
+							( { slug } ) => slug === 'front-page'
+						)?.id;
+						if ( id ) {
+							return id;
+						}
+
+						// If no front page template is found, continue with the
+						// logic below (fetching the page template).
+					} else {
+						// Still resolving `templates`.
+						return undefined;
+					}
 				}
 
 				const editedEntity = getEditedEntityRecord(
diff --git a/test/e2e/specs/site-editor/template-hierarchy.spec.js b/test/e2e/specs/site-editor/template-hierarchy.spec.js
new file mode 100644
index 0000000000000..5fcc77da9942c
--- /dev/null
+++ b/test/e2e/specs/site-editor/template-hierarchy.spec.js
@@ -0,0 +1,35 @@
+/**
+ * WordPress dependencies
+ */
+const { test, expect } = require( '@wordpress/e2e-test-utils-playwright' );
+
+test.describe( 'Template hierarchy', () => {
+	test.beforeAll( async ( { requestUtils } ) => {
+		await requestUtils.activateTheme( 'twentytwentyfour' );
+	} );
+
+	test.afterEach( async ( { requestUtils } ) => {
+		await requestUtils.activateTheme( 'twentytwentyone' );
+	} );
+
+	test( 'shows correct template with page on front option', async ( {
+		admin,
+		page,
+		editor,
+	} ) => {
+		await admin.visitAdminPage( 'options-reading.php' );
+		await page.click( 'input[name="show_on_front"][value="page"]' );
+		await page.selectOption( 'select[name="page_on_front"]', '2' );
+		await page.click( 'input[type="submit"]' );
+		await admin.visitSiteEditor();
+
+		// Title block should contain "Sample Page"
+		await expect(
+			editor.canvas.locator( 'role=document[name="Block: Title"]' )
+		).toContainText( 'Sample Page' );
+
+		await admin.visitAdminPage( 'options-reading.php' );
+		await page.click( 'input[name="show_on_front"][value="posts"]' );
+		await page.click( 'input[type="submit"]' );
+	} );
+} );