diff --git a/.github/workflows/e2e-pull-request.yml b/.github/workflows/e2e-pull-request.yml
index 1b91a2f977e..1098880547a 100644
--- a/.github/workflows/e2e-pull-request.yml
+++ b/.github/workflows/e2e-pull-request.yml
@@ -67,6 +67,7 @@ jobs:
           PHP_STABLE="8.3"
           TEST_GROUPS_WCPAY="wcpay"
           TEST_GROUPS_SUBSCRIPTIONS="subscriptions"
+          TEST_GROUPS_BLOCKS="blocks"
           TEST_BRANCHES_MERCHANT="merchant"
           TEST_BRANCHES_SHOPPER="shopper"
 
@@ -78,12 +79,14 @@ jobs:
           MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
+          MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_BLOCKS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
 
           # Add latest with PHP 8.3
           MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
+          MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_BLOCKS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
 
           # Convert array to JSON
           MATRIX_INCLUDE=$(printf '%s\n' "${MATRIX_ENTRIES[@]}" | jq -s . -c)
@@ -105,6 +108,8 @@ jobs:
       E2E_PHP_VERSION: ${{ matrix.php }}
       E2E_GROUP:  ${{ matrix.test_groups }}
       E2E_BRANCH: ${{ matrix.test_branches }}
+      SKIP_WC_SUBSCRIPTIONS_TESTS: ${{ matrix.test_groups == 'blocks' && '1' || '' }}
+      SKIP_WC_ACTION_SCHEDULER_TESTS: ${{ matrix.test_groups == 'blocks' && '1' || '' }}
 
     steps:
       - name: Checkout WCPay repository
diff --git a/.github/workflows/e2e-test.yml b/.github/workflows/e2e-test.yml
index 943755cc822..2bca8a94f78 100644
--- a/.github/workflows/e2e-test.yml
+++ b/.github/workflows/e2e-test.yml
@@ -62,6 +62,14 @@ jobs:
 
           # Create optimized matrix with selective PHP version testing
           # Build matrix dynamically based on WC versions
+          #
+          # BLOCK-BASED CHECKOUT TESTS STRATEGY:
+          # - Run block-based checkout tests on current stable and newer WC versions where blocks support is mature
+          # - WC 7.7.0: NO block-based checkout tests (too old, limited support)
+          # - WC L-1: YES block-based checkout tests (recent version with full block support)
+          # - WC latest: YES block-based checkout tests (current stable, full support)
+          # - WC beta: YES block-based checkout tests (newer version, test latest features)
+          # - WC RC: YES blocks tests (newest version, test upcoming release)
 
           # Define common values to reduce repetition
           PHP_LEGACY="7.3"
@@ -69,36 +77,40 @@ jobs:
           PHP_LATEST="8.4"
           TEST_GROUPS_WCPAY="wcpay"
           TEST_GROUPS_SUBSCRIPTIONS="subscriptions"
+          TEST_GROUPS_BLOCKS="blocks"
           TEST_BRANCHES_MERCHANT="merchant"
           TEST_BRANCHES_SHOPPER="shopper"
 
           # Initialize empty matrix array
           MATRIX_ENTRIES=()
 
-          # Add WC 7.7.0 with PHP 7.3 only (legacy)
+          # Add WC 7.7.0 with PHP 7.3 only (legacy - NO blocks tests)
           MATRIX_ENTRIES+=("{\"woocommerce\":\"7.7.0\",\"php\":\"$PHP_LEGACY\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"7.7.0\",\"php\":\"$PHP_LEGACY\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"7.7.0\",\"php\":\"$PHP_LEGACY\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"7.7.0\",\"php\":\"$PHP_LEGACY\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
 
-          # Add L-1 version with PHP 8.3 only
+          # Add L-1 version with PHP 8.3 only (INCLUDE blocks tests - recent version with full support)
           MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
+          MATRIX_ENTRIES+=("{\"woocommerce\":\"$L1_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_BLOCKS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
 
-          # Add latest with PHP 8.3 only
+          # Add latest with PHP 8.3 (INCLUDE blocks tests - current stable, full support)
           MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
           MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
+          MATRIX_ENTRIES+=("{\"woocommerce\":\"latest\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_BLOCKS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
 
-          # Add beta with PHP 8.3 only (only if beta version is available)
+          # Add beta with PHP 8.3 (INCLUDE blocks tests - newer version)
           if [[ -n "$BETA_VERSION" ]]; then
             MATRIX_ENTRIES+=("{\"woocommerce\":\"$BETA_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
             MATRIX_ENTRIES+=("{\"woocommerce\":\"$BETA_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
             MATRIX_ENTRIES+=("{\"woocommerce\":\"$BETA_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
             MATRIX_ENTRIES+=("{\"woocommerce\":\"$BETA_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
+            MATRIX_ENTRIES+=("{\"woocommerce\":\"$BETA_VERSION\",\"php\":\"$PHP_STABLE\",\"test_groups\":\"$TEST_GROUPS_BLOCKS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
           fi
 
           # Add rc with PHP 8.4 only (only if RC version is available)
@@ -107,6 +119,7 @@ jobs:
             MATRIX_ENTRIES+=("{\"woocommerce\":\"$RC_VERSION\",\"php\":\"$PHP_LATEST\",\"test_groups\":\"$TEST_GROUPS_WCPAY\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
             MATRIX_ENTRIES+=("{\"woocommerce\":\"$RC_VERSION\",\"php\":\"$PHP_LATEST\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_MERCHANT\"}")
             MATRIX_ENTRIES+=("{\"woocommerce\":\"$RC_VERSION\",\"php\":\"$PHP_LATEST\",\"test_groups\":\"$TEST_GROUPS_SUBSCRIPTIONS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
+            MATRIX_ENTRIES+=("{\"woocommerce\":\"$RC_VERSION\",\"php\":\"$PHP_LATEST\",\"test_groups\":\"$TEST_GROUPS_BLOCKS\",\"test_branches\":\"$TEST_BRANCHES_SHOPPER\"}")
           else
             echo "No RC version available, skipping RC matrix entries" >&2
           fi
@@ -130,7 +143,9 @@ jobs:
       E2E_PHP_VERSION: ${{ matrix.php }}
       E2E_GROUP:  ${{ matrix.test_groups }}
       E2E_BRANCH: ${{ matrix.test_branches }}
-      SKIP_WC_BLOCKS_TESTS: 1 # skip running blocks tests
+      SKIP_WC_SUBSCRIPTIONS_TESTS: ${{ matrix.test_groups == 'blocks' && '1' || '' }}
+      SKIP_WC_ACTION_SCHEDULER_TESTS: ${{ matrix.test_groups == 'blocks' && '1' || '' }}
+      SKIP_WC_BLOCKS_TESTS: ${{ matrix.test_groups != 'blocks' && '1' || '' }}
 
     steps:
       - name: Checkout WCPay repository
@@ -146,38 +161,18 @@ jobs:
       - name: Run tests, upload screenshots & logs
         uses: ./.github/actions/e2e/run-log-tests
 
-  # Run tests against WC Checkout blocks & WC latest
-  # [TODO] Unskip blocks tests after investigating constant failures.
-  # blocks-tests:
-  #   runs-on: ubuntu-latest
-  #   name: WC - latest | blocks - shopper
 
-  #   env:
-  #     E2E_WP_VERSION: 'latest'
-  #     E2E_WC_VERSION: 'latest'
-  #     E2E_GROUP:  'blocks'
-  #     E2E_BRANCH: 'shopper'
-  #     SKIP_WC_SUBSCRIPTIONS_TESTS: 1 #skip installing & running subscriptions tests
-  #     SKIP_WC_ACTION_SCHEDULER_TESTS: 1 #skip installing & running action scheduler tests
-
-  #   steps:
-  #     - name: Checkout WCPay repository
-  #       uses: actions/checkout@v4
-
-  #     - name: Setup E2E environment
-  #       uses: ./.github/actions/e2e/env-setup
-
-  #     - name: Run tests, upload screenshots & logs
-  #       uses: ./.github/actions/e2e/run-log-tests
 
   # Run tests against WP Nightly & WC latest
+  # This section tests new WordPress features with latest WC
+  # Blocks tests are included here since we're testing against WP nightly + WC latest
   wp-nightly-tests:
     runs-on: ubuntu-latest
 
     strategy:
       fail-fast:     false
       matrix:
-        test_groups:   [ 'wcpay', 'subscriptions' ] # [TODO] Unskip blocks tests after investigating constant failures.
+        test_groups:   [ 'wcpay', 'subscriptions', 'blocks' ]
         test_branches: [ 'merchant', 'shopper' ]
 
     name: WP - nightly | WC - latest | ${{ matrix.test_groups }} - ${{ matrix.test_branches }}
diff --git a/tests/e2e/playwright.config.ts b/tests/e2e/playwright.config.ts
index e6a5030e44a..9d4d2ba87bb 100644
--- a/tests/e2e/playwright.config.ts
+++ b/tests/e2e/playwright.config.ts
@@ -11,7 +11,7 @@ config( { path: path.resolve( __dirname, '../e2e/config', 'local.env' ) } );
 
 const { BASE_URL, NODE_ENV, E2E_GROUP, E2E_BRANCH } = process.env;
 
-const validGroups = [ 'wcpay', 'subscriptions' ];
+const validGroups = [ 'wcpay', 'subscriptions', 'blocks' ];
 const validBranches = [ 'merchant', 'shopper' ];
 
 const buildTestDir = ( group: string, branch: string ) => {
@@ -21,6 +21,14 @@ const buildTestDir = ( group: string, branch: string ) => {
 		return baseDir;
 	}
 
+	// Special handling for blocks tests - they are located in wcpay/shopper directory
+	if ( group === 'blocks' ) {
+		if ( ! branch || ! validBranches.includes( branch ) ) {
+			return `${ baseDir }\/wcpay`;
+		}
+		return `${ baseDir }\/wcpay\/${ branch }`;
+	}
+
 	if ( ! branch || ! validBranches.includes( branch ) ) {
 		return `${ baseDir }\/${ group }`;
 	}
@@ -31,6 +39,11 @@ const buildTestDir = ( group: string, branch: string ) => {
 const getTestMatch = ( group: string, branch: string ) => {
 	const testDir = buildTestDir( group, branch );
 
+	// Special handling for blocks tests - filter for wc-blocks test files
+	if ( group === 'blocks' ) {
+		return new RegExp( `${ testDir }\/.*wc-blocks.*\.spec\.ts` );
+	}
+
 	return new RegExp( `${ testDir }\/.*\.spec\.ts` );
 };