diff --git a/editor/src/editor/layout/graph.tsx b/editor/src/editor/layout/graph.tsx
index 248ddf862..72849b65c 100644
--- a/editor/src/editor/layout/graph.tsx
+++ b/editor/src/editor/layout/graph.tsx
@@ -14,7 +14,7 @@ import { IoCheckmark, IoSparklesSharp } from "react-icons/io5";
 import { SiAdobeindesign, SiBabylondotjs } from "react-icons/si";
 
 import { AdvancedDynamicTexture } from "babylonjs-gui";
-import { BaseTexture, Node, Scene, Sound, Tools, IParticleSystem, ParticleSystem } from "babylonjs";
+import { BaseTexture, Node, Scene, Sound, Tools, TransformNode, IParticleSystem, ParticleSystem } from "babylonjs";
 
 import { Editor } from "../main";
 
@@ -399,7 +399,7 @@ export class EditorGraph extends Component<IEditorGraphProps, IEditorGraphState>
 							instance.rotation.copyFrom(object.rotation);
 							instance.scaling.copyFrom(object.scaling);
 							instance.rotationQuaternion = object.rotationQuaternion?.clone() ?? null;
-							instance.parent = object.parent;
+							this._setParentPreservingWorldTransform(instance, object.parent);
 
 							const collisionMesh = getCollisionMeshFor(instance.sourceMesh);
 							collisionMesh?.updateInstances(instance.sourceMesh);
@@ -427,7 +427,7 @@ export class EditorGraph extends Component<IEditorGraphProps, IEditorGraphState>
 						node.uniqueId = UniqueNumber.Get();
 
 						if (parent && isNode(node)) {
-							node.parent = parent;
+							this._setParentPreservingWorldTransform(node, parent);
 						}
 
 						if (isAbstractMesh(node)) {
@@ -899,4 +899,79 @@ export class EditorGraph extends Component<IEditorGraphProps, IEditorGraphState>
 
 		this.refresh();
 	}
+
+	private _setParentPreservingWorldTransform(node: Node, newParent: Node | null): void {
+		// TransformNodes (including Meshes) support full world transform preservation
+		if (node instanceof TransformNode) {
+			// Store the current world transform
+			const worldPosition = node.getAbsolutePosition();
+			const worldRotation = node.rotationQuaternion || node.rotation.toQuaternion();
+			const worldScaling = node.absoluteScaling.clone();
+
+			// Set the new parent
+			node.parent = newParent;
+
+			// Restore the world transform
+			node.position.copyFrom(worldPosition);
+
+			// Compute the local rotation based on the parent's rotation
+			let localRotation = worldRotation;
+			if (newParent instanceof TransformNode) {
+				const parentRotation = newParent.absoluteRotationQuaternion;
+				localRotation = parentRotation.conjugate().multiply(worldRotation);
+			}
+
+			if (node.rotationQuaternion) {
+				node.rotationQuaternion.copyFrom(localRotation);
+			} else {
+				node.rotation.copyFrom(localRotation.toEulerAngles());
+			}
+
+			node.scaling.copyFrom(worldScaling);
+			return;
+		}
+
+		// Cameras and Lights have position and rotation but not the full transform methods
+		if (isCamera(node) || isLight(node)) {
+			// Store current world position and rotation
+			const worldPosition = (node as any).position.clone();
+			const worldRotation = (node as any).rotationQuaternion || (node as any).rotation.toQuaternion();
+
+			// Set the new parent
+			node.parent = newParent;
+
+			// For cameras and lights, we need to compute local position manually
+			if (newParent instanceof TransformNode) {
+				// Compute local position from world position
+				const localPosition = worldPosition.subtract(newParent.getAbsolutePosition());
+				const parentRotationInverse = newParent.absoluteRotationQuaternion.conjugate();
+				localPosition.applyRotationQuaternionInPlace(parentRotationInverse);
+				localPosition.divideInPlace(newParent.absoluteScaling);
+				(node as any).position.copyFrom(localPosition);
+
+				// Compute local rotation
+				const parentRotation = newParent.absoluteRotationQuaternion;
+				const localRotation = parentRotation.conjugate().multiply(worldRotation);
+				
+				if ((node as any).rotationQuaternion) {
+					(node as any).rotationQuaternion.copyFrom(localRotation);
+				} else {
+					(node as any).rotation.copyFrom(localRotation.toEulerAngles());
+				}
+			} else {
+				// No parent, world position/rotation equals local position/rotation
+				(node as any).position.copyFrom(worldPosition);
+				
+				if ((node as any).rotationQuaternion) {
+					(node as any).rotationQuaternion.copyFrom(worldRotation);
+				} else {
+					(node as any).rotation.copyFrom(worldRotation.toEulerAngles());
+				}
+			}
+			return;
+		}
+
+		// For other node types, just set the parent directly
+		node.parent = newParent;
+	}
 }