diff --git a/packages/block-library/src/image/edit.js b/packages/block-library/src/image/edit.js
index b212c21aeb43f..f86ef56a24dc8 100644
--- a/packages/block-library/src/image/edit.js
+++ b/packages/block-library/src/image/edit.js
@@ -18,7 +18,7 @@ import {
 	useBlockProps,
 	store as blockEditorStore,
 } from '@wordpress/block-editor';
-import { useEffect, useRef } from '@wordpress/element';
+import { useEffect, useRef, useState } from '@wordpress/element';
 import { __ } from '@wordpress/i18n';
 import { image as icon } from '@wordpress/icons';
 
@@ -91,6 +91,7 @@ export function ImageEdit( {
 		height,
 		sizeSlug,
 	} = attributes;
+	const [ temporaryURL, setTemporaryURL ] = useState();
 
 	const altRef = useRef();
 	useEffect( () => {
@@ -125,16 +126,15 @@ export function ImageEdit( {
 			return;
 		}
 
-		let mediaAttributes = pickRelevantMediaFiles( media, imageDefaultSize );
-
-		// If the current image is temporary but an alt text was meanwhile
-		// written by the user, make sure the text is not overwritten.
-		if ( isTemporaryImage( id, url ) ) {
-			if ( altRef.current ) {
-				mediaAttributes = omit( mediaAttributes, [ 'alt' ] );
-			}
+		if ( isBlobURL( media.url ) ) {
+			setTemporaryURL( media.url );
+			return;
 		}
 
+		setTemporaryURL();
+
+		let mediaAttributes = pickRelevantMediaFiles( media, imageDefaultSize );
+
 		// If a caption text was meanwhile written by the user,
 		// make sure the text is not overwritten by empty captions.
 		if ( captionRef.current && ! get( mediaAttributes, [ 'caption' ] ) ) {
@@ -255,14 +255,14 @@ export function ImageEdit( {
 	// If an image is temporary, revoke the Blob url when it is uploaded (and is
 	// no longer temporary).
 	useEffect( () => {
-		if ( ! isTemp ) {
+		if ( ! temporaryURL ) {
 			return;
 		}
 
 		return () => {
-			revokeBlobURL( url );
+			revokeBlobURL( temporaryURL );
 		};
-	}, [ isTemp ] );
+	}, [ temporaryURL ] );
 
 	const isExternal = isExternalImage( id, url );
 	const src = isExternal ? url : undefined;
@@ -276,7 +276,7 @@ export function ImageEdit( {
 	);
 
 	const classes = classnames( className, {
-		'is-transient': isBlobURL( url ),
+		'is-transient': temporaryURL,
 		'is-resized': !! width || !! height,
 		[ `size-${ sizeSlug }` ]: sizeSlug,
 	} );
@@ -288,8 +288,9 @@ export function ImageEdit( {
 
 	return (
 		<figure { ...blockProps }>
-			{ url && (
+			{ ( temporaryURL || url ) && (
 				<Image
+					temporaryURL={ temporaryURL }
 					attributes={ attributes }
 					setAttributes={ setAttributes }
 					isSelected={ isSelected }
diff --git a/packages/block-library/src/image/image.js b/packages/block-library/src/image/image.js
index f84e1c748339d..995993f33a060 100644
--- a/packages/block-library/src/image/image.js
+++ b/packages/block-library/src/image/image.js
@@ -62,6 +62,7 @@ function getFilename( url ) {
 }
 
 export default function Image( {
+	temporaryURL,
 	attributes: {
 		url = '',
 		alt,
@@ -414,7 +415,7 @@ export default function Image( {
 		/* eslint-disable jsx-a11y/no-noninteractive-element-interactions, jsx-a11y/click-events-have-key-events */
 		<>
 			<img
-				src={ url }
+				src={ temporaryURL || url }
 				alt={ defaultedAlt }
 				onClick={ onImageClick }
 				onError={ () => onImageError() }
@@ -427,7 +428,7 @@ export default function Image( {
 					);
 				} }
 			/>
-			{ isBlobURL( url ) && <Spinner /> }
+			{ temporaryURL && <Spinner /> }
 		</>
 		/* eslint-enable jsx-a11y/no-noninteractive-element-interactions, jsx-a11y/click-events-have-key-events */
 	);
diff --git a/packages/e2e-tests/specs/editor/blocks/__snapshots__/image.test.js.snap b/packages/e2e-tests/specs/editor/blocks/__snapshots__/image.test.js.snap
index 18b856a57a430..feefe814ca13d 100644
--- a/packages/e2e-tests/specs/editor/blocks/__snapshots__/image.test.js.snap
+++ b/packages/e2e-tests/specs/editor/blocks/__snapshots__/image.test.js.snap
@@ -17,3 +17,9 @@ exports[`Image should drag and drop files into media placeholder 1`] = `
 <figure class=\\"wp-block-image\\"><img alt=\\"\\"/></figure>
 <!-- /wp:image -->"
 `;
+
+exports[`Image should undo without broken temporary state 1`] = `
+"<!-- wp:image -->
+<figure class=\\"wp-block-image\\"><img alt=\\"\\"/></figure>
+<!-- /wp:image -->"
+`;
diff --git a/packages/e2e-tests/specs/editor/blocks/image.test.js b/packages/e2e-tests/specs/editor/blocks/image.test.js
index c0838d48d4737..1acf1248f7182 100644
--- a/packages/e2e-tests/specs/editor/blocks/image.test.js
+++ b/packages/e2e-tests/specs/editor/blocks/image.test.js
@@ -351,4 +351,14 @@ describe( 'Image', () => {
 		// Check if dimensions are reset.
 		expect( await getEditedPostContent() ).toMatch( regexAfter );
 	} );
+
+	it( 'should undo without broken temporary state', async () => {
+		await insertBlock( 'Image' );
+		const fileName = await upload( '.wp-block-image input[type="file"]' );
+		await waitForImage( fileName );
+		await pressKeyWithModifier( 'primary', 'z' );
+		// Expect an empty image block (placeholder) rather than one with a
+		// broken temporary URL.
+		expect( await getEditedPostContent() ).toMatchSnapshot();
+	} );
 } );