diff --git a/src/diff/children.js b/src/diff/children.js
index ba2730478c..fe04b5fed6 100644
--- a/src/diff/children.js
+++ b/src/diff/children.js
@@ -397,9 +397,13 @@ function findMatchingIndex(
 	// remainingOldChildren > 1 if the oldVNode is not already used/matched. Else
 	// if the oldVNode was null or matched, then there could needs to be at least
 	// 1 (aka `remainingOldChildren > 0`) children to find and compare against.
+	//
+	// If there is an unkeyed functional VNode, that isn't a built-in like our Fragment,
+	// we should not search as we risk re-using state of an unrelated VNode.
 	let shouldSearch =
+		(typeof type !== 'function' || type === Fragment || key) &&
 		remainingOldChildren >
-		(oldVNode != null && (oldVNode._flags & MATCHED) === 0 ? 1 : 0);
+			(oldVNode != null && (oldVNode._flags & MATCHED) === 0 ? 1 : 0);
 
 	if (
 		oldVNode === null ||
diff --git a/test/browser/render.test.js b/test/browser/render.test.js
index 96bef10bb0..cac7c7c255 100644
--- a/test/browser/render.test.js
+++ b/test/browser/render.test.js
@@ -1786,6 +1786,77 @@ describe('render()', () => {
 		);
 	});
 
+	// #2949
+	it('should not swap unkeyed chlildren', () => {
+		class X extends Component {
+			constructor(props) {
+				super(props);
+				this.name = props.name;
+			}
+			render() {
+				return <p>{this.name}</p>;
+			}
+		}
+
+		function Foo({ condition }) {
+			return (
+				<div>
+					{condition ? '' : <X name="A" />}
+					{condition ? <X name="B" /> : ''}
+				</div>
+			);
+		}
+
+		render(<Foo />, scratch);
+		expect(scratch.textContent).to.equal('A');
+
+		render(<Foo condition />, scratch);
+		expect(scratch.textContent).to.equal('B');
+
+		render(<Foo />, scratch);
+		expect(scratch.textContent).to.equal('A');
+	});
+
+	it('should retain state for inserted children', () => {
+		class X extends Component {
+			constructor(props) {
+				super(props);
+				this.name = props.name;
+			}
+			render() {
+				return <p>{this.name}</p>;
+			}
+		}
+
+		function Foo({ condition }) {
+			// We swap the prop from A to B but we don't expect this to
+			// reflect in text-content as we are testing whether the
+			// state is retained for a skew that matches the original children.
+			//
+			// We insert <span /> which should amount to a skew of -1 which should
+			// make us correctly match the X component.
+			return condition ? (
+				<div>
+					<span />
+					<X name="B" />
+				</div>
+			) : (
+				<div>
+					<X name="A" />
+				</div>
+			);
+		}
+
+		render(<Foo />, scratch);
+		expect(scratch.textContent).to.equal('A');
+
+		render(<Foo condition />, scratch);
+		expect(scratch.textContent).to.equal('A');
+
+		render(<Foo />, scratch);
+		expect(scratch.textContent).to.equal('A');
+	});
+
 	it('handle shuffled (stress test)', () => {
 		function randomize(arr) {
 			for (let i = arr.length - 1; i > 0; i--) {