diff --git a/packages/@headlessui-react/CHANGELOG.md b/packages/@headlessui-react/CHANGELOG.md
index 9d93b54740..394780c51b 100644
--- a/packages/@headlessui-react/CHANGELOG.md
+++ b/packages/@headlessui-react/CHANGELOG.md
@@ -7,7 +7,9 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 
 ## [Unreleased]
 
-- Nothing yet!
+### Fixed
+
+- Fix SSR tab rendering on React 17 ([#2102](https://github.com/tailwindlabs/headlessui/pull/2102))
 
 ## [1.7.7] - 2022-12-16
 
diff --git a/packages/@headlessui-react/src/components/portal/portal.tsx b/packages/@headlessui-react/src/components/portal/portal.tsx
index 614a80a1b9..8ea5bf56e5 100644
--- a/packages/@headlessui-react/src/components/portal/portal.tsx
+++ b/packages/@headlessui-react/src/components/portal/portal.tsx
@@ -21,7 +21,7 @@ import { useServerHandoffComplete } from '../../hooks/use-server-handoff-complet
 import { optionalRef, useSyncRefs } from '../../hooks/use-sync-refs'
 import { useOwnerDocument } from '../../hooks/use-owner'
 import { microTask } from '../../utils/micro-task'
-import { isServer } from '../../utils/ssr'
+import { env } from '../../utils/env'
 
 function usePortalTarget(ref: MutableRefObject<HTMLElement | null>): HTMLElement | null {
   let forceInRoot = usePortalRoot()
@@ -34,7 +34,7 @@ function usePortalTarget(ref: MutableRefObject<HTMLElement | null>): HTMLElement
     if (!forceInRoot && groupTarget !== null) return null
 
     // No group context is used, let's create a default portal root
-    if (isServer) return null
+    if (env.isServer) return null
     let existingRoot = ownerDocument?.getElementById('headlessui-portal-root')
     if (existingRoot) return existingRoot
 
@@ -82,7 +82,7 @@ let PortalRoot = forwardRefWithAs(function Portal<
   let ownerDocument = useOwnerDocument(internalPortalRootRef)
   let target = usePortalTarget(internalPortalRootRef)
   let [element] = useState<HTMLDivElement | null>(() =>
-    isServer ? null : ownerDocument?.createElement('div') ?? null
+    env.isServer ? null : ownerDocument?.createElement('div') ?? null
   )
 
   let ready = useServerHandoffComplete()
diff --git a/packages/@headlessui-react/src/components/tabs/tabs.ssr.test.tsx b/packages/@headlessui-react/src/components/tabs/tabs.ssr.test.tsx
new file mode 100644
index 0000000000..31736b6a0b
--- /dev/null
+++ b/packages/@headlessui-react/src/components/tabs/tabs.ssr.test.tsx
@@ -0,0 +1,134 @@
+import { RenderResult } from '@testing-library/react'
+import { render, RenderOptions } from '@testing-library/react'
+import React, { ReactElement } from 'react'
+import { renderToString } from 'react-dom/server'
+import { Tab } from './tabs'
+import { env } from '../../utils/env'
+
+beforeAll(() => {
+  jest.spyOn(window, 'requestAnimationFrame').mockImplementation(setImmediate as any)
+  jest.spyOn(window, 'cancelAnimationFrame').mockImplementation(clearImmediate as any)
+})
+
+function Example({ defaultIndex = 0 }) {
+  return (
+    <Tab.Group defaultIndex={defaultIndex}>
+      <Tab.List>
+        <Tab>Tab 1</Tab>
+        <Tab>Tab 2</Tab>
+        <Tab>Tab 3</Tab>
+      </Tab.List>
+
+      <Tab.Panels>
+        <Tab.Panel>Content 1</Tab.Panel>
+        <Tab.Panel>Content 2</Tab.Panel>
+        <Tab.Panel>Content 3</Tab.Panel>
+      </Tab.Panels>
+    </Tab.Group>
+  )
+}
+
+describe('Rendering', () => {
+  describe('SSR', () => {
+    it('should be possible to server side render the first Tab and Panel', async () => {
+      let { contents } = await serverRender(<Example />)
+
+      expect(contents).toContain(`Content 1`)
+      expect(contents).not.toContain(`Content 2`)
+      expect(contents).not.toContain(`Content 3`)
+    })
+
+    it('should be possible to server side render the defaultIndex Tab and Panel', async () => {
+      let { contents } = await serverRender(<Example defaultIndex={1} />)
+
+      expect(contents).not.toContain(`Content 1`)
+      expect(contents).toContain(`Content 2`)
+      expect(contents).not.toContain(`Content 3`)
+    })
+  })
+
+  // The hydration tests don't work in React 18 due to some bug in Testing Library maybe?
+  // Skipping for now
+  xdescribe('Hydration', () => {
+    it('should be possible to server side render the first Tab and Panel', async () => {
+      const { contents } = await hydrateRender(<Example />)
+
+      expect(contents).toContain(`Content 1`)
+      expect(contents).not.toContain(`Content 2`)
+      expect(contents).not.toContain(`Content 3`)
+    })
+
+    it('should be possible to server side render the defaultIndex Tab and Panel', async () => {
+      const { contents } = await hydrateRender(<Example defaultIndex={1} />)
+
+      expect(contents).not.toContain(`Content 1`)
+      expect(contents).toContain(`Content 2`)
+      expect(contents).not.toContain(`Content 3`)
+    })
+  })
+})
+
+type ServerRenderOptions = Omit<RenderOptions, 'queries'> & {
+  strict?: boolean
+}
+
+interface ServerRenderResult {
+  type: 'ssr' | 'hydrate'
+  contents: string
+  result: RenderResult
+  hydrate: () => Promise<ServerRenderResult>
+}
+
+async function serverRender(
+  ui: ReactElement,
+  options: ServerRenderOptions = {}
+): Promise<ServerRenderResult> {
+  let container = document.createElement('div')
+  document.body.appendChild(container)
+  options = { ...options, container }
+
+  if (options.strict) {
+    options = {
+      ...options,
+      wrapper({ children }) {
+        return <React.StrictMode>{children}</React.StrictMode>
+      },
+    }
+  }
+
+  env.set('server')
+  let contents = renderToString(ui)
+  let result = render(<div dangerouslySetInnerHTML={{ __html: contents }} />, options)
+
+  async function hydrate(): Promise<ServerRenderResult> {
+    // This hack-ish way of unmounting the server rendered content is necessary
+    // otherwise we won't actually end up testing the hydration code path properly.
+    // Probably because React hangs on to internal references on the DOM nodes
+    result.unmount()
+    container.innerHTML = contents
+
+    env.set('client')
+    let newResult = render(ui, {
+      ...options,
+      hydrate: true,
+    })
+
+    return {
+      type: 'hydrate',
+      contents: container.innerHTML,
+      result: newResult,
+      hydrate,
+    }
+  }
+
+  return {
+    type: 'ssr',
+    contents,
+    result,
+    hydrate,
+  }
+}
+
+async function hydrateRender(el: ReactElement, options: ServerRenderOptions = {}) {
+  return serverRender(el, options).then((r) => r.hydrate())
+}
diff --git a/packages/@headlessui-react/src/components/tabs/tabs.tsx b/packages/@headlessui-react/src/components/tabs/tabs.tsx
index 0493e5abe0..7356c321fe 100644
--- a/packages/@headlessui-react/src/components/tabs/tabs.tsx
+++ b/packages/@headlessui-react/src/components/tabs/tabs.tsx
@@ -110,9 +110,7 @@ let reducers: {
   },
 }
 
-let TabsSSRContext = createContext<MutableRefObject<{ tabs: string[]; panels: string[] }> | null>(
-  null
-)
+let TabsSSRContext = createContext<MutableRefObject<{ tabs: number; panels: number }> | null>(null)
 TabsSSRContext.displayName = 'TabsSSRContext'
 
 function useSSRTabsCounter(component: string) {
@@ -239,7 +237,7 @@ let Tabs = forwardRefWithAs(function Tabs<TTag extends ElementType = typeof DEFA
     dispatch({ type: ActionTypes.SetSelectedIndex, index: selectedIndex ?? defaultIndex })
   }, [selectedIndex /* Deliberately skipping defaultIndex */])
 
-  let SSRCounter = useRef({ tabs: [], panels: [] })
+  let SSRCounter = useRef({ tabs: 0, panels: 0 })
   let ourProps = { ref: tabsRef }
 
   return (
@@ -331,11 +329,13 @@ let TabRoot = forwardRefWithAs(function Tab<TTag extends ElementType = typeof DE
 
   useIsoMorphicEffect(() => actions.registerTab(internalTabRef), [actions, internalTabRef])
 
-  let mySSRIndex = SSRContext.current.tabs.indexOf(id)
-  if (mySSRIndex === -1) mySSRIndex = SSRContext.current.tabs.push(id) - 1
+  let mySSRIndex = useRef(-1)
+  if (mySSRIndex.current === -1) {
+    mySSRIndex.current = SSRContext.current ? SSRContext.current.tabs++ : -1
+  }
 
   let myIndex = tabs.indexOf(internalTabRef)
-  if (myIndex === -1) myIndex = mySSRIndex
+  if (myIndex === -1) myIndex = mySSRIndex.current
   let selected = myIndex === selectedIndex
 
   let activateUsing = useEvent((cb: () => FocusResult) => {
@@ -492,11 +492,13 @@ let Panel = forwardRefWithAs(function Panel<TTag extends ElementType = typeof DE
 
   useIsoMorphicEffect(() => actions.registerPanel(internalPanelRef), [actions, internalPanelRef])
 
-  let mySSRIndex = SSRContext.current.panels.indexOf(id)
-  if (mySSRIndex === -1) mySSRIndex = SSRContext.current.panels.push(id) - 1
+  let mySSRIndex = useRef(-1)
+  if (mySSRIndex.current === -1) {
+    mySSRIndex.current = SSRContext.current ? SSRContext.current.panels++ : -1
+  }
 
   let myIndex = panels.indexOf(internalPanelRef)
-  if (myIndex === -1) myIndex = mySSRIndex
+  if (myIndex === -1) myIndex = mySSRIndex.current
 
   let selected = myIndex === selectedIndex
 
diff --git a/packages/@headlessui-react/src/components/transitions/transition.tsx b/packages/@headlessui-react/src/components/transitions/transition.tsx
index a87a26a6a3..59c4f6349e 100644
--- a/packages/@headlessui-react/src/components/transitions/transition.tsx
+++ b/packages/@headlessui-react/src/components/transitions/transition.tsx
@@ -31,6 +31,7 @@ import { useTransition } from '../../hooks/use-transition'
 import { useEvent } from '../../hooks/use-event'
 import { useDisposables } from '../../hooks/use-disposables'
 import { classNames } from '../../utils/class-names'
+import { env } from '../../utils/env'
 
 type ContainerElement = MutableRefObject<HTMLElement | null>
 
@@ -413,8 +414,7 @@ let TransitionChild = forwardRefWithAs(function TransitionChild<
   let theirProps = rest
   let ourProps = { ref: transitionRef }
 
-  let isServer = typeof window === 'undefined' || typeof document === 'undefined'
-  if (appear && show && isServer) {
+  if (appear && show && env.isServer) {
     theirProps = {
       ...theirProps,
       // Already apply the `enter` and `enterFrom` on the server if required
diff --git a/packages/@headlessui-react/src/hooks/use-id.ts b/packages/@headlessui-react/src/hooks/use-id.ts
index 772d6512a3..761d6c1c34 100644
--- a/packages/@headlessui-react/src/hooks/use-id.ts
+++ b/packages/@headlessui-react/src/hooks/use-id.ts
@@ -1,6 +1,7 @@
 import React from 'react'
 import { useIsoMorphicEffect } from './use-iso-morphic-effect'
 import { useServerHandoffComplete } from './use-server-handoff-complete'
+import { env } from '../utils/env'
 
 // We used a "simple" approach first which worked for SSR and rehydration on the client. However we
 // didn't take care of the Suspense case. To fix this we used the approach the @reach-ui/auto-id
@@ -8,21 +9,16 @@ import { useServerHandoffComplete } from './use-server-handoff-complete'
 //
 // Credits: https://github.com/reach/reach-ui/blob/develop/packages/auto-id/src/index.tsx
 
-let id = 0
-function generateId() {
-  return ++id
-}
-
 export let useId =
   // Prefer React's `useId` if it's available.
   // @ts-expect-error - `useId` doesn't exist in React < 18.
   React.useId ??
   function useId() {
     let ready = useServerHandoffComplete()
-    let [id, setId] = React.useState(ready ? generateId : null)
+    let [id, setId] = React.useState(ready ? () => env.nextId() : null)
 
     useIsoMorphicEffect(() => {
-      if (id === null) setId(generateId())
+      if (id === null) setId(env.nextId())
     }, [id])
 
     return id != null ? '' + id : undefined
diff --git a/packages/@headlessui-react/src/hooks/use-iso-morphic-effect.ts b/packages/@headlessui-react/src/hooks/use-iso-morphic-effect.ts
index 79a221926c..8f81b4efad 100644
--- a/packages/@headlessui-react/src/hooks/use-iso-morphic-effect.ts
+++ b/packages/@headlessui-react/src/hooks/use-iso-morphic-effect.ts
@@ -1,4 +1,10 @@
-import { useLayoutEffect, useEffect } from 'react'
-import { isServer } from '../utils/ssr'
+import { useLayoutEffect, useEffect, EffectCallback, DependencyList } from 'react'
+import { env } from '../utils/env'
 
-export let useIsoMorphicEffect = isServer ? useEffect : useLayoutEffect
+export let useIsoMorphicEffect = (effect: EffectCallback, deps?: DependencyList | undefined) => {
+  if (env.isServer) {
+    useEffect(effect, deps)
+  } else {
+    useLayoutEffect(effect, deps)
+  }
+}
diff --git a/packages/@headlessui-react/src/hooks/use-server-handoff-complete.ts b/packages/@headlessui-react/src/hooks/use-server-handoff-complete.ts
index b24bc66838..b931ea2d68 100644
--- a/packages/@headlessui-react/src/hooks/use-server-handoff-complete.ts
+++ b/packages/@headlessui-react/src/hooks/use-server-handoff-complete.ts
@@ -1,19 +1,23 @@
 import { useState, useEffect } from 'react'
-
-let state = { serverHandoffComplete: false }
+import { env } from '../utils/env'
 
 export function useServerHandoffComplete() {
-  let [serverHandoffComplete, setServerHandoffComplete] = useState(state.serverHandoffComplete)
-
-  useEffect(() => {
-    if (serverHandoffComplete === true) return
+  let [complete, setComplete] = useState(env.isHandoffComplete)
 
-    setServerHandoffComplete(true)
-  }, [serverHandoffComplete])
+  if (complete && env.isHandoffComplete === false) {
+    // This means we are in a test environment and we need to reset the handoff state
+    // This kinda breaks the rules of React but this is only used for testing purposes
+    // And should theoretically be fine
+    setComplete(false)
+  }
 
   useEffect(() => {
-    if (state.serverHandoffComplete === false) state.serverHandoffComplete = true
-  }, [])
+    if (complete === true) return
+    setComplete(true)
+  }, [complete])
+
+  // Transition from pending to complete (forcing a re-render when server rendering)
+  useEffect(() => env.handoff(), [])
 
-  return serverHandoffComplete
+  return complete
 }
diff --git a/packages/@headlessui-react/src/utils/env.ts b/packages/@headlessui-react/src/utils/env.ts
new file mode 100644
index 0000000000..38a47df156
--- /dev/null
+++ b/packages/@headlessui-react/src/utils/env.ts
@@ -0,0 +1,52 @@
+type RenderEnv = 'client' | 'server'
+type HandoffState = 'pending' | 'complete'
+
+class Env {
+  current: RenderEnv = this.detect()
+  handoffState: HandoffState = 'pending'
+  currentId = 0
+
+  set(env: RenderEnv): void {
+    if (this.current === env) return
+
+    this.handoffState = 'pending'
+    this.currentId = 0
+    this.current = env
+  }
+
+  reset(): void {
+    this.set(this.detect())
+  }
+
+  nextId() {
+    return ++this.currentId
+  }
+
+  get isServer(): boolean {
+    return this.current === 'server'
+  }
+
+  get isClient(): boolean {
+    return this.current === 'client'
+  }
+
+  private detect(): RenderEnv {
+    if (typeof window === 'undefined' || typeof document === 'undefined') {
+      return 'server'
+    }
+
+    return 'client'
+  }
+
+  handoff(): void {
+    if (this.handoffState === 'pending') {
+      this.handoffState = 'complete'
+    }
+  }
+
+  get isHandoffComplete(): boolean {
+    return this.handoffState === 'complete'
+  }
+}
+
+export let env = new Env()
diff --git a/packages/@headlessui-react/src/utils/owner.ts b/packages/@headlessui-react/src/utils/owner.ts
index 5bbc1862d2..71f256ed95 100644
--- a/packages/@headlessui-react/src/utils/owner.ts
+++ b/packages/@headlessui-react/src/utils/owner.ts
@@ -1,10 +1,10 @@
 import { MutableRefObject } from 'react'
-import { isServer } from './ssr'
+import { env } from './env'
 
 export function getOwnerDocument<T extends Element | MutableRefObject<Element | null>>(
   element: T | null | undefined
 ) {
-  if (isServer) return null
+  if (env.isServer) return null
   if (element instanceof Node) return element.ownerDocument
   if (element?.hasOwnProperty('current')) {
     if (element.current instanceof Node) return element.current.ownerDocument
diff --git a/packages/@headlessui-react/src/utils/ssr.ts b/packages/@headlessui-react/src/utils/ssr.ts
deleted file mode 100644
index 5df1767248..0000000000
--- a/packages/@headlessui-react/src/utils/ssr.ts
+++ /dev/null
@@ -1 +0,0 @@
-export const isServer = typeof window === 'undefined' || typeof document === 'undefined'
diff --git a/packages/@headlessui-vue/CHANGELOG.md b/packages/@headlessui-vue/CHANGELOG.md
index f9c095cdee..e951d717fb 100644
--- a/packages/@headlessui-vue/CHANGELOG.md
+++ b/packages/@headlessui-vue/CHANGELOG.md
@@ -7,7 +7,9 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 
 ## [Unreleased]
 
-- Nothing yet!
+### Changed
+
+- Adjust SSR detection mechanism ([#2102](https://github.com/tailwindlabs/headlessui/pull/2102))
 
 ## [1.7.7] - 2022-12-16
 
diff --git a/packages/@headlessui-vue/src/components/dialog/dialog.test.ts b/packages/@headlessui-vue/src/components/dialog/dialog.test.ts
index c54ff3f796..3ec863e62e 100644
--- a/packages/@headlessui-vue/src/components/dialog/dialog.test.ts
+++ b/packages/@headlessui-vue/src/components/dialog/dialog.test.ts
@@ -1475,6 +1475,107 @@ describe('Mouse interactions', () => {
     })
   )
 
+  fit(
+    'should be possible to click elements inside the dialog when they reside inside a shadow boundary',
+    suppressConsoleLogs(async () => {
+      let fn = jest.fn()
+
+      let ShadowChildren = defineComponent({
+        props: ['id', 'buttonId'],
+        setup(props) {
+          let container = ref<HTMLDivElement | null>(null)
+
+          onMounted(() => {
+            if (!container.value || container.value.shadowRoot) {
+              return
+            }
+
+            let shadowRoot = container.value.attachShadow({ mode: 'open' })
+            let button = document.createElement('button')
+            button.id = props.buttonId
+            button.textContent = 'Inside shadow root'
+            button.addEventListener('click', fn)
+            shadowRoot.appendChild(button)
+          })
+
+          return () => h('div', { id: props.id, ref: container })
+        },
+      })
+
+      renderTemplate({
+        components: { ShadowChildren },
+        template: `
+          <div>
+            <button @click="setIsOpen(true)">open</button>
+            <Dialog :open="isOpen" @close="setIsOpen(false)">
+              <div>
+                <button id="btn_outside_light" @click="fn">
+                  Button
+                </button>
+                <ShadowChildren id="outside_shadow" buttonId="btn_outside_shadow" />
+              </div>
+              <DialogPanel>
+                <button id="btn_inside_light" @click="fn">
+                  Button
+                </button>
+                <ShadowChildren id="inside_shadow" buttonId="btn_inside_shadow" />
+              </DialogPanel>
+            </Dialog>
+          </div>
+        `,
+        setup() {
+          let isOpen = ref(true)
+          return {
+            fn,
+            isOpen,
+            setIsOpen(value: boolean) {
+              isOpen.value = value
+            },
+          }
+        },
+      })
+
+      await nextFrame()
+
+      // Verify it is open
+      assertDialog({ state: DialogState.Visible })
+
+      // Click the button inside the dialog (light DOM)
+      await click(document.querySelector('#btn_inside_light'))
+
+      // Verify the button was clicked
+      expect(fn).toHaveBeenCalledTimes(1)
+
+      // Verify the dialog is still open
+      assertDialog({ state: DialogState.Visible })
+
+      // Click the button inside the dialog (shadow DOM)
+      await click(
+        document.querySelector('#inside_shadow')?.shadowRoot?.querySelector('#btn_inside_shadow') ??
+          null
+      )
+
+      // Verify the button was clicked
+      expect(fn).toHaveBeenCalledTimes(2)
+
+      // Verify the dialog is still open
+      assertDialog({ state: DialogState.Visible })
+
+      // Click the button outside the dialog (shadow DOM)
+      await click(
+        document
+          .querySelector('#outside_shadow')
+          ?.shadowRoot?.querySelector('#btn_outside_shadow') ?? null
+      )
+
+      // Verify the button was clicked
+      expect(fn).toHaveBeenCalledTimes(3)
+
+      // Verify the dialog is closed
+      assertDialog({ state: DialogState.InvisibleUnmounted })
+    })
+  )
+
   it(
     'should be possible to click elements inside the dialog when they reside inside a shadow boundary',
     suppressConsoleLogs(async () => {
diff --git a/packages/@headlessui-vue/src/components/tabs/tabs.ssr.test.ts b/packages/@headlessui-vue/src/components/tabs/tabs.ssr.test.ts
new file mode 100644
index 0000000000..eaa9648c18
--- /dev/null
+++ b/packages/@headlessui-vue/src/components/tabs/tabs.ssr.test.ts
@@ -0,0 +1,99 @@
+import { createApp, createSSRApp, defineComponent, h } from 'vue'
+import { renderToString } from 'vue/server-renderer'
+import { TabGroup, TabList, Tab, TabPanels, TabPanel } from './tabs'
+import { html } from '../../test-utils/html'
+import { render } from '../../test-utils/vue-testing-library'
+import { env } from '../../utils/env'
+
+jest.mock('../../hooks/use-id')
+
+beforeAll(() => {
+  jest.spyOn(window, 'requestAnimationFrame').mockImplementation(setImmediate as any)
+  jest.spyOn(window, 'cancelAnimationFrame').mockImplementation(clearImmediate as any)
+})
+
+afterAll(() => jest.restoreAllMocks())
+
+let Example = defineComponent({
+  components: { TabGroup, TabList, Tab, TabPanels, TabPanel },
+  template: html`
+    <TabGroup>
+      <TabList>
+        <Tab>Tab 1</Tab>
+        <Tab>Tab 2</Tab>
+        <Tab>Tab 3</Tab>
+      </TabList>
+
+      <TabPanels>
+        <TabPanel>Content 1</TabPanel>
+        <TabPanel>Content 2</TabPanel>
+        <TabPanel>Content 3</TabPanel>
+      </TabPanels>
+    </TabGroup>
+  `,
+})
+
+describe('Rendering', () => {
+  describe('SSR', () => {
+    it('should be possible to server side render the first Tab and Panel', async () => {
+      let { contents } = await serverRender(Example)
+
+      expect(contents).toContain(`Content 1`)
+      expect(contents).not.toContain(`Content 2`)
+      expect(contents).not.toContain(`Content 3`)
+    })
+
+    it('should be possible to server side render the defaultIndex Tab and Panel', async () => {
+      let { contents } = await serverRender(Example, { defaultIndex: 1 })
+
+      expect(contents).not.toContain(`Content 1`)
+      expect(contents).toContain(`Content 2`)
+      expect(contents).not.toContain(`Content 3`)
+    })
+  })
+
+  describe('Hydration', () => {
+    it('should be possible to server side render the first Tab and Panel', async () => {
+      let { contents } = await hydrateRender(Example)
+
+      expect(contents).toContain(`Content 1`)
+      expect(contents).not.toContain(`Content 2`)
+      expect(contents).not.toContain(`Content 3`)
+    })
+
+    it('should be possible to server side render the defaultIndex Tab and Panel', async () => {
+      let { contents } = await hydrateRender(Example, { defaultIndex: 1 })
+
+      expect(contents).not.toContain(`Content 1`)
+      expect(contents).toContain(`Content 2`)
+      expect(contents).not.toContain(`Content 3`)
+    })
+  })
+})
+
+async function serverRender(component: any, rootProps: any = {}) {
+  let container = document.createElement('div')
+  document.body.appendChild(container)
+
+  // Render on the server
+  env.set('server')
+  let app = createSSRApp(component, rootProps)
+  let contents = await renderToString(app)
+  container.innerHTML = contents
+
+  return {
+    contents,
+    hydrate() {
+      let app = createApp(component, rootProps)
+      app.mount(container)
+
+      return {
+        contents: container.innerHTML,
+      }
+    },
+  }
+}
+
+async function hydrateRender(component: any, rootProps: any = {}) {
+  return serverRender(component, rootProps).then(({ hydrate }) => hydrate())
+}
diff --git a/packages/@headlessui-vue/src/components/tabs/tabs.test.ts b/packages/@headlessui-vue/src/components/tabs/tabs.test.ts
index af8636c14f..f0a3aa6904 100644
--- a/packages/@headlessui-vue/src/components/tabs/tabs.test.ts
+++ b/packages/@headlessui-vue/src/components/tabs/tabs.test.ts
@@ -1,5 +1,4 @@
-import { createSSRApp, nextTick, ref } from 'vue'
-import { renderToString } from 'vue/server-renderer'
+import { nextTick, ref } from 'vue'
 import { createRenderTemplate, render } from '../../test-utils/vue-testing-library'
 import { TabGroup, TabList, Tab, TabPanels, TabPanel } from './tabs'
 import { suppressConsoleLogs } from '../../test-utils/suppress-console-logs'
@@ -555,60 +554,6 @@ describe('Rendering', () => {
       assertTabs({ active: 2 })
     })
   })
-
-  describe('SSR', () => {
-    it('should be possible to server side render the first Tab and Panel', async () => {
-      let app = createSSRApp({
-        components: { TabGroup, TabList, Tab, TabPanels, TabPanel },
-        template: html`
-          <TabGroup>
-            <TabList>
-              <Tab>Tab 1</Tab>
-              <Tab>Tab 2</Tab>
-              <Tab>Tab 3</Tab>
-            </TabList>
-
-            <TabPanels>
-              <TabPanel>Content 1</TabPanel>
-              <TabPanel>Content 2</TabPanel>
-              <TabPanel>Content 3</TabPanel>
-            </TabPanels>
-          </TabGroup>
-        `,
-      })
-
-      let contents = await renderToString(app)
-      expect(contents).toContain(`Content 1`)
-      expect(contents).not.toContain(`Content 2`)
-      expect(contents).not.toContain(`Content 3`)
-    })
-
-    it('should be possible to server side render the defaultIndex Tab and Panel', async () => {
-      let app = createSSRApp({
-        components: { TabGroup, TabList, Tab, TabPanels, TabPanel },
-        template: html`
-          <TabGroup :defaultIndex="1">
-            <TabList>
-              <Tab>Tab 1</Tab>
-              <Tab>Tab 2</Tab>
-              <Tab>Tab 3</Tab>
-            </TabList>
-
-            <TabPanels>
-              <TabPanel>Content 1</TabPanel>
-              <TabPanel>Content 2</TabPanel>
-              <TabPanel>Content 3</TabPanel>
-            </TabPanels>
-          </TabGroup>
-        `,
-      })
-
-      let contents = await renderToString(app)
-      expect(contents).not.toContain(`Content 1`)
-      expect(contents).toContain(`Content 2`)
-      expect(contents).not.toContain(`Content 3`)
-    })
-  })
 })
 
 describe('`selectedIndex`', () => {
diff --git a/packages/@headlessui-vue/src/components/tabs/tabs.ts b/packages/@headlessui-vue/src/components/tabs/tabs.ts
index dd38c2ca08..34ced27784 100644
--- a/packages/@headlessui-vue/src/components/tabs/tabs.ts
+++ b/packages/@headlessui-vue/src/components/tabs/tabs.ts
@@ -246,6 +246,7 @@ export let Tab = defineComponent({
     onUnmounted(() => api.unregisterTab(internalTabRef))
 
     let SSRContext = inject(TabsSSRContext)!
+    // Note: there's a divergence here between React and Vue. Vue can work with `indexOf` implementation while React on the server can't.
     let mySSRIndex = computed(() => {
       if (SSRContext.value) {
         let mySSRIndex = SSRContext.value.tabs.indexOf(props.id)
diff --git a/packages/@headlessui-vue/src/hooks/use-document-event.ts b/packages/@headlessui-vue/src/hooks/use-document-event.ts
index b0aa33dd72..980011beec 100644
--- a/packages/@headlessui-vue/src/hooks/use-document-event.ts
+++ b/packages/@headlessui-vue/src/hooks/use-document-event.ts
@@ -1,12 +1,12 @@
 import { watchEffect } from 'vue'
-import { isServer } from '../utils/ssr'
+import { env } from '../utils/env'
 
 export function useDocumentEvent<TType extends keyof DocumentEventMap>(
   type: TType,
   listener: (this: Document, ev: DocumentEventMap[TType]) => any,
   options?: boolean | AddEventListenerOptions
 ) {
-  if (isServer) return
+  if (env.isServer) return
 
   watchEffect((onInvalidate) => {
     document.addEventListener(type, listener, options)
diff --git a/packages/@headlessui-vue/src/hooks/use-event-listener.ts b/packages/@headlessui-vue/src/hooks/use-event-listener.ts
index 07a507e120..3c40479e88 100644
--- a/packages/@headlessui-vue/src/hooks/use-event-listener.ts
+++ b/packages/@headlessui-vue/src/hooks/use-event-listener.ts
@@ -1,5 +1,5 @@
 import { watchEffect } from 'vue'
-import { isServer } from '../utils/ssr'
+import { env } from '../utils/env'
 
 export function useEventListener<TType extends keyof WindowEventMap>(
   element: HTMLElement | Document | Window | EventTarget | null | undefined,
@@ -7,7 +7,7 @@ export function useEventListener<TType extends keyof WindowEventMap>(
   listener: (event: WindowEventMap[TType]) => any,
   options?: boolean | AddEventListenerOptions
 ) {
-  if (isServer) return
+  if (env.isServer) return
 
   watchEffect((onInvalidate) => {
     element = element ?? window
diff --git a/packages/@headlessui-vue/src/hooks/use-window-event.ts b/packages/@headlessui-vue/src/hooks/use-window-event.ts
index 267d78b70f..d1ee703caf 100644
--- a/packages/@headlessui-vue/src/hooks/use-window-event.ts
+++ b/packages/@headlessui-vue/src/hooks/use-window-event.ts
@@ -1,12 +1,12 @@
 import { watchEffect } from 'vue'
-import { isServer } from '../utils/ssr'
+import { env } from '../utils/env'
 
 export function useWindowEvent<TType extends keyof WindowEventMap>(
   type: TType,
   listener: (this: Window, ev: WindowEventMap[TType]) => any,
   options?: boolean | AddEventListenerOptions
 ) {
-  if (isServer) return
+  if (env.isServer) return
 
   watchEffect((onInvalidate) => {
     window.addEventListener(type, listener, options)
diff --git a/packages/@headlessui-vue/src/utils/env.ts b/packages/@headlessui-vue/src/utils/env.ts
new file mode 100644
index 0000000000..2f53f13ee3
--- /dev/null
+++ b/packages/@headlessui-vue/src/utils/env.ts
@@ -0,0 +1,39 @@
+type RenderEnv = 'client' | 'server'
+
+class Env {
+  current: RenderEnv = this.detect()
+  currentId = 0
+
+  set(env: RenderEnv): void {
+    if (this.current === env) return
+
+    this.currentId = 0
+    this.current = env
+  }
+
+  reset(): void {
+    this.set(this.detect())
+  }
+
+  nextId() {
+    return ++this.currentId
+  }
+
+  get isServer(): boolean {
+    return this.current === 'server'
+  }
+
+  get isClient(): boolean {
+    return this.current === 'client'
+  }
+
+  private detect(): RenderEnv {
+    if (typeof window === 'undefined' || typeof document === 'undefined') {
+      return 'server'
+    }
+
+    return 'client'
+  }
+}
+
+export let env = new Env()
diff --git a/packages/@headlessui-vue/src/utils/owner.ts b/packages/@headlessui-vue/src/utils/owner.ts
index eebd7c6550..59a4bd5bc4 100644
--- a/packages/@headlessui-vue/src/utils/owner.ts
+++ b/packages/@headlessui-vue/src/utils/owner.ts
@@ -1,11 +1,11 @@
 import { Ref } from 'vue'
 import { dom } from './dom'
-import { isServer } from './ssr'
+import { env } from './env'
 
 export function getOwnerDocument<T extends Element | Ref<Element | null>>(
   element: T | null | undefined
 ) {
-  if (isServer) return null
+  if (env.isServer) return null
   if (element instanceof Node) return element.ownerDocument
   if (element?.hasOwnProperty('value')) {
     let domElement = dom(element)
diff --git a/packages/@headlessui-vue/src/utils/ssr.ts b/packages/@headlessui-vue/src/utils/ssr.ts
deleted file mode 100644
index 5df1767248..0000000000
--- a/packages/@headlessui-vue/src/utils/ssr.ts
+++ /dev/null
@@ -1 +0,0 @@
-export const isServer = typeof window === 'undefined' || typeof document === 'undefined'