diff --git a/core/modules/content_moderation/src/Entity/Handler/BlockContentModerationHandler.php b/core/modules/content_moderation/src/Entity/Handler/BlockContentModerationHandler.php
index a618b2246e..2b9a8b2ba9 100644
--- a/core/modules/content_moderation/src/Entity/Handler/BlockContentModerationHandler.php
+++ b/core/modules/content_moderation/src/Entity/Handler/BlockContentModerationHandler.php
@@ -2,6 +2,7 @@
 
 namespace Drupal\content_moderation\Entity\Handler;
 
+use Drupal\Core\Entity\ContentEntityInterface;
 use Drupal\Core\Form\FormStateInterface;
 
 /**
@@ -29,4 +30,14 @@ public function enforceRevisionsBundleFormAlter(array &$form, FormStateInterface
     $form['revision']['#description'] = $this->t('Revisions must be required when moderation is enabled.');
   }
 
+  /**
+   * {@inheritdoc}
+   */
+  public function isModeratedEntity(ContentEntityInterface $entity) {
+    // Only reusable blocks can be moderated individually. Non-reusable or
+    // inline blocks are moderated as part of the entity they are a composite
+    // of.
+    return $entity->isReusable();
+  }
+
 }
diff --git a/core/modules/content_moderation/src/ModerationInformation.php b/core/modules/content_moderation/src/ModerationInformation.php
index 62c2a6103c..ee811b75aa 100644
--- a/core/modules/content_moderation/src/ModerationInformation.php
+++ b/core/modules/content_moderation/src/ModerationInformation.php
@@ -55,7 +55,7 @@ public function isModeratedEntity(EntityInterface $entity) {
     if (!$this->shouldModerateEntitiesOfBundle($entity->getEntityType(), $entity->bundle())) {
       return FALSE;
     }
-    return $entity->getEntityType()->getHandlerClass('moderation')->isModeratedEntity($entity);
+    return  $this->entityTypeManager->getHandler($entity->getEntityTypeId(), 'moderation')->isModeratedEntity($entity);
   }
 
   /**
diff --git a/core/modules/content_moderation/tests/src/Functional/LayoutBuilderContentModerationIntegrationTest.php b/core/modules/content_moderation/tests/src/Functional/LayoutBuilderContentModerationIntegrationTest.php
index 3f61ea9eeb..f90c2f83fb 100644
--- a/core/modules/content_moderation/tests/src/Functional/LayoutBuilderContentModerationIntegrationTest.php
+++ b/core/modules/content_moderation/tests/src/Functional/LayoutBuilderContentModerationIntegrationTest.php
@@ -2,6 +2,7 @@
 
 namespace Drupal\Tests\content_moderation\Functional;
 
+use Drupal\block_content\Entity\BlockContentType;
 use Drupal\layout_builder\Entity\LayoutBuilderEntityViewDisplay;
 use Drupal\Tests\BrowserTestBase;
 use Drupal\Tests\content_moderation\Traits\ContentModerationTestTrait;
@@ -24,6 +25,7 @@ class LayoutBuilderContentModerationIntegrationTest extends BrowserTestBase {
     'node',
     'content_moderation',
     'menu_ui',
+    'block_content',
   ];
 
   /**
@@ -36,10 +38,21 @@ protected function setUp() {
     //   https://www.drupal.org/project/drupal/issues/2917777.
     $this->drupalPlaceBlock('local_tasks_block');
 
+    $workflow = $this->createEditorialWorkflow();
+
     // Add a new bundle and add an editorial workflow.
     $this->createContentType(['type' => 'bundle_with_section_field']);
-    $workflow = $this->createEditorialWorkflow();
     $workflow->getTypePlugin()->addEntityTypeAndBundle('node', 'bundle_with_section_field');
+
+    // Add a new block content bundle to the editorial workflow.
+    BlockContentType::create([
+      'id' => 'basic',
+      'label' => 'Basic',
+      'revision' => 1,
+    ])->save();
+    block_content_add_body_field('basic');
+
+    $workflow->getTypePlugin()->addEntityTypeAndBundle('block_content', 'basic');
     $workflow->save();
 
     // Enable layout overrides.
@@ -57,6 +70,7 @@ protected function setUp() {
       'view latest version',
       'use editorial transition create_new_draft',
       'use editorial transition publish',
+      'create and edit custom blocks',
     ]));
   }
 
@@ -133,4 +147,44 @@ public function testLayoutModeration() {
     $assert_session->pageTextNotContains('Powered by Drupal');
   }
 
+  /**
+   * Test placing inline blocks that belong to a moderated custom block bundle.
+   */
+  public function testModeratedInlineBlockBundles() {
+    $page = $this->getSession()->getPage();
+    $assert_session = $this->assertSession();
+
+    $node = $this->createNode([
+      'type' => 'bundle_with_section_field',
+      'title' => 'The first node title',
+      'moderation_state' => 'published',
+    ]);
+    $this->drupalGet("node/{$node->id()}/layout");
+    $page->clickLink('Add block');
+    $this->clickLink('Create custom block');
+
+    $assert_session->fieldNotExists('settings[block_form][moderation_state][0][state]');
+    $this->submitForm([
+      'settings[label]' => 'Test inline block',
+      'settings[block_form][body][0][value]' => 'Example block body',
+    ], 'Add block');
+
+    // Save a draft of the page with the inline block and ensure the drafted
+    // content appears on the latest version page.
+    $this->assertSession()->pageTextContains('Example block body');
+    $this->submitForm([
+      'moderation_state[0][state]' => 'draft',
+    ], 'Save layout');
+    $assert_session->pageTextContains('The layout override has been saved.');
+    $assert_session->pageTextContains('Example block body');
+
+    // Publish the draft of the page ensure the draft inline block content
+    // apears on the published page.
+    $this->submitForm([
+      'new_state' => 'published',
+    ], 'Apply');
+    $assert_session->pageTextContains('The moderation state has been updated.');
+    $assert_session->pageTextContains('Example block body');
+  }
+
 }
diff --git a/core/modules/content_moderation/tests/src/Unit/ModerationInformationTest.php b/core/modules/content_moderation/tests/src/Unit/ModerationInformationTest.php
index dead3c88ee..d7a93473eb 100644
--- a/core/modules/content_moderation/tests/src/Unit/ModerationInformationTest.php
+++ b/core/modules/content_moderation/tests/src/Unit/ModerationInformationTest.php
@@ -13,6 +13,7 @@
 use Drupal\content_moderation\ModerationInformation;
 use Drupal\Tests\UnitTestCase;
 use Drupal\workflows\WorkflowInterface;
+use Prophecy\Argument;
 
 /**
  * @coversDefaultClass \Drupal\content_moderation\ModerationInformation
@@ -38,6 +39,7 @@ protected function getUser() {
    */
   protected function getEntityTypeManager() {
     $entity_type_manager = $this->prophesize(EntityTypeManagerInterface::class);
+    $entity_type_manager->getHandler(Argument::any(), 'moderation')->willReturn(new ModerationHandler());
     return $entity_type_manager->reveal();
   }
 
@@ -94,6 +96,7 @@ public function testIsModeratedEntity($workflow, $expected) {
     ]);
     $entity = $this->prophesize(ContentEntityInterface::class);
     $entity->getEntityType()->willReturn($entity_type);
+    $entity->getEntityTypeId()->willReturn($entity_type->id());
     $entity->bundle()->willReturn('test_bundle');
 
     $this->assertEquals($expected, $moderation_information->isModeratedEntity($entity->reveal()));