diff --git a/addons/web_editor/static/src/js/editor/odoo-editor/src/utils/utils.js b/addons/web_editor/static/src/js/editor/odoo-editor/src/utils/utils.js
index 0a60eb83e85..0e13cc2f926 100644
--- a/addons/web_editor/static/src/js/editor/odoo-editor/src/utils/utils.js
+++ b/addons/web_editor/static/src/js/editor/odoo-editor/src/utils/utils.js
@@ -1982,8 +1982,11 @@ export function setTagName(el, newTagName) {
     while (el.firstChild) {
         n.append(el.firstChild);
     }
-    if (el.tagName === 'LI') {
+    const closestLi = el.closest('li');
+    if (el.tagName === 'LI' && newTagName !== 'p') {
         el.append(n);
+    } else if (closestLi && newTagName === 'p') {
+        closestLi.replaceChildren(...n.childNodes);
     } else {
         el.parentNode.replaceChild(n, el);
     }
diff --git a/addons/web_editor/static/src/js/editor/odoo-editor/test/spec/format.test.js b/addons/web_editor/static/src/js/editor/odoo-editor/test/spec/format.test.js
index 40b12e16979..4aeae1f0d4f 100644
--- a/addons/web_editor/static/src/js/editor/odoo-editor/test/spec/format.test.js
+++ b/addons/web_editor/static/src/js/editor/odoo-editor/test/spec/format.test.js
@@ -775,6 +775,20 @@ describe('setTagName', () => {
                 contentAfter: '<div><p>[ab]</p></div>',
             });
         });
+        it('should not add paragraph tag when selection is changed to normal in list', async () => {
+            await testEditor(BasicEditor, {
+                contentBefore: '<ul><li><h1>[abcd]</h1></li></ul>',
+                stepFunction: editor => editor.execCommand('setTag', "p"),
+                contentAfter: `<ul><li>[abcd]</li></ul>`
+            });
+        });
+        it('should not add paragraph tag to normal text in list', async () => {
+            await testEditor(BasicEditor, {
+                contentBefore: '<ul><li>[abcd]</li></ul>',
+                stepFunction: editor => editor.execCommand('setTag', "p"),
+                contentAfter: `<ul><li>[abcd]</li></ul>`
+            });
+        });
     });
     describe('to heading 1', () => {
         it('should turn a paragraph into a heading 1', async () => {