diff --git a/packages/angular/build/src/builders/dev-server/vite-server.ts b/packages/angular/build/src/builders/dev-server/vite-server.ts
index f3309d94f6d9..a5fa4216572f 100644
--- a/packages/angular/build/src/builders/dev-server/vite-server.ts
+++ b/packages/angular/build/src/builders/dev-server/vite-server.ts
@@ -138,17 +138,14 @@ export async function* serveWithVite(
     process.setSourceMapsEnabled(true);
   }
 
-  // Enable to support component style hot reloading (`NG_HMR_CSTYLES=0` can be used to disable selectively)
+  // Enable to support link-based component style hot reloading (`NG_HMR_CSTYLES=0` can be used to disable selectively)
   browserOptions.externalRuntimeStyles =
     serverOptions.liveReload && serverOptions.hmr && useComponentStyleHmr;
 
-  // Enable to support component template hot replacement (`NG_HMR_TEMPLATE=1` can be used to enable)
-  browserOptions.templateUpdates = !!serverOptions.liveReload && useComponentTemplateHmr;
-  if (browserOptions.templateUpdates) {
-    context.logger.warn(
-      'Experimental support for component template hot replacement has been enabled via the "NG_HMR_TEMPLATE" environment variable.',
-    );
-  }
+  // Enable to support component template hot replacement (`NG_HMR_TEMPLATE=0` can be used to disable selectively)
+  // This will also replace file-based/inline styles as code if external runtime styles are not enabled.
+  browserOptions.templateUpdates =
+    serverOptions.liveReload && serverOptions.hmr && useComponentTemplateHmr;
 
   // Setup the prebundling transformer that will be shared across Vite prebundling requests
   const prebundleTransformer = new JavaScriptTransformer(
@@ -233,6 +230,12 @@ export async function* serveWithVite(
             assetFiles.set('/' + normalizePath(outputPath), normalizePath(file.inputPath));
           }
         }
+
+        // Invalidate SSR module graph to ensure that only new rebuild is used and not stale component updates
+        if (server && browserOptions.ssr && templateUpdates.size > 0) {
+          server.moduleGraph.invalidateAll();
+        }
+
         // Clear stale template updates on code rebuilds
         templateUpdates.clear();
 
@@ -256,6 +259,16 @@ export async function* serveWithVite(
           'Builder must provide an initial full build before component update results.',
         );
 
+        // Invalidate SSR module graph to ensure that new component updates are used
+        // TODO: Use fine-grained invalidation of only the component update modules
+        if (browserOptions.ssr) {
+          server.moduleGraph.invalidateAll();
+          const { ɵresetCompiledComponents } = (await server.ssrLoadModule('/main.server.mjs')) as {
+            ɵresetCompiledComponents: () => void;
+          };
+          ɵresetCompiledComponents();
+        }
+
         for (const componentUpdate of result.updates) {
           if (componentUpdate.type === 'template') {
             templateUpdates.set(componentUpdate.id, componentUpdate.content);
diff --git a/packages/angular/build/src/tools/esbuild/application-code-bundle.ts b/packages/angular/build/src/tools/esbuild/application-code-bundle.ts
index db2581eb9b00..30f6b750a1a0 100644
--- a/packages/angular/build/src/tools/esbuild/application-code-bundle.ts
+++ b/packages/angular/build/src/tools/esbuild/application-code-bundle.ts
@@ -357,6 +357,9 @@ export function createServerMainCodeBundleOptions(
               ɵgetOrCreateAngularServerApp,
             } from '@angular/ssr';`,
 
+            // Need for HMR
+            `export { ɵresetCompiledComponents } from '@angular/core';`,
+
             // Re-export all symbols including default export from 'main.server.ts'
             `export { default } from '${mainServerEntryPointJsImport}';`,
             `export * from '${mainServerEntryPointJsImport}';`,
diff --git a/packages/angular/build/src/tools/vite/plugins/angular-memory-plugin.ts b/packages/angular/build/src/tools/vite/plugins/angular-memory-plugin.ts
index 92fd7ac7df54..201ce171b3ea 100644
--- a/packages/angular/build/src/tools/vite/plugins/angular-memory-plugin.ts
+++ b/packages/angular/build/src/tools/vite/plugins/angular-memory-plugin.ts
@@ -78,7 +78,7 @@ export async function createAngularMemoryPlugin(
         const requestUrl = new URL(id.slice(1), 'http://localhost');
         const componentId = requestUrl.searchParams.get('c');
 
-        return (componentId && options.templateUpdates?.get(componentId)) ?? '';
+        return (componentId && options.templateUpdates?.get(encodeURIComponent(componentId))) ?? '';
       }
 
       const [file] = id.split('?', 1);
diff --git a/packages/angular/build/src/utils/environment-options.ts b/packages/angular/build/src/utils/environment-options.ts
index 40de16a535e3..63abd82af46e 100644
--- a/packages/angular/build/src/utils/environment-options.ts
+++ b/packages/angular/build/src/utils/environment-options.ts
@@ -107,7 +107,7 @@ export const useComponentStyleHmr =
 
 const hmrComponentTemplateVariable = process.env['NG_HMR_TEMPLATES'];
 export const useComponentTemplateHmr =
-  isPresent(hmrComponentTemplateVariable) && isEnabled(hmrComponentTemplateVariable);
+  !isPresent(hmrComponentTemplateVariable) || !isDisabled(hmrComponentTemplateVariable);
 
 const partialSsrBuildVariable = process.env['NG_BUILD_PARTIAL_SSR'];
 export const usePartialSsrBuild =
diff --git a/tests/legacy-cli/e2e/tests/basic/rebuild.ts b/tests/legacy-cli/e2e/tests/basic/rebuild.ts
index f512961366bc..d289587d78b8 100644
--- a/tests/legacy-cli/e2e/tests/basic/rebuild.ts
+++ b/tests/legacy-cli/e2e/tests/basic/rebuild.ts
@@ -9,13 +9,8 @@ export default async function () {
   const validBundleRegEx = esbuild ? /sent to client/ : /Compiled successfully\./;
   const lazyBundleRegEx = esbuild ? /chunk-/ : /src_app_lazy_lazy_component_ts\.js/;
 
-  // Disable component stylesheet HMR to support page reload based rebuild testing.
-  // Ideally this environment variable would be passed directly to the new serve process
-  // but this would require signficant test changes due to the existing `ngServe` signature.
-  const oldHMRValue = process.env['NG_HMR_CSTYLES'];
-  process.env['NG_HMR_CSTYLES'] = '0';
-  const port = await ngServe();
-  process.env['NG_HMR_CSTYLES'] = oldHMRValue;
+  // Disable HMR to support page reload based rebuild testing.
+  const port = await ngServe('--no-hmr');
 
   // Add a lazy route.
   await silentNg('generate', 'component', 'lazy');
diff --git a/tests/legacy-cli/e2e/tests/vite/ssr-entry-express.ts b/tests/legacy-cli/e2e/tests/vite/ssr-entry-express.ts
index 5337ad5e5cc5..a8fbbea83503 100644
--- a/tests/legacy-cli/e2e/tests/vite/ssr-entry-express.ts
+++ b/tests/legacy-cli/e2e/tests/vite/ssr-entry-express.ts
@@ -90,6 +90,7 @@ export default async function () {
     'src/app/home/home.component.html',
     'home works',
     'yay home works!!!',
+    true,
   );
   await validateResponse('/api/test', /foo/);
   await validateResponse('/home', /yay home works/);
@@ -111,9 +112,12 @@ async function modifyFileAndWaitUntilUpdated(
   filePath: string,
   searchValue: string,
   replaceValue: string,
+  hmr = false,
 ): Promise<void> {
   await Promise.all([
-    waitForAnyProcessOutputToMatch(/Page reload sent to client/),
+    waitForAnyProcessOutputToMatch(
+      hmr ? /Component update sent to client/ : /Page reload sent to client/,
+    ),
     setTimeout(100).then(() => replaceInFile(filePath, searchValue, replaceValue)),
   ]);
 }
diff --git a/tests/legacy-cli/e2e/tests/vite/ssr-entry-fastify.ts b/tests/legacy-cli/e2e/tests/vite/ssr-entry-fastify.ts
index 87c84ad0010f..aca0251b27db 100644
--- a/tests/legacy-cli/e2e/tests/vite/ssr-entry-fastify.ts
+++ b/tests/legacy-cli/e2e/tests/vite/ssr-entry-fastify.ts
@@ -90,6 +90,7 @@ export default async function () {
     'src/app/home/home.component.html',
     'home works',
     'yay home works!!!',
+    true,
   );
   await validateResponse('/api/test', /foo/);
   await validateResponse('/home', /yay home works/);
@@ -111,9 +112,12 @@ async function modifyFileAndWaitUntilUpdated(
   filePath: string,
   searchValue: string,
   replaceValue: string,
+  hmr = false,
 ): Promise<void> {
   await Promise.all([
-    waitForAnyProcessOutputToMatch(/Page reload sent to client/),
+    waitForAnyProcessOutputToMatch(
+      hmr ? /Component update sent to client/ : /Page reload sent to client/,
+    ),
     setTimeout(100).then(() => replaceInFile(filePath, searchValue, replaceValue)),
   ]);
 }
diff --git a/tests/legacy-cli/e2e/tests/vite/ssr-entry-h3.ts b/tests/legacy-cli/e2e/tests/vite/ssr-entry-h3.ts
index 0027190395f4..88e03d34aea9 100644
--- a/tests/legacy-cli/e2e/tests/vite/ssr-entry-h3.ts
+++ b/tests/legacy-cli/e2e/tests/vite/ssr-entry-h3.ts
@@ -81,6 +81,7 @@ export default async function () {
     'src/app/home/home.component.html',
     'home works',
     'yay home works!!!',
+    true,
   );
   await validateResponse('/api/test', /foo/);
   await validateResponse('/home', /yay home works/);
@@ -102,9 +103,12 @@ async function modifyFileAndWaitUntilUpdated(
   filePath: string,
   searchValue: string,
   replaceValue: string,
+  hmr = false,
 ): Promise<void> {
   await Promise.all([
-    waitForAnyProcessOutputToMatch(/Page reload sent to client/),
+    waitForAnyProcessOutputToMatch(
+      hmr ? /Component update sent to client/ : /Page reload sent to client/,
+    ),
     setTimeout(100).then(() => replaceInFile(filePath, searchValue, replaceValue)),
   ]);
 }
diff --git a/tests/legacy-cli/e2e/tests/vite/ssr-entry-hono.ts b/tests/legacy-cli/e2e/tests/vite/ssr-entry-hono.ts
index 353a6cf5b855..f36b36eec332 100644
--- a/tests/legacy-cli/e2e/tests/vite/ssr-entry-hono.ts
+++ b/tests/legacy-cli/e2e/tests/vite/ssr-entry-hono.ts
@@ -3,7 +3,7 @@ import { setTimeout } from 'node:timers/promises';
 import { replaceInFile, writeMultipleFiles } from '../../utils/fs';
 import { ng, silentNg, waitForAnyProcessOutputToMatch } from '../../utils/process';
 import { installPackage, installWorkspacePackages, uninstallPackage } from '../../utils/packages';
-import { ngServe, updateJsonFile, useSha } from '../../utils/project';
+import { ngServe, useSha } from '../../utils/project';
 import { getGlobalVariable } from '../../utils/env';
 
 export default async function () {
@@ -73,6 +73,7 @@ export default async function () {
     'src/app/home/home.component.html',
     'home works',
     'yay home works!!!',
+    true,
   );
   await validateResponse('/api/test', /foo/);
   await validateResponse('/home', /yay home works/);
@@ -94,9 +95,12 @@ async function modifyFileAndWaitUntilUpdated(
   filePath: string,
   searchValue: string,
   replaceValue: string,
+  hmr = false,
 ): Promise<void> {
   await Promise.all([
-    waitForAnyProcessOutputToMatch(/Page reload sent to client/),
+    waitForAnyProcessOutputToMatch(
+      hmr ? /Component update sent to client/ : /Page reload sent to client/,
+    ),
     setTimeout(100).then(() => replaceInFile(filePath, searchValue, replaceValue)),
   ]);
 }