diff --git a/news/changelog-1.3.md b/news/changelog-1.3.md
index b31b0f88e5c..9c0316f1d6c 100644
--- a/news/changelog-1.3.md
+++ b/news/changelog-1.3.md
@@ -101,6 +101,10 @@
 
 - Improve the performance of extremely large documents with margin elements by improving the efficiency of positioning the elements.
 
+## Docx Format
+
+- Ensure that the figure caption and the figure itself is laid out as consecutive paragraphs. ([#4004](https://github.com/quarto-dev/quarto-cli/issues/4004))
+
 ## Listings
 
 - Listings now support `template-params`, which will be passed to custom EJS templates in a variable called `templateParams` when a listing is rendered.
diff --git a/src/resources/filters/layout/wp.lua b/src/resources/filters/layout/wp.lua
index e54637378be..3bd2b93b706 100644
--- a/src/resources/filters/layout/wp.lua
+++ b/src/resources/filters/layout/wp.lua
@@ -8,46 +8,40 @@ function tableWpPanel(divEl, layout, caption)
   })
 end
 
-
 function wpDivFigure(div)
-  
-  -- options
-  options = {
-    pageWidth = wpPageWidth(),
-  }
 
-  -- determine divCaption handler (always left-align)
-  local divCaption = nil
-  if _quarto.format.isDocxOutput() then
-    divCaption = docxDivCaption
-  elseif _quarto.format.isOdtOutput() then
-    divCaption = odtDivCaption
-  end
-  if divCaption then
-    options.divCaption = function(el, align) return divCaption(el, "left") end
-  end
-
-  -- get alignment
   local align = figAlignAttribute(div)
+  local capLoc = capLocation("fig", "bottom")
+
+  local captionPara = div.content[2]:clone()
+  local figurePara = div.content[1]:clone()
+
+  -- Switch to modern alignment directives for OOXML
+  local wordAligns = {
+    left = "start",
+    right = "end",
+    center = "center"
+  }
+
+  -- Generate a raw OOXML string that sets paragraph properties
+  local docxAlign = "<w:pPr><w:pStyle w:val=\"Caption\" /><w:keepNext /><w:jc w:val=\"" .. wordAligns[align] .. "\"/></w:pPr>"
   
-  -- create the row/cell for the figure
-  local row = pandoc.List()
-  local cell = div:clone()
-  transferImageWidthToCell(div, cell)
-  row:insert(tableCellContent(cell, align, options))
-  
-  -- make the table
-  local figureTable = pandoc.SimpleTable(
-    pandoc.List(), -- caption
-    { layoutTableAlign(align) },  
-    {   1   },         -- full width
-    pandoc.List(), -- no headers
-    { row }            -- figure
-  )
-  
-  -- return it
-  return pandoc.utils.from_simple_table(figureTable)
-  
+  captionPara.content:insert(1, pandoc.RawInline("openxml", docxAlign))
+
+  if capLoc == "top" then
+    
+    return pandoc.Div({
+      captionPara,
+      figurePara
+    })
+
+  else
+    -- "bottom" or default
+    return pandoc.Div({
+      figurePara,
+      captionPara
+    })  
+  end
 end
 
 function wpPageWidth()
diff --git a/src/resources/filters/quarto-pre/options.lua b/src/resources/filters/quarto-pre/options.lua
index 0a5a986bbe5..b4fd252a79d 100644
--- a/src/resources/filters/quarto-pre/options.lua
+++ b/src/resources/filters/quarto-pre/options.lua
@@ -30,6 +30,15 @@ function var(name, def)
   end
 end
 
+function capLocation(scope, default)
+  local loc = option(scope .. '-cap-location', option('cap-location', nil))
+  if loc ~= nil then
+    return inlinesToString(loc)
+  else
+    return default
+  end
+end
+
 function parseOption(name, options, def) 
   local keys = split(name, ".")
 
diff --git a/tests/docs/smoke-all/2023/03/01/4004.qmd b/tests/docs/smoke-all/2023/03/01/4004.qmd
new file mode 100644
index 00000000000..880295753d7
--- /dev/null
+++ b/tests/docs/smoke-all/2023/03/01/4004.qmd
@@ -0,0 +1,48 @@
+---
+title: "issue 4004"
+format: 
+  docx:
+    fig-cap-location: top
+_quarto:
+  tests:
+    docx:
+      ensureDocxRegexMatches: 
+        - [
+          <w:pPr><w:pStyle w:val="Caption" /><w:keepNext /><w:jc w:val="start"/></w:pPr><w:r><w:t xml:space="preserve">Figure 1.*?<a:graphic>.*?</a:graphic>,
+          <w:pPr><w:pStyle w:val="Caption" /><w:keepNext /><w:jc w:val="end"/></w:pPr><w:r><w:t xml:space="preserve">Figure 2.*?<a:graphic>.*?</a:graphic>,
+          <w:pPr><w:pStyle w:val="Caption" /><w:keepNext /><w:jc w:val="center"/></w:pPr><w:r><w:t xml:space="preserve">Figure 3.*?<a:graphic>.*?</a:graphic>
+          ]
+---
+
+Lets's see @fig-01. And we'll use different alignments.
+
+```{r}
+#| label: fig-01
+#| fig-cap: The figure caption.
+#| fig-align: left
+plot(1:10)
+```
+
+```{r}
+#| label: fig-02
+#| fig-cap: The figure caption.
+#| fig-align: right
+plot(1:10)
+```
+
+```{r}
+#| label: fig-03
+#| fig-cap: The figure caption.
+#| fig-align: center
+plot(1:10)
+```
+
+Compare with tables (caption implementation not changed for this issue)
+
+```{r}
+#| label: tbl-01
+#| tbl-cap: The table caption.
+library(knitr)
+
+kable(mtcars[1:2, 1:2])
+```