diff --git a/packages/block-editor/src/components/rich-text/content.scss b/packages/block-editor/src/components/rich-text/content.scss
index 63810797a0256f..38a7a4feee1d7d 100644
--- a/packages/block-editor/src/components/rich-text/content.scss
+++ b/packages/block-editor/src/components/rich-text/content.scss
@@ -59,5 +59,5 @@ figcaption.block-editor-rich-text__editable [data-rich-text-placeholder]::before
 // A background, not a pseudo-element: generated content adds a caret stop in
 // Firefox.
 .is-selected .non-breaking-space {
-	background: radial-gradient(circle, $alert-red 2px, transparent 2.5px) center / 100% 100% no-repeat;
+	background: radial-gradient(circle, var(--wp-admin-theme-color) 2px, transparent 2.5px) center / 100% 100% no-repeat;
 }
diff --git a/packages/format-library/CHANGELOG.md b/packages/format-library/CHANGELOG.md
index 2aa537c3218743..f59a86807b8e31 100644
--- a/packages/format-library/CHANGELOG.md
+++ b/packages/format-library/CHANGELOG.md
@@ -4,6 +4,7 @@
 
 ### Bug Fixes
 
+-   Non-breaking space: Remove a non-breaking space instead of replacing it when HTML would collapse the space ([#85873](https://github.com/WordPress/gutenberg/pull/85873)).
 -   Math: Let keyboard users move focus out of the LaTeX field when the formula has an error, instead of sending focus back to the field ([#86027](https://github.com/WordPress/gutenberg/pull/86027)).
 -   Non-breaking space: Label the replace button "Replace non-breaking space" when it replaces only one ([#85777](https://github.com/WordPress/gutenberg/pull/85777)).
 
diff --git a/packages/format-library/src/non-breaking-space/index.tsx b/packages/format-library/src/non-breaking-space/index.tsx
index e8094cecd2d654..b898d1056fa11d 100644
--- a/packages/format-library/src/non-breaking-space/index.tsx
+++ b/packages/format-library/src/non-breaking-space/index.tsx
@@ -1,5 +1,5 @@
 import { __ } from '@wordpress/i18n';
-import { applyFormat, insert, useAnchor } from '@wordpress/rich-text';
+import { applyFormat, insert, remove, useAnchor } from '@wordpress/rich-text';
 import type { RichTextValue } from '@wordpress/rich-text';
 import {
 	RichTextShortcut,
@@ -71,13 +71,29 @@ export const nonBreakingSpace = {
 
 			const [ from, to ] = range;
 			const { text } = value;
-			onChange( {
+			let newValue: RichTextValue = {
 				...value,
 				text:
 					text.slice( 0, from ) +
 					text.slice( from, to ).replaceAll( NBSP, ' ' ) +
 					text.slice( to ),
-			} );
+			};
+
+			// HTML collapses a space next to another space or at the start or
+			// end of a line, so remove the non-breaking space there instead.
+			for ( let index = to - 1; index >= from; index-- ) {
+				const isCollapsed = [
+					newValue.text[ index - 1 ],
+					newValue.text[ index + 1 ],
+				].some( ( character ) =>
+					[ undefined, ' ', '\n' ].includes( character )
+				);
+				if ( text[ index ] === NBSP && isCollapsed ) {
+					newValue = remove( newValue, index, index + 1 );
+				}
+			}
+
+			onChange( newValue );
 			onFocus();
 		}
 
diff --git a/test/e2e/specs/editor/various/rich-text.spec.js b/test/e2e/specs/editor/various/rich-text.spec.js
index a89ea29e0e722e..35f8fccbd84b43 100644
--- a/test/e2e/specs/editor/various/rich-text.spec.js
+++ b/test/e2e/specs/editor/various/rich-text.spec.js
@@ -1091,12 +1091,75 @@ test.describe( 'RichText (@firefox, @webkit)', () => {
 				exact: true,
 			} )
 			.click();
+		await expect.poll( editor.getBlocks ).toMatchObject( [
+			{
+				name: 'core/paragraph',
+				attributes: { content: 'one two' },
+			},
+		] );
+	} );
+
+	test( 'should remove non-breaking spaces that would collapse when replaced', async ( {
+		page,
+		editor,
+		pageUtils,
+	} ) => {
+		const toolbar = page.getByRole( 'toolbar', { name: 'Block tools' } );
+
+		await editor.insertBlock( {
+			name: 'core/paragraph',
+			attributes: { content: 'one \u00a0 two' },
+		} );
+		await editor.canvas
+			.getByRole( 'document', { name: 'Block: Paragraph' } )
+			.click();
+		await pageUtils.pressKeys( 'End' );
+		// After the non-breaking space.
+		await pageUtils.pressKeys( 'ArrowLeft', { times: 4 } );
+		await editor.showBlockToolbar();
+		await toolbar
+			.getByRole( 'button', {
+				name: 'Replace non-breaking space',
+				exact: true,
+			} )
+			.click();
 		await expect.poll( editor.getBlocks ).toMatchObject( [
 			{
 				name: 'core/paragraph',
 				attributes: { content: 'one  two' },
 			},
 		] );
+
+		await page.keyboard.type( '!' );
+		await expect.poll( editor.getBlocks ).toMatchObject( [
+			{
+				name: 'core/paragraph',
+				attributes: { content: 'one ! two' },
+			},
+		] );
+
+		await editor.insertBlock( {
+			name: 'core/paragraph',
+			attributes: { content: '\u00a0one\u00a0\u00a0two\u00a0' },
+		} );
+		await editor.canvas
+			.getByRole( 'document', { name: 'Block: Paragraph' } )
+			.last()
+			.click();
+		await pageUtils.pressKeys( 'primary+a' );
+		await editor.showBlockToolbar();
+		await toolbar
+			.getByRole( 'button', {
+				name: 'Replace non-breaking spaces',
+				exact: true,
+			} )
+			.click();
+		await expect
+			.poll( editor.getBlocks )
+			.toMatchObject( [
+				{ attributes: { content: 'one ! two' } },
+				{ attributes: { content: 'one two' } },
+			] );
 	} );
 
 	test( 'should delete all content of a block', async ( {