diff --git a/.changeset/tasty-cooks-own.md b/.changeset/tasty-cooks-own.md
new file mode 100644
index 000000000..b2fca7f10
--- /dev/null
+++ b/.changeset/tasty-cooks-own.md
@@ -0,0 +1,5 @@
+---
+"@preact/signals": patch
+---
+
+Allow for context to propagate to components using context
diff --git a/packages/preact/src/index.ts b/packages/preact/src/index.ts
index 5171394ae..f2968c0c5 100644
--- a/packages/preact/src/index.ts
+++ b/packages/preact/src/index.ts
@@ -271,7 +271,7 @@ hook(OptionsTypes.UNMOUNT, (old, vnode: VNode) => {
 
 /** Mark components that use hook state so we can skip sCU optimization. */
 hook(OptionsTypes.HOOK, (old, component, index, type) => {
-	if (type < 3)
+	if (type < 3 || type === 9)
 		(component as AugmentedComponent)._updateFlags |= HAS_HOOK_STATE;
 	old(component, index, type);
 });
diff --git a/packages/preact/test/index.test.tsx b/packages/preact/test/index.test.tsx
index 212375da1..9bc5bb11d 100644
--- a/packages/preact/test/index.test.tsx
+++ b/packages/preact/test/index.test.tsx
@@ -1,11 +1,12 @@
 import {
-	signal,
 	computed,
 	useComputed,
 	useSignalEffect,
 	Signal,
+	signal,
 } from "@preact/signals";
-import { createElement, createRef, render } from "preact";
+import { createElement, createRef, render, createContext } from "preact";
+import { useContext, useState } from "preact/hooks";
 import { setupRerender, act } from "preact/test-utils";
 
 const sleep = (ms?: number) => new Promise(r => setTimeout(r, ms));
@@ -417,6 +418,39 @@ describe("@preact/signals", () => {
 		});
 	});
 
+	describe('hooks mixed with signals', () => {
+		it('signals should not stop context from propagating', () => {
+			const ctx = createContext({ test: 'should-not-exist' });
+			let update: any;
+
+			function Provider(props: any) {
+				const [test, setTest] = useState('foo');
+				update = setTest
+				return (
+					<ctx.Provider value={{ test }}>{props.children}</ctx.Provider>
+				);
+			}
+
+			const s = signal('baz')
+			function Test() {
+				const value = useContext(ctx);
+				return <p>{value.test} {s.value}</p>
+			}
+
+			function App() {
+				return <Provider><Test /></Provider>
+			}
+
+			render(<App />, scratch);
+
+			expect(scratch.innerHTML).to.equal('<p>foo baz</p>')
+			act(() => {
+				update('bar')
+			})
+			expect(scratch.innerHTML).to.equal('<p>bar baz</p>')
+		})
+	})
+
 	describe("useSignalEffect()", () => {
 		it("should be invoked after commit", async () => {
 			const ref = createRef();