diff --git a/packages/builder/src/builderStore/store/frontend.js b/packages/builder/src/builderStore/store/frontend.js
index b6d315f15d..97fad5f1bb 100644
--- a/packages/builder/src/builderStore/store/frontend.js
+++ b/packages/builder/src/builderStore/store/frontend.js
@@ -236,12 +236,12 @@ export const getFrontendStore = () => {
           }
         }
 
-        // Validate the entire tree and throw and error if an illegal child is
+        // Validate the entire tree and throw an error if an illegal child is
         // found anywhere
         const illegalChild = findIllegalChild(screen.props)
         if (illegalChild) {
           const def = store.actions.components.getDefinition(illegalChild)
-          throw `A ${def.name} can't be inserted here`
+          throw `You can't place a ${def.name} here`
         }
       },
       save: async screen => {
diff --git a/packages/builder/src/pages/builder/app/[application]/design/[screenId]/components/[componentId]/new/_components/NewComponentPanel.svelte b/packages/builder/src/pages/builder/app/[application]/design/[screenId]/components/[componentId]/new/_components/NewComponentPanel.svelte
index ca8912a74f..0610be6d0a 100644
--- a/packages/builder/src/pages/builder/app/[application]/design/[screenId]/components/[componentId]/new/_components/NewComponentPanel.svelte
+++ b/packages/builder/src/pages/builder/app/[application]/design/[screenId]/components/[componentId]/new/_components/NewComponentPanel.svelte
@@ -11,9 +11,10 @@
     notifications,
   } from "@budibase/bbui"
   import structure from "./componentStructure.json"
-  import { store, selectedComponent } from "builderStore"
+  import { store, selectedComponent, selectedScreen } from "builderStore"
   import { onMount } from "svelte"
   import { fly } from "svelte/transition"
+  import { findComponentPath } from "builderStore/componentUtils"
 
   let section = "components"
   let searchString
@@ -21,8 +22,10 @@
   let selectedIndex
   let componentList = []
 
-  $: currentDefinition = store.actions.components.getDefinition(
-    $selectedComponent?._component
+  $: allowedComponents = getAllowedComponents(
+    $store.components,
+    $selectedScreen,
+    $selectedComponent
   )
   $: enrichedStructure = enrichStructure(
     structure,
@@ -31,13 +34,50 @@
   )
   $: filteredStructure = filterStructure(
     enrichedStructure,
-    section,
-    currentDefinition,
+    allowedComponents,
     searchString
   )
   $: blocks = enrichedStructure.find(x => x.name === "Blocks").children
   $: orderMap = createComponentOrderMap(componentList)
 
+  const getAllowedComponents = (allComponents, screen, component) => {
+    const path = findComponentPath(screen?.props, component?._id)
+    if (!path?.length) {
+      return []
+    }
+
+    // Get initial set of allowed components
+    let allowedComponents = []
+    const definition = store.actions.components.getDefinition(
+      component?._component
+    )
+    if (definition.legalDirectChildren?.length) {
+      allowedComponents = definition.legalDirectChildren.map(x => {
+        return `@budibase/standard-components/${x}`
+      })
+    } else {
+      allowedComponents = Object.keys(allComponents)
+    }
+
+    // Build up list of illegal children from ancestors
+    let illegalChildren = definition.illegalChildren || []
+    path.forEach(ancestor => {
+      const def = store.actions.components.getDefinition(ancestor._component)
+      const blacklist = def?.illegalChildren?.map(x => {
+        return `@budibase/standard-components/${x}`
+      })
+      illegalChildren = [...illegalChildren, ...(blacklist || [])]
+    })
+    illegalChildren = [...new Set(illegalChildren)]
+
+    // Filter out illegal children from allowed components
+    allowedComponents = allowedComponents.filter(x => {
+      return !illegalChildren.includes(x)
+    })
+
+    return allowedComponents
+  }
+
   // Creates a simple lookup map from an array, so we can find the selected
   // component much faster
   const createComponentOrderMap = list => {
@@ -90,7 +130,7 @@
     return enrichedStructure
   }
 
-  const filterStructure = (structure, section, currentDefinition, search) => {
+  const filterStructure = (structure, allowedComponents, search) => {
     selectedIndex = search ? 0 : null
     componentList = []
     if (!structure?.length) {
@@ -114,7 +154,7 @@
         }
 
         // Check if the component is allowed as a child
-        return !currentDefinition?.illegalChildren?.includes(name)
+        return allowedComponents.includes(child.component)
       })
       if (matchedChildren.length) {
         filteredStructure.push({