diff --git a/CHANGELOG.md b/CHANGELOG.md
index b59438dc4fe7..1b9208d31e00 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -2,6 +2,10 @@
 
 ## [Unreleased]
 
+### Fixed
+
+- Fixes issue where wrapped strings would be incorrectly indented in macro defs when `format_strings` was enabled [#4036](https://github.com/rust-lang/rustfmt/issues/4036)
+
 ## [1.4.38] 2021-10-20
 
 ### Changed
diff --git a/src/utils.rs b/src/utils.rs
index 2428d8cb0fd8..35512e78fa6e 100644
--- a/src/utils.rs
+++ b/src/utils.rs
@@ -646,9 +646,22 @@ pub(crate) fn trim_left_preserve_layout(
 }
 
 /// Based on the given line, determine if the next line can be indented or not.
-/// This allows to preserve the indentation of multi-line literals.
-pub(crate) fn indent_next_line(kind: FullCodeCharKind, _line: &str, config: &Config) -> bool {
-    !(kind.is_string() || (config.version() == Version::Two && kind.is_commented_string()))
+/// This allows to preserve the indentation of multi-line literals when
+/// re-inserted a code block that has been formatted separately from the rest
+/// of the code, such as code in macro defs or code blocks doc comments.
+pub(crate) fn indent_next_line(kind: FullCodeCharKind, line: &str, config: &Config) -> bool {
+    if kind.is_string() {
+        // If the string ends with '\', the string has been wrapped over
+        // multiple lines. If `format_strings = true`, then the indentation of
+        // strings wrapped over multiple lines will have been adjusted while
+        // formatting the code block, therefore the string's indentation needs
+        // to be adjusted for the code surrounding the code block.
+        config.format_strings() && line.ends_with('\\')
+    } else if config.version() == Version::Two {
+        !kind.is_commented_string()
+    } else {
+        true
+    }
 }
 
 pub(crate) fn is_empty_line(s: &str) -> bool {
diff --git a/tests/source/issue-4036/one.rs b/tests/source/issue-4036/one.rs
new file mode 100644
index 000000000000..9f9675f51631
--- /dev/null
+++ b/tests/source/issue-4036/one.rs
@@ -0,0 +1,11 @@
+// rustfmt-format_strings: true
+
+macro_rules! test {
+    () => {
+        fn from() {
+            None.expect(
+                "We asserted that `buffer.len()` is exactly `$n` so we can expect `ApInt::from_iter` to be successful.",
+            )
+        }
+    };
+}
diff --git a/tests/source/issue-4036/three.rs b/tests/source/issue-4036/three.rs
new file mode 100644
index 000000000000..e1865dd0868b
--- /dev/null
+++ b/tests/source/issue-4036/three.rs
@@ -0,0 +1,12 @@
+// rustfmt-format_strings: true
+// rustfmt-hard_tabs: true
+
+macro_rules! test {
+    () => {
+        fn from() {
+            None.expect(
+                "Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.",
+            )
+        }
+    };
+}
diff --git a/tests/source/issue-4036/two.rs b/tests/source/issue-4036/two.rs
new file mode 100644
index 000000000000..fa54d2e3e09c
--- /dev/null
+++ b/tests/source/issue-4036/two.rs
@@ -0,0 +1,11 @@
+// rustfmt-format_strings: true
+
+macro_rules! test {
+    () => {
+        fn from() {
+            None.expect(
+                "Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.",
+            )
+        }
+    };
+}
diff --git a/tests/target/issue-4036/one.rs b/tests/target/issue-4036/one.rs
new file mode 100644
index 000000000000..54e490b7fbea
--- /dev/null
+++ b/tests/target/issue-4036/one.rs
@@ -0,0 +1,12 @@
+// rustfmt-format_strings: true
+
+macro_rules! test {
+    () => {
+        fn from() {
+            None.expect(
+                "We asserted that `buffer.len()` is exactly `$n` so we can expect \
+                 `ApInt::from_iter` to be successful.",
+            )
+        }
+    };
+}
diff --git a/tests/target/issue-4036/three.rs b/tests/target/issue-4036/three.rs
new file mode 100644
index 000000000000..394dc8633f53
--- /dev/null
+++ b/tests/target/issue-4036/three.rs
@@ -0,0 +1,17 @@
+// rustfmt-format_strings: true
+// rustfmt-hard_tabs: true
+
+macro_rules! test {
+	() => {
+		fn from() {
+			None.expect(
+				"Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor \
+				 incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis \
+				 nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. \
+				 Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu \
+				 fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in \
+				 culpa qui officia deserunt mollit anim id est laborum.",
+			)
+		}
+	};
+}
diff --git a/tests/target/issue-4036/two.rs b/tests/target/issue-4036/two.rs
new file mode 100644
index 000000000000..01cafa76b684
--- /dev/null
+++ b/tests/target/issue-4036/two.rs
@@ -0,0 +1,16 @@
+// rustfmt-format_strings: true
+
+macro_rules! test {
+    () => {
+        fn from() {
+            None.expect(
+                "Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor \
+                 incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis \
+                 nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. \
+                 Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu \
+                 fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in \
+                 culpa qui officia deserunt mollit anim id est laborum.",
+            )
+        }
+    };
+}