diff --git a/source/blender/io/common/IO_abstract_hierarchy_iterator.h b/source/blender/io/common/IO_abstract_hierarchy_iterator.h
index 0b8405e2234..0f954314a1b 100644
--- a/source/blender/io/common/IO_abstract_hierarchy_iterator.h
+++ b/source/blender/io/common/IO_abstract_hierarchy_iterator.h
@@ -281,7 +281,7 @@ class AbstractHierarchyIterator {
                                       const ExportGraph::key_type &graph_index) const;
 
   void determine_export_paths(const HierarchyContext *parent_context);
-  void determine_duplication_references(const HierarchyContext *parent_context,
+  bool determine_duplication_references(const HierarchyContext *parent_context,
                                         const std::string &indent);
 
   /* These three functions create writers and call their write() method. */
@@ -365,14 +365,6 @@ class AbstractHierarchyIterator {
 
   AbstractHierarchyWriter *get_writer(const std::string &export_path) const;
   ExportChildren &graph_children(const HierarchyContext *context);
-
-  /* Return true if duplication references should be resolved for the children of the given
-   * context. */
-  virtual bool should_determine_duplication_references(
-      const HierarchyContext *parent_context) const
-  {
-    return parent_context != nullptr;
-  }
 };
 
 }  // namespace blender::io
diff --git a/source/blender/io/common/intern/abstract_hierarchy_iterator.cc b/source/blender/io/common/intern/abstract_hierarchy_iterator.cc
index a661157773c..ac515368c7b 100644
--- a/source/blender/io/common/intern/abstract_hierarchy_iterator.cc
+++ b/source/blender/io/common/intern/abstract_hierarchy_iterator.cc
@@ -543,11 +543,15 @@ void AbstractHierarchyIterator::determine_export_paths(const HierarchyContext *p
   }
 }
 
-void AbstractHierarchyIterator::determine_duplication_references(
+bool AbstractHierarchyIterator::determine_duplication_references(
     const HierarchyContext *parent_context, const std::string &indent)
 {
   ExportChildren children = graph_children(parent_context);
 
+  /* Will be set to true if any child contexts are instances that were designated
+   * as proxies for the original prototype.*/
+  bool contains_proxy_prototype = false;
+
   for (HierarchyContext *context : children) {
     if (context->duplicator != nullptr) {
       ID *source_id = &context->object->id;
@@ -557,6 +561,7 @@ void AbstractHierarchyIterator::determine_duplication_references(
         /* The original was not found, so mark this instance as "the original". */
         context->mark_as_not_instanced();
         duplisource_export_path_[source_id] = context->export_path;
+        contains_proxy_prototype = true;
       }
       else {
         context->mark_as_instance_of(it->second);
@@ -583,10 +588,18 @@ void AbstractHierarchyIterator::determine_duplication_references(
       }
     }
 
-    if (should_determine_duplication_references(context)) {
-      determine_duplication_references(context, indent + "  ");
+    if (determine_duplication_references(context, indent + "  ")) {
+      /* A descendant was designated a prototype proxy. If the current context
+       * is an instance, we must change it to a prototype proxy as well. */
+      if (context->is_instance()) {
+        context->mark_as_not_instanced();
+        ID *source_id = &context->object->id;
+        duplisource_export_path_[source_id] = context->export_path;
+      }
+      contains_proxy_prototype = true;
     }
   }
+  return contains_proxy_prototype;
 }
 
 void AbstractHierarchyIterator::make_writers(const HierarchyContext *parent_context)
diff --git a/source/blender/io/usd/intern/usd_hierarchy_iterator.cc b/source/blender/io/usd/intern/usd_hierarchy_iterator.cc
index febbc45f72f..6f759ba1863 100644
--- a/source/blender/io/usd/intern/usd_hierarchy_iterator.cc
+++ b/source/blender/io/usd/intern/usd_hierarchy_iterator.cc
@@ -263,12 +263,6 @@ bool USDHierarchyIterator::include_child_writers(const HierarchyContext *context
   return !(params_.use_instancing && context->is_instance());
 }
 
-bool USDHierarchyIterator::should_determine_duplication_references(
-    const HierarchyContext *parent_context) const
-{
-  return !(params_.use_instancing && parent_context->is_instance());
-}
-
 void USDHierarchyIterator::add_usd_skel_export_mapping(const Object *obj, const pxr::SdfPath &path)
 {
   if (params_.export_shapekeys && is_mesh_with_shape_keys(obj)) {
diff --git a/source/blender/io/usd/intern/usd_hierarchy_iterator.hh b/source/blender/io/usd/intern/usd_hierarchy_iterator.hh
index 7b30823a8ec..ef297a4599c 100644
--- a/source/blender/io/usd/intern/usd_hierarchy_iterator.hh
+++ b/source/blender/io/usd/intern/usd_hierarchy_iterator.hh
@@ -60,11 +60,6 @@ class USDHierarchyIterator : public AbstractHierarchyIterator {
   virtual bool include_data_writers(const HierarchyContext *context) const override;
   virtual bool include_child_writers(const HierarchyContext *context) const override;
 
-  /* Return true if duplication references should be resolved for the children of the given
-   * context. */
-  virtual bool should_determine_duplication_references(
-      const HierarchyContext *parent_context) const override;
-
  private:
   USDExporterContext create_usd_export_context(const HierarchyContext *context);