diff --git a/CHANGELOG.md b/CHANGELOG.md
index d1b7c61d2293..104e4324bdfa 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -15,6 +15,7 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 - Split box shadows on top-level commas only ([#7479](https://github.com/tailwindlabs/tailwindcss/pull/7479))
 - Use local user CSS cache for `@apply` ([#7524](https://github.com/tailwindlabs/tailwindcss/pull/7524))
 - Invalidate context when main CSS changes ([#7626](https://github.com/tailwindlabs/tailwindcss/pull/7626))
+- Only add `!` to selector class matching template candidate when using important modifier with mutli-class selectors ([#7664](https://github.com/tailwindlabs/tailwindcss/pull/7664))
 
 ### Changed
 
diff --git a/src/lib/generateRules.js b/src/lib/generateRules.js
index 40322cd15d53..1ff2800cf562 100644
--- a/src/lib/generateRules.js
+++ b/src/lib/generateRules.js
@@ -88,7 +88,7 @@ function applyPrefix(matches, context) {
   return matches
 }
 
-function applyImportant(matches) {
+function applyImportant(matches, classCandidate) {
   if (matches.length === 0) {
     return matches
   }
@@ -98,7 +98,10 @@ function applyImportant(matches) {
     let container = postcss.root({ nodes: [rule.clone()] })
     container.walkRules((r) => {
       r.selector = updateAllClasses(r.selector, (className) => {
-        return `!${className}`
+        if (className === classCandidate) {
+          return `!${className}`
+        }
+        return className
       })
       r.walkDecls((d) => (d.important = true))
     })
@@ -514,7 +517,7 @@ function* resolveMatches(candidate, context) {
     matches = applyPrefix(matches, context)
 
     if (important) {
-      matches = applyImportant(matches, context)
+      matches = applyImportant(matches, classCandidate)
     }
 
     for (let variant of variants) {
diff --git a/tests/important-modifier.test.js b/tests/important-modifier.test.js
index d25d66190c46..e57c81340575 100644
--- a/tests/important-modifier.test.js
+++ b/tests/important-modifier.test.js
@@ -17,6 +17,22 @@ test('important modifier', () => {
       },
     ],
     corePlugins: { preflight: false },
+    plugins: [
+      function ({ theme, matchUtilities }) {
+        matchUtilities(
+          {
+            'custom-parent': (value) => {
+              return {
+                '.custom-child': {
+                  margin: value,
+                },
+              }
+            },
+          },
+          { values: theme('spacing') }
+        )
+      },
+    ],
   }
 
   let input = css`
@@ -57,6 +73,9 @@ test('important modifier', () => {
       .\!font-bold {
         font-weight: 700 !important;
       }
+      .\!custom-parent-5 .custom-child {
+        margin: 1.25rem !important;
+      }
       .hover\:\!text-center:hover {
         text-align: center !important;
       }