diff --git a/packages/compiler-cli/src/ngtsc/indexer/test/template_spec.ts b/packages/compiler-cli/src/ngtsc/indexer/test/template_spec.ts
index d7accd9aa45..da38b965aaf 100644
--- a/packages/compiler-cli/src/ngtsc/indexer/test/template_spec.ts
+++ b/packages/compiler-cli/src/ngtsc/indexer/test/template_spec.ts
@@ -889,5 +889,26 @@ runInEachFileSystem(() => {
         }
       ]));
     });
+
+    it('should handle interpolations in attributes, preceded by HTML entity', () => {
+      const template = `<img src="&nbsp;{{foo}}" />`;
+      const refs = getTemplateIdentifiers(bind(template));
+
+      expect(Array.from(refs)).toEqual([
+        {
+          kind: IdentifierKind.Element,
+          name: 'img',
+          span: new AbsoluteSourceSpan(1, 4),
+          usedDirectives: new Set(),
+          attributes: new Set(),
+        },
+        {
+          kind: IdentifierKind.Property,
+          name: 'foo',
+          span: new AbsoluteSourceSpan(18, 21),
+          target: null,
+        }
+      ]);
+    });
   });
 });
diff --git a/packages/compiler/src/expression_parser/parser.ts b/packages/compiler/src/expression_parser/parser.ts
index 739b8cb2df3..3d24447079a 100644
--- a/packages/compiler/src/expression_parser/parser.ts
+++ b/packages/compiler/src/expression_parser/parser.ts
@@ -8,6 +8,7 @@
 
 import * as chars from '../chars';
 import {DEFAULT_INTERPOLATION_CONFIG, InterpolationConfig} from '../ml_parser/interpolation_config';
+import {InterpolatedAttributeToken, InterpolatedTextToken, TokenType as MlParserTokenType} from '../ml_parser/tokens';
 
 import {AbsoluteSourceSpan, AST, ASTWithSource, Binary, BindingPipe, Call, Chain, Conditional, EmptyExpr, ExpressionBinding, ImplicitReceiver, Interpolation, KeyedRead, KeyedWrite, LiteralArray, LiteralMap, LiteralMapKey, LiteralPrimitive, NonNullAssert, ParserError, ParseSpan, PrefixNot, PropertyRead, PropertyWrite, RecursiveAstVisitor, SafeCall, SafeKeyedRead, SafePropertyRead, TemplateBinding, TemplateBindingIdentifier, ThisReceiver, Unary, VariableBinding} from './ast';
 import {EOF, Lexer, Token, TokenType} from './lexer';
@@ -147,9 +148,10 @@ export class Parser {
 
   parseInterpolation(
       input: string, location: string, absoluteOffset: number,
+      interpolatedTokens: InterpolatedAttributeToken[]|InterpolatedTextToken[]|null,
       interpolationConfig: InterpolationConfig = DEFAULT_INTERPOLATION_CONFIG): ASTWithSource|null {
     const {strings, expressions, offsets} =
-        this.splitInterpolation(input, location, interpolationConfig);
+        this.splitInterpolation(input, location, interpolatedTokens, interpolationConfig);
     if (expressions.length === 0) return null;
 
     const expressionNodes: AST[] = [];
@@ -203,10 +205,13 @@ export class Parser {
    */
   splitInterpolation(
       input: string, location: string,
+      interpolatedTokens: InterpolatedAttributeToken[]|InterpolatedTextToken[]|null,
       interpolationConfig: InterpolationConfig = DEFAULT_INTERPOLATION_CONFIG): SplitInterpolation {
     const strings: InterpolationPiece[] = [];
     const expressions: InterpolationPiece[] = [];
     const offsets: number[] = [];
+    const inputToTemplateIndexMap =
+        interpolatedTokens ? getIndexMapForOriginalTemplate(interpolatedTokens) : null;
     let i = 0;
     let atInterpolation = false;
     let extendLastString = false;
@@ -244,7 +249,9 @@ export class Parser {
               `at column ${i} in`, location);
         }
         expressions.push({text, start: fullStart, end: fullEnd});
-        offsets.push(exprStart);
+        const startInOriginalTemplate = inputToTemplateIndexMap?.get(fullStart) ?? fullStart;
+        const offset = startInOriginalTemplate + interpStart.length;
+        offsets.push(offset);
 
         i = fullEnd;
         atInterpolation = false;
@@ -1314,3 +1321,38 @@ class SimpleExpressionChecker extends RecursiveAstVisitor {
     this.errors.push('pipes');
   }
 }
+/**
+ * Computes the real offset in the original template for indexes in an interpolation.
+ *
+ * Because templates can have encoded HTML entities and the input passed to the parser at this stage
+ * of the compiler is the _decoded_ value, we need to compute the real offset using the original
+ * encoded values in the interpolated tokens. Note that this is only a special case handling for
+ * `MlParserTokenType.ENCODED_ENTITY` token types. All other interpolated tokens are expected to
+ * have parts which exactly match the input string for parsing the interpolation.
+ *
+ * @param interpolatedTokens The tokens for the interpolated value.
+ *
+ * @returns A map of index locations in the decoded template to indexes in the original template
+ */
+function getIndexMapForOriginalTemplate(interpolatedTokens: InterpolatedAttributeToken[]|
+                                        InterpolatedTextToken[]): Map<number, number> {
+  let offsetMap = new Map<number, number>();
+  let consumedInOriginalTemplate = 0;
+  let consumedInInput = 0;
+  let tokenIndex = 0;
+  while (tokenIndex < interpolatedTokens.length) {
+    const currentToken = interpolatedTokens[tokenIndex];
+    if (currentToken.type === MlParserTokenType.ENCODED_ENTITY) {
+      const [decoded, encoded] = currentToken.parts;
+      consumedInOriginalTemplate += encoded.length;
+      consumedInInput += decoded.length;
+    } else {
+      const lengthOfParts = currentToken.parts.reduce((sum, current) => sum + current.length, 0);
+      consumedInInput += lengthOfParts;
+      consumedInOriginalTemplate += lengthOfParts;
+    }
+    offsetMap.set(consumedInInput, consumedInOriginalTemplate);
+    tokenIndex++;
+  }
+  return offsetMap;
+}
diff --git a/packages/compiler/src/render3/r3_template_transform.ts b/packages/compiler/src/render3/r3_template_transform.ts
index 048757f68a4..ead3d64651d 100644
--- a/packages/compiler/src/render3/r3_template_transform.ts
+++ b/packages/compiler/src/render3/r3_template_transform.ts
@@ -11,6 +11,7 @@ import * as i18n from '../i18n/i18n_ast';
 import * as html from '../ml_parser/ast';
 import {replaceNgsp} from '../ml_parser/html_whitespaces';
 import {isNgTemplate} from '../ml_parser/tags';
+import {InterpolatedAttributeToken, InterpolatedTextToken} from '../ml_parser/tokens';
 import {ParseError, ParseErrorLevel, ParseSourceSpan} from '../parse_util';
 import {isStyleUrlResolvable} from '../style_url_resolver';
 import {BindingParser} from '../template_parser/binding_parser';
@@ -255,7 +256,7 @@ class HtmlAstToIvyAst implements html.Visitor {
   }
 
   visitText(text: html.Text): t.Node {
-    return this._visitTextWithInterpolation(text.value, text.sourceSpan, text.i18n);
+    return this._visitTextWithInterpolation(text.value, text.sourceSpan, text.tokens, text.i18n);
   }
 
   visitExpansion(expansion: html.Expansion): t.Icu|null {
@@ -288,7 +289,7 @@ class HtmlAstToIvyAst implements html.Visitor {
 
         vars[formattedKey] = new t.BoundText(ast, value.sourceSpan);
       } else {
-        placeholders[key] = this._visitTextWithInterpolation(value.text, value.sourceSpan);
+        placeholders[key] = this._visitTextWithInterpolation(value.text, value.sourceSpan, null);
       }
     });
     return new t.Icu(vars, placeholders, expansion.sourceSpan, message);
@@ -443,14 +444,17 @@ class HtmlAstToIvyAst implements html.Visitor {
     // No explicit binding found.
     const keySpan = createKeySpan(srcSpan, '' /* prefix */, name);
     const hasBinding = this.bindingParser.parsePropertyInterpolation(
-        name, value, srcSpan, attribute.valueSpan, matchableAttributes, parsedProperties, keySpan);
+        name, value, srcSpan, attribute.valueSpan, matchableAttributes, parsedProperties, keySpan,
+        attribute.valueTokens ?? null);
     return hasBinding;
   }
 
   private _visitTextWithInterpolation(
-      value: string, sourceSpan: ParseSourceSpan, i18n?: i18n.I18nMeta): t.Text|t.BoundText {
+      value: string, sourceSpan: ParseSourceSpan,
+      interpolatedTokens: InterpolatedAttributeToken[]|InterpolatedTextToken[]|null,
+      i18n?: i18n.I18nMeta): t.Text|t.BoundText {
     const valueNoNgsp = replaceNgsp(value);
-    const expr = this.bindingParser.parseInterpolation(valueNoNgsp, sourceSpan);
+    const expr = this.bindingParser.parseInterpolation(valueNoNgsp, sourceSpan, interpolatedTokens);
     return expr ? new t.BoundText(expr, sourceSpan, i18n) : new t.Text(valueNoNgsp, sourceSpan);
   }
 
diff --git a/packages/compiler/src/template_parser/binding_parser.ts b/packages/compiler/src/template_parser/binding_parser.ts
index 0cc05ddae15..0bab38106d9 100644
--- a/packages/compiler/src/template_parser/binding_parser.ts
+++ b/packages/compiler/src/template_parser/binding_parser.ts
@@ -11,6 +11,7 @@ import {AbsoluteSourceSpan, ASTWithSource, BindingPipe, BindingType, BoundElemen
 import {Parser} from '../expression_parser/parser';
 import {InterpolationConfig} from '../ml_parser/interpolation_config';
 import {mergeNsAndName} from '../ml_parser/tags';
+import {InterpolatedAttributeToken, InterpolatedTextToken} from '../ml_parser/tokens';
 import {ParseError, ParseErrorLevel, ParseLocation, ParseSourceSpan} from '../parse_util';
 import {ElementSchemaRegistry} from '../schema/element_schema_registry';
 import {CssSelector} from '../selector';
@@ -95,13 +96,16 @@ export class BindingParser {
     return targetEvents;
   }
 
-  parseInterpolation(value: string, sourceSpan: ParseSourceSpan): ASTWithSource {
+  parseInterpolation(
+      value: string, sourceSpan: ParseSourceSpan,
+      interpolatedTokens: InterpolatedAttributeToken[]|InterpolatedTextToken[]|
+      null): ASTWithSource {
     const sourceInfo = sourceSpan.start.toString();
     const absoluteOffset = sourceSpan.fullStart.offset;
 
     try {
       const ast = this._exprParser.parseInterpolation(
-          value, sourceInfo, absoluteOffset, this._interpolationConfig)!;
+          value, sourceInfo, absoluteOffset, interpolatedTokens, this._interpolationConfig)!;
       if (ast) this._reportExpressionParserErrors(ast.errors, sourceSpan);
       return ast;
     } catch (e) {
@@ -275,8 +279,9 @@ export class BindingParser {
   parsePropertyInterpolation(
       name: string, value: string, sourceSpan: ParseSourceSpan,
       valueSpan: ParseSourceSpan|undefined, targetMatchableAttrs: string[][],
-      targetProps: ParsedProperty[], keySpan: ParseSourceSpan): boolean {
-    const expr = this.parseInterpolation(value, valueSpan || sourceSpan);
+      targetProps: ParsedProperty[], keySpan: ParseSourceSpan,
+      interpolatedTokens: InterpolatedAttributeToken[]|InterpolatedTextToken[]|null): boolean {
+    const expr = this.parseInterpolation(value, valueSpan || sourceSpan, interpolatedTokens);
     if (expr) {
       this._parsePropertyAst(
           name, expr, sourceSpan, keySpan, valueSpan, targetMatchableAttrs, targetProps);
diff --git a/packages/compiler/test/expression_parser/parser_spec.ts b/packages/compiler/test/expression_parser/parser_spec.ts
index a2171dd0887..e7e6c5fe79f 100644
--- a/packages/compiler/test/expression_parser/parser_spec.ts
+++ b/packages/compiler/test/expression_parser/parser_spec.ts
@@ -995,7 +995,8 @@ describe('parser', () => {
 
     it('should support custom interpolation', () => {
       const parser = new Parser(new Lexer());
-      const ast = parser.parseInterpolation('{% a %}', '', 0, {start: '{%', end: '%}'})!.ast as any;
+      const ast =
+          parser.parseInterpolation('{% a %}', '', 0, null, {start: '{%', end: '%}'})!.ast as any;
       expect(ast.strings).toEqual(['', '']);
       expect(ast.expressions.length).toEqual(1);
       expect(ast.expressions[0].name).toEqual('a');
@@ -1194,11 +1195,11 @@ function _parseTemplateBindings(attribute: string, templateUrl: string) {
 
 function parseInterpolation(text: string, location: any = null, offset: number = 0): ASTWithSource|
     null {
-  return createParser().parseInterpolation(text, location, offset);
+  return createParser().parseInterpolation(text, location, offset, null);
 }
 
 function splitInterpolation(text: string, location: any = null): SplitInterpolation|null {
-  return createParser().splitInterpolation(text, location);
+  return createParser().splitInterpolation(text, location, null);
 }
 
 function parseSimpleBinding(text: string, location: any = null, offset: number = 0): ASTWithSource {
diff --git a/packages/compiler/test/render3/r3_ast_absolute_span_spec.ts b/packages/compiler/test/render3/r3_ast_absolute_span_spec.ts
index 83bd27d5d4e..c9a7dc0ee3d 100644
--- a/packages/compiler/test/render3/r3_ast_absolute_span_spec.ts
+++ b/packages/compiler/test/render3/r3_ast_absolute_span_spec.ts
@@ -157,6 +157,45 @@ describe('expression AST absolute source spans', () => {
             ['2', new AbsoluteSourceSpan(11, 12)],
           ]));
     });
+
+    it('should handle HTML entity before interpolation', () => {
+      expect(humanizeExpressionSource(parse('&nbsp;{{abc}}').nodes))
+          .toEqual(jasmine.arrayContaining([
+            ['abc', new AbsoluteSourceSpan(8, 11)],
+          ]));
+    });
+
+    it('should handle many HTML entities and many interpolations', () => {
+      expect(humanizeExpressionSource(parse('&quot;{{abc}}&quot;{{def}}&nbsp;{{ghi}}').nodes))
+          .toEqual(jasmine.arrayContaining([
+            ['abc', new AbsoluteSourceSpan(8, 11)],
+            ['def', new AbsoluteSourceSpan(21, 24)],
+            ['ghi', new AbsoluteSourceSpan(34, 37)],
+          ]));
+    });
+
+    it('should handle interpolation in attribute', () => {
+      expect(humanizeExpressionSource(parse('<div class="{{abc}}"><div>').nodes))
+          .toEqual(jasmine.arrayContaining([
+            ['abc', new AbsoluteSourceSpan(14, 17)],
+          ]));
+    });
+
+    it('should handle interpolation preceded by HTML entity in attribute', () => {
+      expect(humanizeExpressionSource(parse('<div class="&nbsp;{{abc}}"><div>').nodes))
+          .toEqual(jasmine.arrayContaining([
+            ['abc', new AbsoluteSourceSpan(20, 23)],
+          ]));
+    });
+
+    it('should handle many interpolation with HTML entities in attribute', () => {
+      expect(humanizeExpressionSource(
+                 parse('<div class="&quot;{{abc}}&quot;&nbsp;{{def}}"><div>').nodes))
+          .toEqual(jasmine.arrayContaining([
+            ['abc', new AbsoluteSourceSpan(20, 23)],
+            ['def', new AbsoluteSourceSpan(39, 42)],
+          ]));
+    });
   });
 
   describe('keyed read', () => {
diff --git a/packages/compiler/test/render3/view/i18n_spec.ts b/packages/compiler/test/render3/view/i18n_spec.ts
index ec664981f62..c9f2e4add64 100644
--- a/packages/compiler/test/render3/view/i18n_spec.ts
+++ b/packages/compiler/test/render3/view/i18n_spec.ts
@@ -52,8 +52,8 @@ describe('I18nContext', () => {
 
     // binding collection checks
     expect(ctx.bindings.size).toBe(0);
-    ctx.appendBinding(expressionParser.parseInterpolation('{{ valueA }}', '', 0) as AST);
-    ctx.appendBinding(expressionParser.parseInterpolation('{{ valueB }}', '', 0) as AST);
+    ctx.appendBinding(expressionParser.parseInterpolation('{{ valueA }}', '', 0, null) as AST);
+    ctx.appendBinding(expressionParser.parseInterpolation('{{ valueB }}', '', 0, null) as AST);
     expect(ctx.bindings.size).toBe(2);
   });
 
@@ -80,7 +80,7 @@ describe('I18nContext', () => {
 
     // set data for root ctx
     ctx.appendBoundText(i18nOf(boundTextA));
-    ctx.appendBinding(expressionParser.parseInterpolation('{{ valueA }}', '', 0) as AST);
+    ctx.appendBinding(expressionParser.parseInterpolation('{{ valueA }}', '', 0, null) as AST);
     ctx.appendElement(i18nOf(elementA), 0);
     ctx.appendTemplate(i18nOf(templateA), 1);
     ctx.appendElement(i18nOf(elementA), 0, true);
@@ -96,11 +96,11 @@ describe('I18nContext', () => {
     // set data for child context
     childCtx.appendElement(i18nOf(elementB), 0);
     childCtx.appendBoundText(i18nOf(boundTextB));
-    childCtx.appendBinding(expressionParser.parseInterpolation('{{ valueB }}', '', 0) as AST);
+    childCtx.appendBinding(expressionParser.parseInterpolation('{{ valueB }}', '', 0, null) as AST);
     childCtx.appendElement(i18nOf(elementC), 1);
     childCtx.appendElement(i18nOf(elementC), 1, true);
     childCtx.appendBoundText(i18nOf(boundTextC));
-    childCtx.appendBinding(expressionParser.parseInterpolation('{{ valueC }}', '', 0) as AST);
+    childCtx.appendBinding(expressionParser.parseInterpolation('{{ valueC }}', '', 0, null) as AST);
     childCtx.appendElement(i18nOf(elementB), 0, true);
 
     expect(childCtx.bindings.size).toBe(2);