diff --git a/plugins/woocommerce-admin/changelogs/fix-7680_category_lookup_class b/plugins/woocommerce-admin/changelogs/fix-7680_category_lookup_class
new file mode 100644
index 00000000000..42cf8a3b2bc
--- /dev/null
+++ b/plugins/woocommerce-admin/changelogs/fix-7680_category_lookup_class
@@ -0,0 +1,4 @@
+Significance: patch
+Type: Fix
+
+Fix category lookup logic to update children correctly. #7709
diff --git a/plugins/woocommerce-admin/src/CategoryLookup.php b/plugins/woocommerce-admin/src/CategoryLookup.php
index d3d9125160c..770475fcde1 100644
--- a/plugins/woocommerce-admin/src/CategoryLookup.php
+++ b/plugins/woocommerce-admin/src/CategoryLookup.php
@@ -179,16 +179,17 @@ class CategoryLookup {
 	protected function update( $category_id ) {
 		global $wpdb;
 
-		$ancestors = get_ancestors( $category_id, 'product_cat', 'taxonomy' );
-		$children  = get_term_children( $category_id, 'product_cat' );
-		$inserts   = array();
-		$inserts[] = $this->get_insert_sql( $category_id, $category_id );
+		$ancestors    = get_ancestors( $category_id, 'product_cat', 'taxonomy' );
+		$children     = get_term_children( $category_id, 'product_cat' );
+		$inserts      = array();
+		$inserts[]    = $this->get_insert_sql( $category_id, $category_id );
+		$children_ids = array_map( 'intval', array_unique( array_filter( $children ) ) );
 
 		foreach ( $ancestors as $ancestor ) {
 			$inserts[] = $this->get_insert_sql( $category_id, $ancestor );
 
-			foreach ( $children as $child ) {
-				$inserts[] = $this->get_insert_sql( $child->category_id, $ancestor );
+			foreach ( $children_ids as $child_category_id ) {
+				$inserts[] = $this->get_insert_sql( $child_category_id, $ancestor );
 			}
 		}
 
diff --git a/plugins/woocommerce-admin/tests/category-lookup.php b/plugins/woocommerce-admin/tests/category-lookup.php
new file mode 100644
index 00000000000..1c6cdd97856
--- /dev/null
+++ b/plugins/woocommerce-admin/tests/category-lookup.php
@@ -0,0 +1,139 @@
+<?php
+/**
+ * CategoryLookup tests
+ *
+ * @package WooCommerce\Admin\Tests\CategoryLookup
+ */
+
+use \Automattic\WooCommerce\Admin\CategoryLookup;
+
+/**
+ * WC_Admin_Tests_Admin_Helper Class
+ *
+ * @package WooCommerce\Admin\Tests\CategoryLookup
+ */
+class WC_Admin_Tests_Category_Lookup extends WP_UnitTestCase {
+
+	/** @var int parent term id */
+	protected $parent_term_id;
+	/** @var int parent 2 term id */
+	protected $parent2_term_id;
+	/** @var int child term id */
+	protected $child_term_id;
+
+	/**
+	 * Setup
+	 */
+	public function setUp() {
+		parent::setUp();
+		$parent                = wp_insert_term( 'test_parent', 'product_cat' );
+		$parent2               = wp_insert_term( 'test_parent_2', 'product_cat' );
+		$child                 = wp_insert_term(
+			'test_child',
+			'product_cat',
+			array(
+				'parent' => $parent['term_id'],
+			)
+		);
+		$this->parent_term_id  = $parent['term_id'];
+		$this->parent2_term_id = $parent2['term_id'];
+		$this->child_term_id   = $child['term_id'];
+		CategoryLookup::instance()->init();
+	}
+
+	/**
+	 * Tear Down
+	 */
+	public function tearDown() {
+		parent::tearDown();
+		wp_delete_term( $this->parent_term_id, 'product_cat' );
+		wp_delete_term( $this->parent2_term_id, 'product_cat' );
+		wp_delete_term( $this->child_term_id, 'product_cat' );
+	}
+
+	/**
+	 * @param int $category_id category id.
+	 * @return int[] list of category tree ids
+	 */
+	public function get_category_parent_id( $category_id ) {
+		global $wpdb;
+
+		return wp_parse_id_list(
+			$wpdb->get_col(
+				$wpdb->prepare(
+					"SELECT category_tree_id FROM $wpdb->wc_category_lookup WHERE category_id = %d",
+					$category_id
+				)
+			)
+		);
+	}
+
+	/**
+	 * Test on_create callback for when product category is created.
+	 */
+	public function test_create_product_category_update_lookup_table() {
+		$parent_ids = $this->get_category_parent_id( $this->parent_term_id );
+		$this->assertCount( 1, $parent_ids );
+		$this->assertContains( $this->parent_term_id, $parent_ids );
+		$parent2_ids = $this->get_category_parent_id( $this->parent2_term_id );
+		$this->assertCount( 1, $parent2_ids );
+		$this->assertContains( $this->parent2_term_id, $parent2_ids );
+		$child_ids = $this->get_category_parent_id( $this->child_term_id );
+		$this->assertCount( 2, $child_ids );
+		$this->assertContains( $this->parent_term_id, $child_ids );
+	}
+
+	/**
+	 * Test update callback for product category update.
+	 */
+	public function test_product_category_edit_should_update_table() {
+		wp_update_term(
+			$this->child_term_id,
+			'product_cat',
+			array(
+				'slug' => 'test',
+			)
+		);
+		$child_parent_ids = $this->get_category_parent_id( $this->child_term_id );
+		$this->assertCount( 2, $child_parent_ids );
+		$this->assertContains( $this->parent_term_id, $child_parent_ids );
+	}
+
+	/**
+	 * Test update of product category with children.
+	 */
+	public function test_product_category_update_with_children() {
+		wp_update_term(
+			$this->parent_term_id,
+			'product_cat',
+			array(
+				'parent' => $this->parent2_term_id,
+			)
+		);
+		$parent_parent_ids = $this->get_category_parent_id( $this->parent_term_id );
+
+		$this->assertCount( 2, $parent_parent_ids );
+		$this->assertContains( $this->parent2_term_id, $parent_parent_ids );
+	}
+
+	/**
+	 * Test deleting old lookup data upon product category update.
+	 */
+	public function test_product_category_update_should_delete_old_lookups() {
+		$parent_parent_ids = $this->get_category_parent_id( $this->parent_term_id );
+		$this->assertCount( 1, $parent_parent_ids );
+		$this->assertNotContains( $this->parent2_term_id, $parent_parent_ids );
+
+		wp_update_term(
+			$this->parent_term_id,
+			'product_cat',
+			array(
+				'parent' => $this->parent2_term_id,
+			)
+		);
+		$parent_parent_ids = $this->get_category_parent_id( $this->parent_term_id );
+
+		$this->assertCount( 2, $parent_parent_ids );
+		$this->assertContains( $this->parent2_term_id, $parent_parent_ids );
+	}
+}