diff --git a/tests/e2e/specs/merchant/merchant-orders-partial-refund.spec.js b/tests/e2e/specs/merchant/merchant-orders-partial-refund.spec.js
new file mode 100644
index 00000000000..3ab95bebbcd
--- /dev/null
+++ b/tests/e2e/specs/merchant/merchant-orders-partial-refund.spec.js
@@ -0,0 +1,197 @@
+/**
+ * External dependencies
+ */
+import config from 'config';
+
+const { merchant, shopper, uiUnblocked } = require( '@woocommerce/e2e-utils' );
+
+/**
+ * Internal dependencies
+ */
+import { merchantWCP } from '../../utils';
+import { fillCardDetails, setupProductCheckout } from '../../utils/payments';
+
+const card = config.get( 'cards.basic' );
+const product1 = config.get( 'products.simple.name' );
+const product2 = 'Belt';
+const product3 = 'Hoodie';
+
+/**
+ * Elements:
+ * - test title
+ * - object containing the items to be ordered, and the quantities and amounts to be refunded
+ */
+const dataTable = [
+	[
+		'a single line item',
+		{
+			lineItems: [
+				[ product1, 1 ],
+				[ product2, 1 ],
+			],
+			refundInputs: [ { refundQty: 0, refundAmount: 5 } ],
+		},
+	],
+	[
+		'several line items',
+		{
+			lineItems: [
+				[ product1, 1 ],
+				[ product2, 2 ],
+				[ product3, 1 ],
+			],
+			refundInputs: [
+				{ refundQty: 1, refundAmount: 18 },
+				{ refundQty: 1, refundAmount: 55 },
+			],
+		},
+	],
+];
+
+describe.each( dataTable )(
+	'Order > Partial refund',
+	( testName, { lineItems, refundInputs } ) => {
+		let orderId;
+		let orderTotal;
+
+		beforeAll( async () => {
+			// Set up the test order
+			await setupProductCheckout(
+				config.get( 'addresses.customer.billing' ),
+				lineItems
+			);
+			await fillCardDetails( page, card );
+			await shopper.placeOrder();
+			await expect( page ).toMatch( 'Order received' );
+
+			// Remember the order ID and order total. We will need them later.
+			orderId = await page.$eval(
+				'.woocommerce-order-overview__order.order > strong',
+				( el ) => el.innerText
+			);
+			orderTotal = await page.$eval(
+				'.woocommerce-order-overview__total strong',
+				( el ) => Number( el.innerText.replace( '$', '' ) )
+			);
+
+			// Login as merchant
+			await merchant.login();
+		} );
+
+		afterAll( async () => {
+			await merchant.logout();
+		} );
+
+		it( `should refund ${ testName }`, async () => {
+			const refundReason = `Refunding ${ testName }`;
+			const refundTotal = refundInputs
+				.map( ( { refundAmount } ) => refundAmount )
+				.reduce( ( acc, cur ) => acc + cur );
+			const refundTotalString = refundTotal.toFixed( 2 );
+			const netPayment = ( orderTotal - refundTotal ).toFixed( 2 );
+
+			await merchant.goToOrder( orderId );
+
+			// We need to remove any listeners on the `dialog` event otherwise we can't catch the dialog below
+			await page.removeAllListeners( 'dialog' );
+
+			// Click the Refund button
+			await expect( page ).toClick( 'button.refund-items' );
+
+			// Fill up the quantity and/or amount to be refunded per line item
+			const rows = await page.$$( '#order_line_items tr.item' );
+			for ( let i = 0; i < refundInputs.length; i++ ) {
+				const { refundQty, refundAmount } = refundInputs[ i ];
+				const row = rows[ i ];
+
+				if ( refundQty ) {
+					await expect( row ).toFill(
+						'.refund_order_item_qty',
+						`${ refundQty }`
+					);
+				} else {
+					await expect( row ).toFill(
+						'.refund_line_total',
+						`${ refundAmount }`
+					);
+				}
+			}
+
+			// Fill up the rest of the form and complete the refund flow
+			await expect( page ).toFill( '#refund_reason', refundReason );
+			await expect( page ).toMatchElement( '.do-api-refund', {
+				text: `Refund $${ refundTotalString } via WooCommerce Payments`,
+			} );
+			const refundDialog = await expect( page ).toDisplayDialog(
+				async () => {
+					await expect( page ).toClick( 'button.do-api-refund' );
+				}
+			);
+			await refundDialog.accept();
+			await uiUnblocked();
+			await page.waitForNavigation( { waitUntil: 'networkidle0' } );
+
+			// Verify each line item shows the refunded quantity and/or amount
+			const updatedRows = await page.$$( '#order_line_items tr.item' );
+			for ( let i = 0; i < refundInputs.length; i++ ) {
+				const { refundQty, refundAmount } = refundInputs[ i ];
+				const row = updatedRows[ i ];
+
+				if ( refundQty ) {
+					await expect( row ).toMatchElement( '.quantity .refunded', {
+						text: `-${ refundQty }`,
+					} );
+				}
+
+				await expect( row ).toMatchElement( '.line_cost .refunded', {
+					text: `-$${ refundAmount.toFixed( 2 ) }`,
+				} );
+			}
+
+			// Verify the refund shows in the list with the amount
+			await expect( page ).toMatchElement( '.refund > .line_cost', {
+				text: `-$${ refundTotalString }`,
+			} );
+
+			// Verify system note was added
+			await expect( page ).toMatchElement( '.system-note', {
+				text: `refund of $${ refundTotalString }`,
+			} );
+			await expect( page ).toMatchElement( '.system-note', {
+				text: `Reason: ${ refundReason }`,
+			} );
+
+			// Verify "Refunded" and "Net Payment" values in Order Totals section
+			await expect( page ).toMatchElement(
+				'.wc-order-totals .total.refunded-total',
+				{
+					text: `-$${ refundTotalString }`,
+				}
+			);
+			await expect( page ).toMatchElement( '.wc-order-totals .total', {
+				text: `$${ netPayment }`,
+			} );
+
+			// Pull out and follow the link to avoid working in multiple tabs
+			const paymentDetailsLink = await page.$eval(
+				'p.order_number > a',
+				( anchor ) => anchor.getAttribute( 'href' )
+			);
+
+			await merchantWCP.openPaymentDetails( paymentDetailsLink );
+
+			// Verify the transaction timeline reflects the refund events
+			await Promise.all( [
+				expect( page ).toMatchElement( 'li.woocommerce-timeline-item', {
+					text: `A payment of $${ refundTotalString } was successfully refunded.`,
+				} ),
+				expect( page ).toMatchElement( 'li.woocommerce-timeline-item', {
+					text: `$${ refundTotalString } will be deducted from a future deposit.`,
+				} ),
+				expect( page ).toMatchElement( 'li.woocommerce-timeline-item', {
+					text: 'Payment status changed to Partial Refund.',
+				} ),
+			] );
+		} );
+	}
+);
diff --git a/tests/e2e/utils/payments.js b/tests/e2e/utils/payments.js
index 4f427fd97d3..b8768013d77 100644
--- a/tests/e2e/utils/payments.js
+++ b/tests/e2e/utils/payments.js
@@ -52,10 +52,45 @@ export async function confirmCardAuthentication(
 	await button.click();
 }
 
-// Set up checkout with simple product
-export async function setupProductCheckout( billingDetails ) {
+/**
+ * Set up checkout with any number of products.
+ *
+ * @param {any} billingDetails Values to be entered into the 'Billing details' form in the Checkout page
+ * @param {any} lineItems A 2D array of line items where each line item is an array
+ * that contains the product title as the first element, and the quantity as the second.
+ * For example, if you want to checkout the products x2 "Hoodie" and x3 "Belt" then you can set this `lineItems` parameter like this:
+ *
+ * `[ [ "Hoodie", 2 ], [ "Belt", 3 ] ]`.
+ *
+ * Default value is 1 piece of `config.get( 'products.simple.name' )`.
+ */
+export async function setupProductCheckout(
+	billingDetails,
+	lineItems = [ [ config.get( 'products.simple.name' ), 1 ] ]
+) {
+	const cartItemsCounter = '.cart-contents .count';
+
 	await shopper.goToShop();
-	await shopper.addToCartFromShopPage( config.get( 'products.simple.name' ) );
+
+	// Get the current number of items in the cart
+	let cartSize = await page.$eval( cartItemsCounter, ( e ) =>
+		Number( e.innerText.replace( /\D/g, '' ) )
+	);
+
+	// Add items to the cart
+	for ( const line of lineItems ) {
+		let [ productTitle, qty ] = line;
+
+		while ( qty-- ) {
+			await shopper.addToCartFromShopPage( productTitle );
+
+			// Make sure that the number of items in the cart is incremented first before adding another item.
+			await expect( page ).toMatchElement( cartItemsCounter, {
+				text: new RegExp( `${ ++cartSize } items?` ),
+			} );
+		}
+	}
+
 	await setupCheckout( billingDetails );
 }