diff --git a/CHANGELOG.md b/CHANGELOG.md
index 03aede03cb..3cd7495990 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -200,6 +200,9 @@ The format is based on [Keep a Changelog](http://keepachangelog.com/en/1.0.0/).
 - Fixed an issue with unsupported torch.inference_mode() on hpu backends by making it use no_grad ([#13014](https://github.com/PyTorchLightning/pytorch-lightning/pull/13014))
 
 
+- Fixed `materialize_module` setting a module's child recursively ([#12870](https://github.com/PyTorchLightning/pytorch-lightning/pull/12870))
+
+
 - Fixed the number of references of `LightningModule` so it can be deleted ([#12897](https://github.com/PyTorchLightning/pytorch-lightning/pull/12897))
 
 
diff --git a/pytorch_lightning/utilities/meta.py b/pytorch_lightning/utilities/meta.py
index d14f111e87..a5edcfb300 100644
--- a/pytorch_lightning/utilities/meta.py
+++ b/pytorch_lightning/utilities/meta.py
@@ -186,7 +186,7 @@ def materialize_module(root_module: nn.Module) -> nn.Module:
         if not materialize_fn or isinstance(child, (Sequential, ModuleList, ModuleDict)):
             materialize_module(child)
         else:
-            setattr(child, name, materialize_fn())
+            setattr(root_module, name, materialize_fn())
     return root_module
 
 
diff --git a/tests/utilities/test_meta.py b/tests/utilities/test_meta.py
index c55f04591f..34a2c3d04e 100644
--- a/tests/utilities/test_meta.py
+++ b/tests/utilities/test_meta.py
@@ -11,10 +11,12 @@
 # WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
 # See the License for the specific language governing permissions and
 # limitations under the License.
+import pytest
 from torch import nn
 
 from pytorch_lightning.core.lightning import LightningModule
 from pytorch_lightning.utilities.meta import init_meta_context, is_on_meta_device, materialize_module
+from tests.helpers.boring_model import BoringModel
 from tests.helpers.runif import RunIf
 
 
@@ -24,7 +26,7 @@ class MLP(nn.Module):
         self.layer = nn.Sequential(*[nn.Linear(1, 1) for _ in range(num_layers)] + [nn.Dropout(), nn.LayerNorm(1)])
 
 
-class BoringModel(LightningModule):
+class SimpleBoringModel(LightningModule):
     def __init__(self, num_layers: int):
         super().__init__()
         self.save_hyperparameters()
@@ -48,7 +50,7 @@ def test_init_meta_context():
         assert not is_on_meta_device(mlp)
         assert not is_on_meta_device(nn.Module())
 
-        model = BoringModel(4)
+        model = SimpleBoringModel(4)
         assert model.layer[0].weight.device.type == "meta"
         materialize_module(model)
         assert model.layer[0].weight.device.type == "cpu"
@@ -68,3 +70,15 @@ def test_init_meta_context():
 
     m = nn.Linear(in_features=1, out_features=1)
     assert m.weight.device.type == "cpu"
+
+
+@RunIf(min_torch="1.10.0", standalone=True)
+def test_materialize_module_recursive_child():
+    """Test materialize_module doesn't set a child recursively to a model instantiated within init_meta_context."""
+    with init_meta_context():
+        model = BoringModel()
+
+    materialize_module(model)
+
+    with pytest.raises(AttributeError, match="'Linear' object has no attribute 'layer'"):
+        model.layer.layer