$re = '/(^\#{4}\s{1}[\d\D].*?[:]\s{2})\n\n(>[\d\D].*?\s{2})\n([\d\D].*?\s{2})/m';
$str = '#### <u>Author name</u> writes in his \'Title of some Book/Essay/Article\':
> First sentence with soft line breaks at the end.
Second sentence.
Third sentence.
Any number of sentences if there are any will follow — all need to be in quote blocks.
<Some other text not belonging to above author comes after empty line>.
';
$subst = "$1\n\n$2\n> $3\n> ";
$result = preg_replace($re, $subst, $str);
echo "The result of the substitution is ".$result;
Please keep in mind that these code samples are automatically generated and are not guaranteed to work. If you find any syntax errors, feel free to submit a bug report. For a full regex reference for PHP, please visit: http://php.net/manual/en/ref.pcre.php