$re = '/#{3}(?P<town>.*?)(@{3}\n.*?)(&{3}(?P<person>.*?)(\^{3}\n))+?/ms';
$str = 'STARTOFTEXT
&&&Aragorn^^^
###The Shire@@@
&&&Frodo^^^
&&&Bilbo^^^
&&&Pippin^^^
###Gondor@@@
&&&Faramir^^^
&&&Boramir^^^
ENDOFTEXT';
$subst = "\g<person> is from \g<town>\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