When you run $dataToReplace =~ s/\#.*//; you are changing the $dataToReplace so that it no longer matches what is in $fileContent so nothing matches in the replace.

use strict; use warnings; use Data::Dumper; 

my $replacementData=<<'REPDATA'
"new/path/desired/data"
"new/path/desired/data"
"new/path/desired/data"
REPDATA
;

populateHash(); 

sub populateHash{
my $fileContent; 
if (0){ 

    my $inputFile = 'input.txt';
    
    $fileContent = do {
        open(my $fileHandle, $inputFile ) or die "Could not open file 
+'$inputFile ' $!";
    
        local $/;
        <$fileHandle>;
    };
}
else { $fileContent = do { local $/;<DATA>;};}

    my $hashData = truncateText($fileContent, "key1 => {", "key2 =>");
print 'hashdata:'.$hashData."\n\n";
# notice change to first END_SEARCHPATHS to match your sample data 
    my $dataToReplace = truncateText($hashData, "END_SEARCHPATHS", "EN
+D_SEARCH_PATHS");
print 'torep1:'.$dataToReplace."\n\n";


    #Removes Comments works best if called multiple times
#       $dataToReplace =~ s/\#.*//smg;
#    $dataToReplace =~ s/\#.*//;
#    $dataToReplace =~ s/\#.*//;
#    $dataToReplace =~ s/\#.*//;
#print 'torep:2'.$dataToReplace."\n";

        #replacementData was gathered in another function and stored i
+n a global variable
# notice addition of \n to replacement to put first on its own line 
    $fileContent =~ s/\Q$dataToReplace\E/\n$replacementData/;


print 'Res:'.$fileContent."\n";
#    print Dumper($fileContent);

}

sub truncateText{
    #Truncates text by removing everything before and and after the pa
+ssed in variables
    
    my($text, $beginString, $endString) = @_;

    my $truncatedText;

    if($text =~ /\Q$beginString\E(.*?)\Q$endString\E/s){
        $truncatedText = $1;
        #print $truncatedText;    
    }

    return $truncatedText;

}

__DATA__
key1 => {
        #some data i don't need
        #more data i don't need
        <<'END_SEARCHPATHS',
        #block of data I want to replace
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
END_SEARCH_PATHS
}
key2 => {
        <<'END_SEARCHPATHS',
        #another block of data to replace
        "another/path/to/some/file"
        "another/path/to/some/file"
        "another/path/to/some/file"
        "another/path/to/some/file"
END_SEARCH_PATHS
}
[download]

Result

hashdata:
        #some data i don't need
        #more data i don't need
        <<'END_SEARCHPATHS',
        #block of data I want to replace
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
END_SEARCH_PATHS
}


torep1:',
        #block of data I want to replace
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"
        "some/path/to/some/file"


Res:key1 => {
        #some data i don't need
        #more data i don't need
        <<'END_SEARCHPATHS
"new/path/desired/data"
"new/path/desired/data"
"new/path/desired/data"
END_SEARCH_PATHS
}
key2 => {
        <<'END_SEARCHPATHS',
        #another block of data to replace
        "another/path/to/some/file"
        "another/path/to/some/file"
        "another/path/to/some/file"
        "another/path/to/some/file"
END_SEARCH_PATHS
}
[download]

---

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