diff --git a/.changeset/gorgeous-chefs-fly.md b/.changeset/gorgeous-chefs-fly.md
new file mode 100644
index 000000000..4cdb7ecd5
--- /dev/null
+++ b/.changeset/gorgeous-chefs-fly.md
@@ -0,0 +1,5 @@
+---
+'@lion/ui': minor
+---
+
+[overlays]: don't use hidesOnOutsideEsc in configs, as it disallows nested overlays (a11y concern)
diff --git a/packages/ui/components/overlays/src/configurations/withDropdownConfig.js b/packages/ui/components/overlays/src/configurations/withDropdownConfig.js
index 3c2aac95e..b315402f9 100644
--- a/packages/ui/components/overlays/src/configurations/withDropdownConfig.js
+++ b/packages/ui/components/overlays/src/configurations/withDropdownConfig.js
@@ -9,7 +9,6 @@ export const withDropdownConfig = () =>
     placementMode: 'local',
     inheritsReferenceWidth: 'min',
     hidesOnOutsideClick: true,
-    hidesOnOutsideEsc: true,
     hidesOnEsc: true,
     popperConfig: {
       placement: 'bottom-start',
diff --git a/packages/ui/components/overlays/src/configurations/withTooltipConfig.js b/packages/ui/components/overlays/src/configurations/withTooltipConfig.js
index 31280fae3..266f00aec 100644
--- a/packages/ui/components/overlays/src/configurations/withTooltipConfig.js
+++ b/packages/ui/components/overlays/src/configurations/withTooltipConfig.js
@@ -18,7 +18,6 @@ export const withTooltipConfig = ({
     placementMode: 'local',
     elementToFocusAfterHide: undefined,
     hidesOnEsc: true,
-    hidesOnOutsideEsc: true,
     handlesAccessibility: true,
     isTooltip: true,
     invokerRelation,