diff --git a/Source/Toolbar/Toolbar.css b/Source/Toolbar/Toolbar.css
index fdd82d6..4689d8f 100644
--- a/Source/Toolbar/Toolbar.css
+++ b/Source/Toolbar/Toolbar.css
@@ -187,6 +187,22 @@
     pointer-events: auto;
 }
 
+/*
+ * Reveal complete. The clip-path did its job — the wipe cannot run without it,
+ * because `clip-path: none` is a discrete value that snaps instead of
+ * interpolating. But clip-path also clips every descendant, so leaving a zero
+ * inset in place slices off the hover tooltips of the outermost buttons, which
+ * paint outside the panel by design.
+ *
+ * ToolbarFanOutItem therefore adds this class once the reveal transition ends,
+ * and takes it off again (restoring an interpolable inset) before the close
+ * transition starts — so both wipes keep their exact timing and a settled panel
+ * clips nothing.
+ */
+.toolbar-fanout-panel--settled {
+    clip-path: none;
+}
+
 /* ── Toolbar folder ──────────────────────────────────────────────────────── */
 
 .toolbar-folder-item {
@@ -288,18 +304,25 @@
 /* ── Toolbar slot transition (ToolbarGroup slot content) ─────────────────── */
 
 /*
- * Size-morphing container for slot content inside a ToolbarGroup.
+ * Size-morphing container for slot content inside a ToolbarGroup or ToolbarLayout.
  * Mirrors the .toolbar-section transition parameters for visual consistency —
  * the container resizes smoothly while content cross-fades.
+ * Overflow stays visible in the settled state so absolutely-positioned children
+ * (fan-out and folder panels, and the hover tooltips inside them) can escape the
+ * section's bounds; it is only clipped while outgoing content is fading out, so
+ * that content does not bleed past the container mid-transition.
  */
 .toolbar-slot-section {
     position: relative;
-    overflow: hidden;
     transition:
         width 0.35s cubic-bezier(0.4, 0, 0.2, 1),
         height 0.35s cubic-bezier(0.4, 0, 0.2, 1);
 }
 
+.toolbar-slot-section--transitioning {
+    overflow: hidden;
+}
+
 @keyframes toolbar-slot-fade-in {
     from { opacity: 0; }
     to   { opacity: 1; }
diff --git a/Source/Toolbar/ToolbarFanOutItem.tsx b/Source/Toolbar/ToolbarFanOutItem.tsx
index 2fa6787..a381f78 100644
--- a/Source/Toolbar/ToolbarFanOutItem.tsx
+++ b/Source/Toolbar/ToolbarFanOutItem.tsx
@@ -1,7 +1,7 @@
 // Copyright (c) Cratis. All rights reserved.
 // Licensed under the MIT license. See LICENSE file in the project root for full license information.
 
-import { ReactNode, useEffect, useRef, useState } from 'react';
+import React, { ReactNode, useCallback, useEffect, useRef, useState } from 'react';
 import { IconDisplay } from '../Common/Icon';
 import type { Icon } from '../Common/Icon';
 import { Tooltip } from '../Common/Tooltip';
@@ -43,10 +43,40 @@ export const ToolbarFanOutItem = ({
     children,
 }: ToolbarFanOutItemProps) => {
     const [isExpanded, setIsExpanded] = useState(false);
+    const [isSettled, setIsSettled] = useState(false);
     const containerRef = useRef<HTMLDivElement>(null);
+    const panelRef = useRef<HTMLDivElement>(null);
+
+    // A settled panel has `clip-path: none`, which cannot interpolate — closing
+    // straight from it would snap the panel shut instead of wiping it closed.
+    // Put an equivalent inset back and let the browser observe it (the forced
+    // reflow) before React removes the visible class, so the close transition
+    // has an interpolable starting value.
+    const collapse = useCallback(() => {
+        const panel = panelRef.current;
+        if (panel && panel.classList.contains('toolbar-fanout-panel--settled')) {
+            panel.style.setProperty('clip-path', 'inset(0 0 0 0 round 1rem)');
+            panel.style.setProperty('transition', 'none');
+            void panel.offsetWidth;
+            panel.style.removeProperty('transition');
+            panel.style.removeProperty('clip-path');
+        }
+        setIsSettled(false);
+        setIsExpanded(false);
+    }, []);
 
     const handleToggle = () => {
-        setIsExpanded(!isExpanded);
+        if (isExpanded) {
+            collapse();
+        } else {
+            setIsExpanded(true);
+        }
+    };
+
+    const handleTransitionEnd = (event: React.TransitionEvent<HTMLDivElement>) => {
+        if (event.target === panelRef.current && event.propertyName === 'clip-path' && isExpanded) {
+            setIsSettled(true);
+        }
     };
 
     // Close the fan-out when clicking outside
@@ -55,7 +85,7 @@ export const ToolbarFanOutItem = ({
 
         const handleClickOutside = (event: MouseEvent) => {
             if (containerRef.current && !containerRef.current.contains(event.target as Node)) {
-                setIsExpanded(false);
+                collapse();
             }
         };
 
@@ -63,10 +93,11 @@ export const ToolbarFanOutItem = ({
         return () => {
             document.removeEventListener('mousedown', handleClickOutside);
         };
-    }, [isExpanded]);
+    }, [isExpanded, collapse]);
 
     const activeClass = isExpanded ? 'toolbar-button--active' : '';
     const panelVisibleClass = isExpanded ? 'toolbar-fanout-panel--visible' : '';
+    const panelSettledClass = isExpanded && isSettled ? 'toolbar-fanout-panel--settled' : '';
     const directionClass = `toolbar-fanout-panel--${fanOutDirection}`;
 
     return (
@@ -82,7 +113,11 @@ export const ToolbarFanOutItem = ({
                     <IconDisplay icon={icon} className='text-lg' />
                 </button>
             </Tooltip>
-            <div className={`toolbar-fanout-panel ${directionClass} ${panelVisibleClass}`}>
+            <div
+                ref={panelRef}
+                className={`toolbar-fanout-panel ${directionClass} ${panelVisibleClass} ${panelSettledClass}`}
+                onTransitionEnd={handleTransitionEnd}
+            >
                 {children}
             </div>
         </div>
diff --git a/Source/Toolbar/ToolbarGroup.tsx b/Source/Toolbar/ToolbarGroup.tsx
index 4350db5..451d25c 100644
--- a/Source/Toolbar/ToolbarGroup.tsx
+++ b/Source/Toolbar/ToolbarGroup.tsx
@@ -83,9 +83,15 @@ const SlotTransition = ({ slotName, flexClass }: { slotName: string; flexClass:
 
     if (current.length === 0 && exiting.length === 0) return null;
 
+    // The section is only clipped while outgoing content is fading out, so it
+    // doesn't bleed outside the container. Once the transition is complete the
+    // section must be overflow:visible so fan-out and folder panels (which are
+    // position:absolute children) can escape the slot section's bounds.
+    const transitioningClass = exiting.length > 0 ? 'toolbar-slot-section--transitioning' : '';
+
     return (
         <div
-            className='toolbar-slot-section'
+            className={`toolbar-slot-section ${transitioningClass}`}
             style={size ? { width: size.width, height: size.height } : undefined}
         >
             {/* Incoming content — fades in via @keyframes animation on mount */}
diff --git a/Source/Toolbar/ToolbarLayout.tsx b/Source/Toolbar/ToolbarLayout.tsx
index a1a5390..f03e448 100644
--- a/Source/Toolbar/ToolbarLayout.tsx
+++ b/Source/Toolbar/ToolbarLayout.tsx
@@ -61,16 +61,16 @@ const LayoutTransition = ({ items, flexClass }: { items: ReactNode[]; flexClass:
 
     if (current.length === 0 && exiting.length === 0) return null;
 
-    // overflow:hidden is only needed while outgoing content is fading out so it
+    // The section is only clipped while outgoing content is fading out, so it
     // doesn't bleed outside the container. Once the transition is complete the
     // section must be overflow:visible so fan-out and folder panels (which are
     // position:absolute children) can escape the slot section's bounds.
-    const isTransitioning = exiting.length > 0;
+    const transitioningClass = exiting.length > 0 ? 'toolbar-slot-section--transitioning' : '';
 
     return (
         <div
-            className='toolbar-slot-section'
-            style={size ? { width: size.width, height: size.height, overflow: isTransitioning ? 'hidden' : 'visible' } : { overflow: 'visible' }}
+            className={`toolbar-slot-section ${transitioningClass}`}
+            style={size ? { width: size.width, height: size.height } : undefined}
         >
             <div
                 ref={incomingRef}