diff --git a/packages/coding-agent/docs/extensions.md b/packages/coding-agent/docs/extensions.md
index 40781092..a30bbf52 100644
--- a/packages/coding-agent/docs/extensions.md
+++ b/packages/coding-agent/docs/extensions.md
@@ -2371,7 +2371,7 @@ const result = await ctx.ui.custom<string | null>(
 );
 ```
 
-For advanced positioning (anchors, margins, percentages, responsive visibility), pass `overlayOptions`. Use `onHandle` to control visibility programmatically:
+For advanced positioning (anchors, margins, percentages, responsive visibility), pass `overlayOptions`. Use `onHandle` to control focus or visibility programmatically:
 
 ```typescript
 const result = await ctx.ui.custom<string | null>(
@@ -2379,12 +2379,19 @@ const result = await ctx.ui.custom<string | null>(
   {
     overlay: true,
     overlayOptions: { anchor: "top-right", width: "50%", margin: 2 },
-    onHandle: (handle) => { /* handle.setHidden(true/false) */ }
+    onHandle: (handle) => {
+      handle.focus(); // focus this overlay and bring it to the visual front
+      // handle.unfocus({ target: editorComponent }); // release input to a specific component
+      // handle.setHidden(true/false); // toggle visibility
+      // handle.hide(); // permanently remove
+    }
   }
 );
 ```
 
-See [tui.md](tui.md) for the full `OverlayOptions` API and [overlay-qa-tests.ts](../examples/extensions/overlay-qa-tests.ts) for examples.
+A focused visible overlay can reclaim input after temporary non-overlay custom UI closes. If you intentionally want another component to keep input while the overlay stays visible, call `handle.unfocus({ target })`. Passing `{ target: null }` releases the overlay without focusing another component.
+
+See [tui.md](tui.md) for the full `OverlayOptions` and `OverlayHandle` API and [overlay-qa-tests.ts](../examples/extensions/overlay-qa-tests.ts) for examples.
 
 ### Custom Editor
 
diff --git a/packages/coding-agent/docs/tui.md b/packages/coding-agent/docs/tui.md
index afdaf721..c3b31204 100644
--- a/packages/coding-agent/docs/tui.md
+++ b/packages/coding-agent/docs/tui.md
@@ -145,8 +145,11 @@ const result = await ctx.ui.custom<string | null>(
       // Responsive: hide on narrow terminals
       visible: (termWidth, termHeight) => termWidth >= 80,
     },
-    // Get handle for programmatic visibility control
+    // Get handle for programmatic focus and visibility control
     onHandle: (handle) => {
+      // handle.focus() - focus this overlay and bring it to the visual front
+      // handle.unfocus() - release input to normal fallback
+      // handle.unfocus({ target }) - release input to a specific component or null
       // handle.setHidden(true/false) - toggle visibility
       // handle.hide() - permanently remove
     },
@@ -154,6 +157,12 @@ const result = await ctx.ui.custom<string | null>(
 );
 ```
 
+### Overlay Focus
+
+A focused visible overlay keeps input ownership across temporary non-overlay UI. If an overlay opens another `ctx.ui.custom()` component without `{ overlay: true }`, that replacement UI receives input while it is active; when it closes, the focused overlay can reclaim input.
+
+Use `handle.unfocus()` when a visible overlay should stop owning input and let TUI fall back to another visible capturing overlay or the previous focus target. Use `handle.unfocus({ target })` when a specific component should receive input while the overlay stays visible. Passing `{ target: null }` intentionally leaves no focused component until focus is set again.
+
 ### Overlay Lifecycle
 
 Overlay components are disposed when closed. Don't reuse references - create fresh instances:
diff --git a/packages/coding-agent/examples/extensions/overlay-qa-tests.ts b/packages/coding-agent/examples/extensions/overlay-qa-tests.ts
index 306c139b..fd4486d8 100644
--- a/packages/coding-agent/examples/extensions/overlay-qa-tests.ts
+++ b/packages/coding-agent/examples/extensions/overlay-qa-tests.ts
@@ -15,13 +15,13 @@
  *   /overlay-sidepanel  - Responsive sidepanel (hides when terminal < 100 cols)
  *   /overlay-toggle     - Toggle visibility demo (demonstrates OverlayHandle.setHidden)
  *   /overlay-passive    - Non-capturing overlay demo (passive info panel alongside active overlay)
- *   /overlay-focus      - Focus cycling and rendering order with non-capturing overlays
+ *   /overlay-focus      - Focus cycling, input routing, dismissal, and rendering order with overlays
  *   /overlay-streaming  - Multiple input panels with simulated streaming (Tab to cycle focus)
  */
 
 import type { ExtensionAPI, ExtensionCommandContext, Theme } from "@earendil-works/pi-coding-agent";
 import type { Component, OverlayAnchor, OverlayHandle, OverlayOptions, TUI } from "@earendil-works/pi-tui";
-import { matchesKey, truncateToWidth, visibleWidth } from "@earendil-works/pi-tui";
+import { Input, matchesKey, truncateToWidth, visibleWidth } from "@earendil-works/pi-tui";
 import { spawn } from "child_process";
 
 // Global handle for toggle demo (in real code, use a more elegant pattern)
@@ -272,9 +272,9 @@ export default function (pi: ExtensionAPI) {
 		},
 	});
 
-	// Focus cycling demo - demonstrates focus(), unfocus(), isFocused() and rendering order
+	// Focus cycling demo - demonstrates focus(), input routing, per-panel dismissal, and rendering order
 	pi.registerCommand("overlay-focus", {
-		description: "Test focus cycling and rendering order with non-capturing overlays",
+		description: "Test focus cycling, input routing, dismissal, and rendering order with overlays",
 		handler: async (_args: string, ctx: ExtensionCommandContext) => {
 			ctx.ui.setEditorText("");
 			await ctx.ui.custom<void>((tui, theme, _kb, done) => new FocusDemoController(tui, theme, done), {
@@ -1031,57 +1031,66 @@ class TimerPanel extends BaseOverlay {
 
 // === Focus cycling demo ===
 
+type FocusPanelColor = "error" | "success" | "accent";
+type FocusPanelConfig = { label: string; color: FocusPanelColor; options: OverlayOptions };
+type FocusPanelEntry = { panel: FocusPanel; handle: OverlayHandle };
+
+const FOCUS_PANEL_CONFIGS = [
+	{ label: "Alpha", color: "error", options: { row: 2, col: 4, width: 34 } },
+	{ label: "Beta", color: "success", options: { row: 5, col: 28, width: 34 } },
+	{ label: "Gamma", color: "accent", options: { row: 8, col: 52, width: 34 } },
+] satisfies FocusPanelConfig[];
+
 class FocusDemoController extends BaseOverlay {
-	private tui: TUI;
-	private panels: FocusPanel[] = [];
-	private handles: OverlayHandle[] = [];
-	private focusIndex = -1;
-	private done: () => void;
+	private readonly tui: TUI;
+	private entries: FocusPanelEntry[] = [];
+	private readonly done: () => void;
+	private closed = false;
 
 	constructor(tui: TUI, theme: Theme, done: () => void) {
 		super(theme);
 		this.tui = tui;
 		this.done = done;
-		const colors = ["error", "success", "accent"] as const;
-		const labels = ["Alpha", "Beta", "Gamma"];
 
-		for (let i = 0; i < 3; i++) {
-			const panel = new FocusPanel(
-				theme,
-				labels[i]!,
-				colors[i]!,
-				() => this.cycleFocus(),
-				() => this.close(),
-			);
-			const handle = this.tui.showOverlay(panel, {
-				nonCapturing: true,
-				row: 2,
-				col: 5 + i * 6,
-				width: 28,
-			});
-			panel.handle = handle;
-			this.panels.push(panel);
-			this.handles.push(handle);
+		for (const config of FOCUS_PANEL_CONFIGS) {
+			const panel = new FocusPanel({ theme, config, controller: this });
+			const handle = this.tui.showOverlay(panel, { nonCapturing: true, ...config.options });
+			this.entries.push({ panel, handle });
 		}
+
+		this.focusFirstOpenPanel();
 	}
 
-	private cycleFocus(): void {
-		if (this.focusIndex >= 0 && this.focusIndex < this.handles.length) {
-			this.handles[this.focusIndex]!.unfocus();
-		}
-		this.focusIndex++;
-		if (this.focusIndex >= this.handles.length) {
-			this.focusIndex = -1;
-		} else {
-			this.handles[this.focusIndex]!.focus();
-		}
-		this.tui.requestRender();
+	focusNext(current: FocusPanel, direction: 1 | -1 = 1): void {
+		const openEntries = this.openEntries();
+		const currentOpenPosition = openEntries.findIndex((entry) => entry.panel === current);
+		if (currentOpenPosition === -1) throw new Error(`Panel ${current.label} is not open`);
+		const nextOpenPosition = (currentOpenPosition + direction + openEntries.length) % openEntries.length;
+		this.focusEntryAt(openEntries, nextOpenPosition);
 	}
 
-	private close(): void {
-		for (const handle of this.handles) handle.hide();
-		this.handles = [];
-		this.panels = [];
+	dismiss(panel: FocusPanel): void {
+		const openEntries = this.openEntries();
+		const currentOpenPosition = openEntries.findIndex((candidate) => candidate.panel === panel);
+		if (currentOpenPosition === -1) return;
+		const entry = openEntries[currentOpenPosition];
+		if (!entry) throw new Error(`Invalid focus panel index ${currentOpenPosition}`);
+		const remainingEntries = openEntries.filter((candidate) => candidate.panel !== panel);
+
+		entry.panel.closed = true;
+		entry.handle.hide();
+		if (remainingEntries.length === 0) {
+			this.close();
+			return;
+		}
+
+		this.focusEntryAt(remainingEntries, currentOpenPosition % remainingEntries.length);
+	}
+
+	close(): void {
+		if (this.closed) return;
+		this.closed = true;
+		this.hidePanels();
 		this.done();
 	}
 
@@ -1089,86 +1098,148 @@ class FocusDemoController extends BaseOverlay {
 		if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c")) {
 			this.close();
 		} else if (matchesKey(data, "tab")) {
-			this.cycleFocus();
+			this.focusFirstOpenPanel();
 		}
 	}
 
 	render(width: number): string[] {
 		const th = this.theme;
-		const focused = this.focusIndex === -1 ? "Controller" : (this.panels[this.focusIndex]?.label ?? "?");
+		const focused = this.entries.find((entry) => entry.handle.isFocused())?.panel.label ?? "Controller";
 		return this.box(
 			[
 				"",
 				` Current focus: ${th.fg("accent", focused)}`,
 				"",
 				" Three overlapping panels above are",
-				` all ${th.fg("accent", "nonCapturing")}. Press Tab to`,
-				" cycle focus() between them.",
+				` ${th.fg("accent", "nonCapturing")} overlays controlled with`,
+				" raw OverlayHandle.focus()/hide().",
 				"",
-				" Focused panel renders on top",
-				" (focus-based rendering order).",
+				" Type in the focused panel's input.",
+				" Focused panel renders on top.",
 				"",
-				th.fg("dim", " Tab = cycle focus | Esc = close"),
+				th.fg("dim", " Tab/Shift+Tab = cycle panels"),
+				th.fg("dim", " Esc/Ctrl+D = dismiss panel"),
+				th.fg("dim", " Ctrl+C = close all"),
 				"",
 			],
 			width,
-			"Focus Demo",
+			"Focus + Input Demo",
 		);
 	}
 
 	override dispose(): void {
-		for (const handle of this.handles) handle.hide();
+		if (this.closed) return;
+		this.closed = true;
+		this.hidePanels();
+	}
+
+	private focusFirstOpenPanel(): void {
+		const firstOpen = this.openEntries()[0];
+		if (firstOpen) {
+			firstOpen.handle.focus();
+			this.tui.requestRender();
+		}
+	}
+
+	private focusEntryAt(entries: FocusPanelEntry[], index: number): void {
+		const entry = entries[index];
+		if (!entry) throw new Error(`Invalid focus panel index ${index}`);
+		entry.handle.focus();
+		this.tui.requestRender();
+	}
+
+	private hidePanels(): void {
+		for (const entry of this.entries) {
+			if (!entry.panel.closed) {
+				entry.panel.closed = true;
+				entry.handle.hide();
+			}
+		}
+		this.entries = [];
+	}
+
+	private openEntries(): FocusPanelEntry[] {
+		return this.entries.filter((entry) => !entry.panel.closed);
 	}
 }
 
 class FocusPanel extends BaseOverlay {
-	handle: OverlayHandle | null = null;
+	focused = false;
+	closed = false;
 	readonly label: string;
-	private color: "error" | "success" | "accent";
-	private onTab: () => void;
-	private onClose: () => void;
+	private readonly color: FocusPanelColor;
+	private readonly controller: FocusDemoController;
+	private readonly input = new Input();
+	private inputs: string[] = [];
 
-	constructor(
-		theme: Theme,
-		label: string,
-		color: "error" | "success" | "accent",
-		onTab: () => void,
-		onClose: () => void,
-	) {
+	constructor({
+		theme,
+		config,
+		controller,
+	}: {
+		theme: Theme;
+		config: FocusPanelConfig;
+		controller: FocusDemoController;
+	}) {
 		super(theme);
-		this.label = label;
-		this.color = color;
-		this.onTab = onTab;
-		this.onClose = onClose;
+		this.label = config.label;
+		this.color = config.color;
+		this.controller = controller;
 	}
 
 	handleInput(data: string): void {
 		if (matchesKey(data, "tab")) {
-			this.onTab();
-		} else if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c")) {
-			this.onClose();
+			this.controller.focusNext(this);
+		} else if (matchesKey(data, "shift+tab")) {
+			this.controller.focusNext(this, -1);
+		} else if (matchesKey(data, "escape") || matchesKey(data, "ctrl+d")) {
+			this.controller.dismiss(this);
+		} else if (matchesKey(data, "ctrl+c")) {
+			this.controller.close();
+		} else if (matchesKey(data, "return")) {
+			this.inputs.push("Enter");
+		} else if (matchesKey(data, "up")) {
+			this.inputs.push("↑");
+		} else if (matchesKey(data, "down")) {
+			this.inputs.push("↓");
+		} else if (matchesKey(data, "left")) {
+			this.input.handleInput(data);
+			this.inputs.push("←");
+		} else if (matchesKey(data, "right")) {
+			this.input.handleInput(data);
+			this.inputs.push("→");
+		} else if (matchesKey(data, "backspace")) {
+			this.input.handleInput(data);
+			this.inputs.push("Backspace");
+		} else {
+			this.input.handleInput(data);
+			this.inputs.push(JSON.stringify(data));
 		}
 	}
 
 	render(width: number): string[] {
 		const th = this.theme;
-		const focused = this.handle?.isFocused() ?? false;
 		const innerW = Math.max(1, width - 2);
-		const border = (c: string) => th.fg(this.color, c);
+		const border = (c: string) => th.fg(this.focused ? this.color : "dim", c);
 		const padLine = (s: string) => truncateToWidth(s, innerW, "...", true);
+		const recent = this.inputs.length === 0 ? "(none)" : this.inputs.slice(-6).join(" ");
 		const lines: string[] = [];
 
+		this.input.focused = this.focused;
+		const [inputLine = ""] = this.input.render(Math.max(1, innerW - 8));
 		lines.push(border(`╭${"─".repeat(innerW)}╮`));
-		lines.push(border("│") + padLine(` ${th.fg("accent", this.label)}`) + border("│"));
-		lines.push(border("│") + padLine("") + border("│"));
-		if (focused) {
-			lines.push(border("│") + padLine(th.fg("success", " ● FOCUSED")) + border("│"));
-			lines.push(border("│") + padLine(th.fg("dim", " (receiving input)")) + border("│"));
-		} else {
-			lines.push(border("│") + padLine(th.fg("dim", " ○ unfocused")) + border("│"));
-			lines.push(border("│") + padLine(th.fg("dim", " (passive)")) + border("│"));
-		}
+		lines.push(
+			border("│") +
+				padLine(
+					` ${th.fg(this.color, this.label)} ${this.focused ? th.fg("success", "FOCUSED") : th.fg("dim", "visible")}`,
+				) +
+				border("│"),
+		);
 		lines.push(border("│") + padLine("") + border("│"));
+		lines.push(border("│") + padLine(` Input: ${inputLine}`) + border("│"));
+		lines.push(border("│") + padLine(` Keys: ${recent}`) + border("│"));
+		lines.push(border("│") + padLine(th.fg("dim", " Tab/Shift+Tab focus")) + border("│"));
+		lines.push(border("│") + padLine(th.fg("dim", " Esc/Ctrl+D dismiss")) + border("│"));
 		lines.push(border(`╰${"─".repeat(innerW)}╯`));
 
 		return lines;
diff --git a/packages/coding-agent/test/interactive-mode-status.test.ts b/packages/coding-agent/test/interactive-mode-status.test.ts
index d5a2c159..5f4a8e21 100644
--- a/packages/coding-agent/test/interactive-mode-status.test.ts
+++ b/packages/coding-agent/test/interactive-mode-status.test.ts
@@ -1,7 +1,9 @@
 import { homedir } from "node:os";
 import * as path from "node:path";
-import { type AutocompleteProvider, CombinedAutocompleteProvider, Container } from "@earendil-works/pi-tui";
+import { type AutocompleteProvider, CombinedAutocompleteProvider } from "@earendil-works/pi-tui";
 import { beforeAll, describe, expect, test, vi } from "vitest";
+import { type Component, Container, type Focusable, TUI } from "../../tui/src/tui.ts";
+import { VirtualTerminal } from "../../tui/test/virtual-terminal.ts";
 import type { AutocompleteProviderFactory } from "../src/core/extensions/types.ts";
 import type { SourceInfo } from "../src/core/source-info.ts";
 import { InteractiveMode } from "../src/modes/interactive/interactive-mode.ts";
@@ -17,6 +19,41 @@ function renderAll(container: Container, width = 120): string {
 	return container.children.flatMap((child) => child.render(width)).join("\n");
 }
 
+class TestFocusableComponent implements Component, Focusable {
+	focused = false;
+	inputs: string[] = [];
+	private readonly label: string;
+	private text = "";
+
+	constructor(label: string) {
+		this.label = label;
+	}
+
+	handleInput(data: string): void {
+		this.inputs.push(data);
+	}
+
+	getText(): string {
+		return this.text;
+	}
+
+	setText(text: string): void {
+		this.text = text;
+	}
+
+	render(): string[] {
+		return [this.label];
+	}
+
+	invalidate(): void {}
+}
+
+async function flushTui(tui: TUI, terminal: VirtualTerminal): Promise<void> {
+	tui.requestRender(true);
+	await Promise.resolve();
+	await terminal.waitForRender();
+}
+
 function normalizeRenderedOutput(container: Container, width = 220): string {
 	return renderAll(container, width)
 		.replace(/\u001b\[[0-9;]*m/g, "")
@@ -148,6 +185,78 @@ describe("InteractiveMode.createExtensionUIContext setTheme", () => {
 	});
 });
 
+describe("InteractiveMode.showExtensionCustom", () => {
+	beforeAll(() => {
+		initTheme("dark");
+	});
+
+	test("overlay custom UI reclaims input after non-overlay custom UI closes", async () => {
+		const terminal = new VirtualTerminal(80, 24);
+		const ui = new TUI(terminal);
+		const editorContainer = new Container();
+		const editor = new TestFocusableComponent("EDITOR");
+		const palette = new TestFocusableComponent("PALETTE");
+		const overlay = new TestFocusableComponent("OVERLAY");
+		const replacement = new TestFocusableComponent("REPLACEMENT");
+		let closeOverlay: (value: string) => void = () => {
+			throw new Error("closeOverlay was not initialized");
+		};
+		let closeReplacement: (value: string) => void = () => {
+			throw new Error("closeReplacement was not initialized");
+		};
+		const fakeThis = {
+			editor,
+			editorContainer,
+			keybindings: {},
+			ui,
+		};
+		const showExtensionCustom = <T>(
+			factory: (tui: TUI, theme: unknown, keybindings: unknown, done: (result: T) => void) => Component,
+			options?: { overlay?: boolean },
+		): Promise<T> =>
+			(InteractiveMode as any).prototype.showExtensionCustom.call(fakeThis, factory, options) as Promise<T>;
+
+		editorContainer.addChild(editor);
+		ui.addChild(editorContainer);
+		ui.addChild(palette);
+		ui.setFocus(palette);
+		ui.start();
+		try {
+			const overlayPromise = showExtensionCustom<string>(
+				(_tui, _theme, _keybindings, done) => {
+					closeOverlay = done;
+					return overlay;
+				},
+				{ overlay: true },
+			);
+			await flushTui(ui, terminal);
+			expect(overlay.focused).toBe(true);
+
+			const replacementPromise = showExtensionCustom<string>((_tui, _theme, _keybindings, done) => {
+				closeReplacement = done;
+				return replacement;
+			});
+			await flushTui(ui, terminal);
+			expect(replacement.focused).toBe(true);
+
+			closeReplacement("done");
+			await replacementPromise;
+			await flushTui(ui, terminal);
+			terminal.sendInput("x");
+			await flushTui(ui, terminal);
+
+			expect(overlay.inputs).toEqual(["x"]);
+			expect(editor.inputs).toEqual([]);
+			expect(overlay.focused).toBe(true);
+
+			closeOverlay("closed");
+			await overlayPromise;
+		} finally {
+			ui.stop();
+		}
+	});
+});
+
 describe("InteractiveMode.createExtensionUIContext addAutocompleteProvider", () => {
 	test("stores wrapper factories and rebuilds autocomplete immediately", () => {
 		const wrapper: AutocompleteProviderFactory = (current) => current;
diff --git a/packages/tui/README.md b/packages/tui/README.md
index 1da50a3a..d0aae400 100644
--- a/packages/tui/README.md
+++ b/packages/tui/README.md
@@ -116,9 +116,21 @@ handle.setHidden(true);     // Temporarily hide (can show again)
 handle.setHidden(false);    // Show again after hiding
 handle.isHidden();          // Check if temporarily hidden
 handle.focus();             // Focus and bring to visual front
-handle.unfocus();           // Release focus to previous target
+handle.unfocus();           // Release focus to normal fallback
+handle.unfocus({ target: baseComponent }); // Release this overlay to a specific component
+handle.unfocus({ target: null });   // Release this overlay and leave focus empty
 handle.isFocused();         // Check if overlay has focus
 
+handle.unfocus();
+// Overlay loses focus; TUI falls back to another visible capturing overlay or the previous focus target.
+
+handle.unfocus({ target: null });
+// Overlay loses focus; no component receives input until focus is set again.
+
+// A focused visible overlay reclaims keyboard input after temporary replacement UI
+// releases focus. If you want a specific component to receive input while overlays remain
+// visible, call handle.unfocus({ target: component }).
+
 // Hide topmost overlay
 tui.hideOverlay();
 
diff --git a/packages/tui/src/index.ts b/packages/tui/src/index.ts
index a645c8a6..fe0fed00 100644
--- a/packages/tui/src/index.ts
+++ b/packages/tui/src/index.ts
@@ -99,6 +99,7 @@ export {
 	type OverlayHandle,
 	type OverlayMargin,
 	type OverlayOptions,
+	type OverlayUnfocusOptions,
 	type SizeValue,
 	TUI,
 } from "./tui.ts";
diff --git a/packages/tui/src/tui.ts b/packages/tui/src/tui.ts
index 2874ef02..f746ee68 100644
--- a/packages/tui/src/tui.ts
+++ b/packages/tui/src/tui.ts
@@ -176,6 +176,12 @@ export interface OverlayOptions {
 	nonCapturing?: boolean;
 }
 
+/** Options for {@link OverlayHandle.unfocus}. */
+export interface OverlayUnfocusOptions {
+	/** Explicit target to focus after releasing this overlay. */
+	target: Component | null;
+}
+
 /**
  * Handle returned by showOverlay for controlling the overlay
  */
@@ -188,12 +194,32 @@ export interface OverlayHandle {
 	isHidden(): boolean;
 	/** Focus this overlay and bring it to the visual front */
 	focus(): void;
-	/** Release focus to the previous target */
-	unfocus(): void;
+	/** Release focus to the next visible capturing overlay or previous target, or to an explicit target when provided */
+	unfocus(options?: OverlayUnfocusOptions): void;
 	/** Check if this overlay currently has focus */
 	isFocused(): boolean;
 }
 
+type OverlayStackEntry = {
+	component: Component;
+	options?: OverlayOptions;
+	preFocus: Component | null;
+	hidden: boolean;
+	focusOrder: number;
+};
+
+type OverlayBlockedFocusResume = { status: "restore-overlay" } | { status: "focus-target"; target: Component | null };
+type EligibleOverlayFocusRestoreState = { status: "eligible"; overlay: OverlayStackEntry };
+type BlockedOverlayFocusRestoreState = {
+	status: "blocked";
+	overlay: OverlayStackEntry;
+	blockedBy: Component;
+	resume: OverlayBlockedFocusResume;
+};
+type ActiveOverlayFocusRestoreState = EligibleOverlayFocusRestoreState | BlockedOverlayFocusRestoreState;
+type OverlayFocusRestoreState = { status: "inactive" } | ActiveOverlayFocusRestoreState;
+type OverlayFocusRestorePolicy = "clear" | "preserve";
+
 /**
  * Container - a component that contains other components
  */
@@ -262,13 +288,8 @@ export class TUI extends Container {
 
 	// Overlay stack for modal components rendered on top of base content
 	private focusOrderCounter = 0;
-	private overlayStack: {
-		component: Component;
-		options?: OverlayOptions;
-		preFocus: Component | null;
-		hidden: boolean;
-		focusOrder: number;
-	}[] = [];
+	private overlayStack: OverlayStackEntry[] = [];
+	private overlayFocusRestore: OverlayFocusRestoreState = { status: "inactive" };
 
 	constructor(terminal: Terminal, showHardwareCursor?: boolean) {
 		super();
@@ -309,17 +330,126 @@ export class TUI extends Container {
 	}
 
 	setFocus(component: Component | null): void {
-		// Clear focused flag on old component
+		this.setFocusInternal({ component, overlayFocusRestore: "clear" });
+	}
+
+	private setFocusInternal({
+		component,
+		overlayFocusRestore,
+	}: {
+		component: Component | null;
+		overlayFocusRestore: OverlayFocusRestorePolicy;
+	}): void {
+		const previousFocus = this.focusedComponent;
+		let nextFocus = component;
+		const previousFocusedOverlay = previousFocus
+			? this.overlayStack.find((entry) => entry.component === previousFocus && this.isOverlayVisible(entry))
+			: undefined;
+		const nextFocusIsOverlay = nextFocus ? this.overlayStack.some((entry) => entry.component === nextFocus) : false;
+		const restoreState = this.getVisibleOverlayFocusRestore();
+		if (nextFocus && !nextFocusIsOverlay) {
+			if (restoreState.status === "blocked" && restoreState.blockedBy === previousFocus) {
+				if (restoreState.resume.status === "focus-target" || !this.isComponentMounted(restoreState.blockedBy)) {
+					nextFocus = this.resolveBlockedOverlayFocusResume(restoreState);
+				} else {
+					this.overlayFocusRestore = {
+						status: "blocked",
+						overlay: restoreState.overlay,
+						blockedBy: nextFocus,
+						resume: restoreState.resume,
+					};
+				}
+			} else if (
+				previousFocusedOverlay &&
+				restoreState.status !== "inactive" &&
+				restoreState.overlay === previousFocusedOverlay &&
+				!this.isOverlayFocusAncestor(previousFocusedOverlay, nextFocus)
+			) {
+				this.overlayFocusRestore = {
+					status: "blocked",
+					overlay: previousFocusedOverlay,
+					blockedBy: nextFocus,
+					resume: { status: "restore-overlay" },
+				};
+			}
+		} else if (nextFocus === null) {
+			if (restoreState.status === "blocked" && restoreState.blockedBy === previousFocus) {
+				nextFocus = this.resolveBlockedOverlayFocusResume(restoreState);
+			} else if (overlayFocusRestore === "clear") {
+				this.clearOverlayFocusRestore();
+			}
+		}
+
 		if (isFocusable(this.focusedComponent)) {
 			this.focusedComponent.focused = false;
 		}
 
-		this.focusedComponent = component;
+		this.focusedComponent = nextFocus;
 
-		// Set focused flag on new component
-		if (isFocusable(component)) {
-			component.focused = true;
+		if (isFocusable(nextFocus)) {
+			nextFocus.focused = true;
 		}
+
+		const focusedOverlay = nextFocus
+			? this.overlayStack.find((entry) => entry.component === nextFocus && this.isOverlayVisible(entry))
+			: undefined;
+		if (focusedOverlay) {
+			this.overlayFocusRestore = { status: "eligible", overlay: focusedOverlay };
+		}
+	}
+
+	private clearOverlayFocusRestore(): void {
+		this.overlayFocusRestore = { status: "inactive" };
+	}
+
+	private clearOverlayFocusRestoreFor(overlay: OverlayStackEntry): void {
+		if (this.overlayFocusRestore.status !== "inactive" && this.overlayFocusRestore.overlay === overlay) {
+			this.clearOverlayFocusRestore();
+		}
+	}
+
+	private resolveBlockedOverlayFocusResume(restoreState: BlockedOverlayFocusRestoreState): Component | null {
+		if (restoreState.resume.status === "restore-overlay") return restoreState.overlay.component;
+		this.clearOverlayFocusRestore();
+		return restoreState.resume.target;
+	}
+
+	private getVisibleOverlayFocusRestore(): OverlayFocusRestoreState {
+		const restoreState = this.overlayFocusRestore;
+		if (restoreState.status === "inactive") return restoreState;
+		if (!this.overlayStack.includes(restoreState.overlay) || !this.isOverlayVisible(restoreState.overlay)) {
+			return { status: "inactive" };
+		}
+		return restoreState;
+	}
+
+	private isOverlayFocusAncestor(entry: OverlayStackEntry, component: Component): boolean {
+		const visited = new Set<Component>();
+		let current = entry.preFocus;
+		while (current && !visited.has(current)) {
+			visited.add(current);
+			if (current === component) return true;
+			current = this.overlayStack.find((overlay) => overlay.component === current)?.preFocus ?? null;
+		}
+		return false;
+	}
+
+	private retargetOverlayPreFocus(removed: OverlayStackEntry): void {
+		for (const overlay of this.overlayStack) {
+			if (overlay !== removed && overlay.preFocus === removed.component) {
+				overlay.preFocus = removed.preFocus;
+			}
+		}
+	}
+
+	private isComponentMounted(component: Component): boolean {
+		return this.children.some((child) => this.containsComponent(child, component));
+	}
+
+	private containsComponent(root: Component, target: Component): boolean {
+		if (root === target) return true;
+		if (!(root instanceof Container)) return false;
+		return root.children.some((child) => this.containsComponent(child, target));
 	}
 
 	/**
@@ -327,9 +457,9 @@ export class TUI extends Container {
 	 * Returns a handle to control the overlay's visibility.
 	 */
 	showOverlay(component: Component, options?: OverlayOptions): OverlayHandle {
-		const entry = {
+		const entry: OverlayStackEntry = {
 			component,
-			options,
+			...(options === undefined ? {} : { options }),
 			preFocus: this.focusedComponent,
 			hidden: false,
 			focusOrder: ++this.focusOrderCounter,
@@ -347,6 +477,8 @@ export class TUI extends Container {
 			hide: () => {
 				const index = this.overlayStack.indexOf(entry);
 				if (index !== -1) {
+					this.clearOverlayFocusRestoreFor(entry);
+					this.retargetOverlayPreFocus(entry);
 					this.overlayStack.splice(index, 1);
 					// Restore focus if this overlay had focus
 					if (this.focusedComponent === component) {
@@ -362,6 +494,7 @@ export class TUI extends Container {
 				entry.hidden = hidden;
 				// Update focus when hiding/showing
 				if (hidden) {
+					this.clearOverlayFocusRestoreFor(entry);
 					// If this overlay had focus, move focus to next visible or preFocus
 					if (this.focusedComponent === component) {
 						const topVisible = this.getTopmostVisibleOverlay();
@@ -379,16 +512,39 @@ export class TUI extends Container {
 			isHidden: () => entry.hidden,
 			focus: () => {
 				if (!this.overlayStack.includes(entry) || !this.isOverlayVisible(entry)) return;
-				if (this.focusedComponent !== component) {
-					this.setFocus(component);
-				}
 				entry.focusOrder = ++this.focusOrderCounter;
+				this.setFocus(component);
 				this.requestRender();
 			},
-			unfocus: () => {
-				if (this.focusedComponent !== component) return;
-				const topVisible = this.getTopmostVisibleOverlay();
-				this.setFocus(topVisible && topVisible !== entry ? topVisible.component : entry.preFocus);
+			unfocus: (unfocusOptions) => {
+				const isFocused = this.focusedComponent === component;
+				const restoreState = this.overlayFocusRestore;
+				const hasPendingRestore = restoreState.status !== "inactive" && restoreState.overlay === entry;
+				if (!isFocused && !hasPendingRestore) return;
+				if (
+					restoreState.status === "blocked" &&
+					restoreState.overlay === entry &&
+					this.focusedComponent === restoreState.blockedBy
+				) {
+					if (unfocusOptions) {
+						this.overlayFocusRestore = {
+							status: "blocked",
+							overlay: entry,
+							blockedBy: restoreState.blockedBy,
+							resume: { status: "focus-target", target: unfocusOptions.target },
+						};
+					} else {
+						this.clearOverlayFocusRestore();
+					}
+					this.requestRender();
+					return;
+				}
+				this.clearOverlayFocusRestoreFor(entry);
+				if (isFocused || unfocusOptions) {
+					const topVisible = this.getTopmostVisibleOverlay();
+					const fallbackTarget = topVisible && topVisible !== entry ? topVisible.component : entry.preFocus;
+					this.setFocus(unfocusOptions ? unfocusOptions.target : fallbackTarget);
+				}
 				this.requestRender();
 			},
 			isFocused: () => this.focusedComponent === component,
@@ -397,8 +553,11 @@ export class TUI extends Container {
 
 	/** Hide the topmost overlay and restore previous focus. */
 	hideOverlay(): void {
-		const overlay = this.overlayStack.pop();
+		const overlay = this.overlayStack[this.overlayStack.length - 1];
 		if (!overlay) return;
+		this.clearOverlayFocusRestoreFor(overlay);
+		this.retargetOverlayPreFocus(overlay);
+		this.overlayStack.pop();
 		if (this.focusedComponent === overlay.component) {
 			// Find topmost visible overlay, or fall back to preFocus
 			const topVisible = this.getTopmostVisibleOverlay();
@@ -414,7 +573,7 @@ export class TUI extends Container {
 	}
 
 	/** Check if an overlay entry is currently visible */
-	private isOverlayVisible(entry: (typeof this.overlayStack)[number]): boolean {
+	private isOverlayVisible(entry: OverlayStackEntry): boolean {
 		if (entry.hidden) return false;
 		if (entry.options?.visible) {
 			return entry.options.visible(this.terminal.columns, this.terminal.rows);
@@ -422,15 +581,16 @@ export class TUI extends Container {
 		return true;
 	}
 
-	/** Find the topmost visible capturing overlay, if any */
-	private getTopmostVisibleOverlay(): (typeof this.overlayStack)[number] | undefined {
-		for (let i = this.overlayStack.length - 1; i >= 0; i--) {
-			if (this.overlayStack[i].options?.nonCapturing) continue;
-			if (this.isOverlayVisible(this.overlayStack[i])) {
-				return this.overlayStack[i];
+	/** Find the visual-frontmost visible capturing overlay, if any */
+	private getTopmostVisibleOverlay(): OverlayStackEntry | undefined {
+		let topmost: OverlayStackEntry | undefined;
+		for (const overlay of this.overlayStack) {
+			if (overlay.options?.nonCapturing || !this.isOverlayVisible(overlay)) continue;
+			if (!topmost || overlay.focusOrder > topmost.focusOrder) {
+				topmost = overlay;
 			}
 		}
-		return undefined;
+		return topmost;
 	}
 
 	override invalidate(): void {
@@ -579,8 +739,22 @@ export class TUI extends Container {
 			if (topVisible) {
 				this.setFocus(topVisible.component);
 			} else {
-				// No visible overlays, restore to preFocus
-				this.setFocus(focusedOverlay.preFocus);
+				this.setFocusInternal({ component: focusedOverlay.preFocus, overlayFocusRestore: "preserve" });
+			}
+		}
+
+		const focusIsOverlay = this.overlayStack.some((o) => o.component === this.focusedComponent);
+		if (!focusIsOverlay) {
+			const restoreState = this.getVisibleOverlayFocusRestore();
+			if (restoreState.status === "eligible") {
+				this.setFocus(restoreState.overlay.component);
+			} else if (restoreState.status === "blocked" && restoreState.blockedBy !== this.focusedComponent) {
+				if (restoreState.resume.status === "restore-overlay") {
+					this.setFocus(restoreState.overlay.component);
+				} else {
+					this.clearOverlayFocusRestore();
+					this.setFocus(restoreState.resume.target);
+				}
 			}
 		}
 
diff --git a/packages/tui/test/overlay-non-capturing.test.ts b/packages/tui/test/overlay-non-capturing.test.ts
index cb91e5e4..64ce6203 100644
--- a/packages/tui/test/overlay-non-capturing.test.ts
+++ b/packages/tui/test/overlay-non-capturing.test.ts
@@ -1,7 +1,7 @@
 import assert from "node:assert";
 import { describe, it } from "node:test";
 import type { Component, Focusable } from "../src/tui.ts";
-import { TUI } from "../src/tui.ts";
+import { Container, TUI } from "../src/tui.ts";
 import { VirtualTerminal } from "./virtual-terminal.ts";
 
 class StaticOverlay implements Component {
@@ -222,6 +222,35 @@ describe("TUI overlay non-capturing", () => {
 			}
 		});
 
+		it("removed focused child overlay does not become parent overlay fallback", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const child = new FocusableOverlay(["CHILD"]);
+			const parent = new FocusableOverlay(["PARENT"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				const childHandle = tui.showOverlay(child, { nonCapturing: true });
+				childHandle.focus();
+				const parentHandle = tui.showOverlay(parent);
+				assert.strictEqual(parent.focused, true);
+
+				childHandle.hide();
+				parentHandle.hide();
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+
+				assert.deepStrictEqual(editor.inputs, ["x"]);
+				assert.deepStrictEqual(child.inputs, []);
+				assert.deepStrictEqual(parent.inputs, []);
+				assert.strictEqual(editor.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
 		it("microtask-deferred sub-overlay pattern (showExtensionCustom simulation) restores focus", async () => {
 			const terminal = new VirtualTerminal(80, 24);
 			const tui = new TUI(terminal);
@@ -234,16 +263,18 @@ describe("TUI overlay non-capturing", () => {
 			try {
 				// Simulate showExtensionCustom: factory creates timer synchronously,
 				// then .then() pushes controller as a microtask
-				let timerHandle: ReturnType<typeof tui.showOverlay>;
-				let doneFn: () => void;
+				let timerHandle: ReturnType<typeof tui.showOverlay> | null = null;
+				let doneFn: () => void = () => {
+					throw new Error("doneFn was not initialized");
+				};
 
 				const overlayPromise = new Promise<void>((resolve) => {
 					doneFn = () => {
+						if (!timerHandle) throw new Error("timerHandle was not initialized");
 						timerHandle.hide();
 						tui.hideOverlay();
 						resolve();
 					};
-					// Factory runs synchronously: creates timer sub-overlay
 					timerHandle = tui.showOverlay(timer, { nonCapturing: true });
 					// .then() runs as microtask — same as showExtensionCustom
 					Promise.resolve(controller).then((c) => {
@@ -251,15 +282,14 @@ describe("TUI overlay non-capturing", () => {
 					});
 				});
 
-				// Wait for .then() microtask and renders to settle
-				await new Promise<void>((r) => setTimeout(r, 50));
+				await Promise.resolve();
 				await renderAndFlush(tui, terminal);
 
 				assert.strictEqual(controller.focused, true);
 				assert.strictEqual(editor.focused, false);
 
 				// Simulate Esc: cleanup + close (from inside handleInput)
-				doneFn!();
+				doneFn();
 				// Now await the promise (simulating showExtensionCustom resolving)
 				await overlayPromise;
 				await renderAndFlush(tui, terminal);
@@ -305,6 +335,473 @@ describe("TUI overlay non-capturing", () => {
 			}
 		});
 
+		it("active base focus replacement receives close input before overlay restore", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const replacement = new FocusableOverlay(["REPLACEMENT"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			overlay.handleInput = (data: string) => {
+				overlay.inputs.push(data);
+				if (data === "b") {
+					tui.setFocus(replacement);
+				}
+			};
+			replacement.handleInput = (data: string) => {
+				replacement.inputs.push(data);
+				if (data === "\r") {
+					tui.setFocus(editor);
+				}
+			};
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				tui.showOverlay(overlay);
+				assert.strictEqual(overlay.focused, true);
+				terminal.sendInput("b");
+				await renderAndFlush(tui, terminal);
+				assert.strictEqual(replacement.focused, true);
+
+				terminal.sendInput("\r");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(replacement.inputs, ["\r"]);
+				assert.deepStrictEqual(overlay.inputs, ["b"]);
+				assert.strictEqual(overlay.focused, true);
+
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(overlay.inputs, ["b", "x"]);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("active replacement still receives input when it is another overlay preFocus", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const replacement = new FocusableOverlay(["REPLACEMENT"]);
+			const passive = new FocusableOverlay(["PASSIVE"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			overlay.handleInput = (data: string) => {
+				overlay.inputs.push(data);
+				if (data === "b") {
+					tui.setFocus(replacement);
+				}
+			};
+			replacement.handleInput = (data: string) => {
+				replacement.inputs.push(data);
+				if (data === "\r") {
+					tui.setFocus(editor);
+				}
+			};
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				tui.setFocus(replacement);
+				tui.showOverlay(passive, { nonCapturing: true });
+				tui.setFocus(editor);
+				tui.showOverlay(overlay);
+				terminal.sendInput("b");
+				await renderAndFlush(tui, terminal);
+				assert.strictEqual(replacement.focused, true);
+
+				terminal.sendInput("1");
+				terminal.sendInput("\r");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(replacement.inputs, ["1", "\r"]);
+				assert.deepStrictEqual(overlay.inputs, ["b"]);
+				assert.strictEqual(overlay.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("blocked replacement can move focus internally before overlay restore", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const base = new Container();
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const firstReplacement = new FocusableOverlay(["FIRST"]);
+			const secondReplacement = new FocusableOverlay(["SECOND"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			overlay.handleInput = (data: string) => {
+				overlay.inputs.push(data);
+				if (data === "b") tui.setFocus(firstReplacement);
+			};
+			firstReplacement.handleInput = (data: string) => {
+				firstReplacement.inputs.push(data);
+				if (data === "n") tui.setFocus(secondReplacement);
+			};
+			secondReplacement.handleInput = (data: string) => {
+				secondReplacement.inputs.push(data);
+				if (data === "\r") {
+					base.clear();
+					base.addChild(editor);
+					tui.setFocus(editor);
+				}
+			};
+			base.addChild(editor);
+			base.addChild(firstReplacement);
+			base.addChild(secondReplacement);
+			tui.addChild(base);
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				tui.showOverlay(overlay);
+				terminal.sendInput("b");
+				await renderAndFlush(tui, terminal);
+				terminal.sendInput("n");
+				await renderAndFlush(tui, terminal);
+				terminal.sendInput("2");
+				terminal.sendInput("\r");
+				await renderAndFlush(tui, terminal);
+
+				assert.deepStrictEqual(overlay.inputs, ["b"]);
+				assert.deepStrictEqual(firstReplacement.inputs, ["n"]);
+				assert.deepStrictEqual(secondReplacement.inputs, ["2", "\r"]);
+				assert.strictEqual(overlay.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("removed replacement restores overlay even when overlay preFocus differs from next focus", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const base = new Container();
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const palette = new FocusableOverlay(["PALETTE"]);
+			const replacement = new FocusableOverlay(["REPLACEMENT"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			overlay.handleInput = (data: string) => {
+				overlay.inputs.push(data);
+				if (data === "b") tui.setFocus(replacement);
+			};
+			replacement.handleInput = (data: string) => {
+				replacement.inputs.push(data);
+				if (data === "\r") {
+					base.clear();
+					base.addChild(editor);
+					tui.setFocus(editor);
+				}
+			};
+			base.addChild(editor);
+			base.addChild(palette);
+			base.addChild(replacement);
+			tui.addChild(base);
+			tui.setFocus(palette);
+			tui.start();
+			try {
+				tui.showOverlay(overlay);
+				terminal.sendInput("b");
+				await renderAndFlush(tui, terminal);
+				terminal.sendInput("\r");
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+
+				assert.deepStrictEqual(overlay.inputs, ["b", "x"]);
+				assert.deepStrictEqual(replacement.inputs, ["\r"]);
+				assert.deepStrictEqual(editor.inputs, []);
+				assert.strictEqual(overlay.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("unfocus target releases a blocked overlay while replacement remains focused", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const fallback = new FocusableOverlay(["FALLBACK"]);
+			const target = new FocusableOverlay(["TARGET"]);
+			const replacement = new FocusableOverlay(["REPLACEMENT"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			replacement.handleInput = (data: string) => {
+				replacement.inputs.push(data);
+				if (data === "\r") tui.setFocus(fallback);
+			};
+			tui.addChild(new EmptyContent());
+			tui.start();
+			try {
+				const overlayHandle = tui.showOverlay(overlay);
+				overlay.handleInput = (data: string) => {
+					overlay.inputs.push(data);
+					if (data === "b") {
+						tui.setFocus(replacement);
+						overlayHandle.unfocus({ target });
+					}
+				};
+
+				terminal.sendInput("b");
+				await renderAndFlush(tui, terminal);
+				assert.strictEqual(replacement.focused, true);
+				terminal.sendInput("\r");
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+
+				assert.deepStrictEqual(overlay.inputs, ["b"]);
+				assert.deepStrictEqual(replacement.inputs, ["\r"]);
+				assert.deepStrictEqual(fallback.inputs, []);
+				assert.deepStrictEqual(target.inputs, ["x"]);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("handleInput restores focus to a visible focused overlay after base focus steal", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const replacement = new FocusableOverlay(["REPLACEMENT"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				tui.showOverlay(overlay);
+				assert.strictEqual(overlay.focused, true);
+				tui.setFocus(replacement);
+				tui.setFocus(editor);
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(overlay.inputs, ["x"]);
+				assert.deepStrictEqual(editor.inputs, []);
+				assert.strictEqual(overlay.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("handleInput restores focus to explicitly focused raw sub-overlay after base focus steal", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const controller = new FocusableOverlay(["CONTROLLER"]);
+			const subOverlay = new FocusableOverlay(["SUB"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				tui.showOverlay(controller);
+				const subHandle = tui.showOverlay(subOverlay, { nonCapturing: true });
+				subHandle.focus();
+				tui.setFocus(editor);
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(subOverlay.inputs, ["x"]);
+				assert.deepStrictEqual(controller.inputs, []);
+				assert.deepStrictEqual(editor.inputs, []);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("passive non-capturing overlay does not regain input after base focus", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const passive = new FocusableOverlay(["PASSIVE"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				tui.showOverlay(passive, { nonCapturing: true });
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(editor.inputs, ["x"]);
+				assert.deepStrictEqual(passive.inputs, []);
+				assert.strictEqual(editor.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("explicitly focused non-capturing overlay regains input after base focus steal", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const overlay = new FocusableOverlay(["NC"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				const handle = tui.showOverlay(overlay, { nonCapturing: true });
+				handle.focus();
+				tui.setFocus(editor);
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(overlay.inputs, ["x"]);
+				assert.deepStrictEqual(editor.inputs, []);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("unfocus() prevents visible overlay from regaining input", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				const handle = tui.showOverlay(overlay);
+				handle.unfocus();
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(editor.inputs, ["x"]);
+				assert.deepStrictEqual(overlay.inputs, []);
+				assert.strictEqual(editor.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("setFocus(null) explicitly clears visible overlay restore", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			tui.addChild(new EmptyContent());
+			tui.start();
+			try {
+				tui.showOverlay(overlay);
+				tui.setFocus(null);
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(overlay.inputs, []);
+				assert.strictEqual(overlay.focused, false);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("blocked replacement setFocus(null) resumes the visible overlay", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const replacement = new FocusableOverlay(["REPLACEMENT"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			replacement.handleInput = (data: string) => {
+				replacement.inputs.push(data);
+				if (data === "\r") tui.setFocus(null);
+			};
+			overlay.handleInput = (data: string) => {
+				overlay.inputs.push(data);
+				if (data === "b") tui.setFocus(replacement);
+			};
+			tui.addChild(new EmptyContent());
+			tui.start();
+			try {
+				tui.showOverlay(overlay);
+				terminal.sendInput("b");
+				await renderAndFlush(tui, terminal);
+				terminal.sendInput("\r");
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(replacement.inputs, ["\r"]);
+				assert.deepStrictEqual(overlay.inputs, ["b", "x"]);
+				assert.strictEqual(overlay.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("temporarily invisible focused overlay falls back without losing restore eligibility", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			let visible = true;
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				tui.showOverlay(overlay, { visible: () => visible });
+				tui.setFocus(editor);
+				visible = false;
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(editor.inputs, ["x"]);
+				assert.deepStrictEqual(overlay.inputs, []);
+				visible = true;
+				terminal.sendInput("y");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(editor.inputs, ["x"]);
+				assert.deepStrictEqual(overlay.inputs, ["y"]);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("temporarily invisible focused overlay with null preFocus restores when visible again", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			let visible = true;
+			tui.addChild(new EmptyContent());
+			tui.start();
+			try {
+				tui.showOverlay(overlay, { visible: () => visible });
+				visible = false;
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(overlay.inputs, []);
+				visible = true;
+				terminal.sendInput("y");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(overlay.inputs, ["y"]);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("cyclic overlay preFocus ancestry does not hang focus changes", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(overlay);
+			tui.start();
+			try {
+				const handle = tui.showOverlay(overlay, { nonCapturing: true });
+				handle.focus();
+				tui.setFocus(editor);
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(editor.inputs, ["x"]);
+				assert.deepStrictEqual(overlay.inputs, []);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("handleInput restores the focus-order top overlay after base focus steal", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const lower = new FocusableOverlay(["LOWER"]);
+			const upper = new FocusableOverlay(["UPPER"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				const lowerHandle = tui.showOverlay(lower);
+				tui.showOverlay(upper);
+				lowerHandle.focus();
+				tui.setFocus(editor);
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(lower.inputs, ["x"]);
+				assert.deepStrictEqual(upper.inputs, []);
+				assert.deepStrictEqual(editor.inputs, []);
+			} finally {
+				tui.stop();
+			}
+		});
+
 		it("hideOverlay() does not reassign focus when topmost overlay is non-capturing", async () => {
 			const terminal = new VirtualTerminal(80, 24);
 			const tui = new TUI(terminal);
@@ -481,6 +978,95 @@ describe("TUI overlay non-capturing", () => {
 				tui.stop();
 			}
 		});
+
+		it("explicit unfocus target supports cycling between three overlays and editor", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const a = new FocusableOverlay(["A"]);
+			const b = new FocusableOverlay(["B"]);
+			const c = new FocusableOverlay(["C"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				const aHandle = tui.showOverlay(a);
+				const bHandle = tui.showOverlay(b);
+				const cHandle = tui.showOverlay(c);
+
+				aHandle.focus();
+				terminal.sendInput("a");
+				await renderAndFlush(tui, terminal);
+				bHandle.focus();
+				terminal.sendInput("b");
+				await renderAndFlush(tui, terminal);
+				cHandle.focus();
+				terminal.sendInput("c");
+				await renderAndFlush(tui, terminal);
+				cHandle.unfocus({ target: editor });
+				terminal.sendInput("e");
+				await renderAndFlush(tui, terminal);
+				aHandle.focus();
+				terminal.sendInput("A");
+				await renderAndFlush(tui, terminal);
+				aHandle.unfocus({ target: editor });
+				terminal.sendInput("E");
+				await renderAndFlush(tui, terminal);
+
+				assert.deepStrictEqual(a.inputs, ["a", "A"]);
+				assert.deepStrictEqual(b.inputs, ["b"]);
+				assert.deepStrictEqual(c.inputs, ["c"]);
+				assert.deepStrictEqual(editor.inputs, ["e", "E"]);
+				assert.strictEqual(editor.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("explicit null unfocus target clears focus without restoring overlays", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new FocusableOverlay(["OVERLAY"]);
+			tui.addChild(new EmptyContent());
+			tui.start();
+			try {
+				const handle = tui.showOverlay(overlay);
+				handle.unfocus({ target: null });
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(overlay.inputs, []);
+				assert.strictEqual(handle.isFocused(), false);
+			} finally {
+				tui.stop();
+			}
+		});
+
+		it("hiding focused overlay falls back to next visual-frontmost overlay", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const editor = new FocusableOverlay(["EDITOR"]);
+			const a = new FocusableOverlay(["A"]);
+			const b = new FocusableOverlay(["B"]);
+			const c = new FocusableOverlay(["C"]);
+			tui.addChild(new EmptyContent());
+			tui.setFocus(editor);
+			tui.start();
+			try {
+				const aHandle = tui.showOverlay(a);
+				const bHandle = tui.showOverlay(b);
+				tui.showOverlay(c);
+				aHandle.focus();
+				bHandle.focus();
+				bHandle.setHidden(true);
+				terminal.sendInput("x");
+				await renderAndFlush(tui, terminal);
+				assert.deepStrictEqual(a.inputs, ["x"]);
+				assert.deepStrictEqual(c.inputs, []);
+				assert.strictEqual(a.focused, true);
+			} finally {
+				tui.stop();
+			}
+		});
 	});
 
 	describe("rendering order", () => {