diff --git a/src/components/Modal/Modal.test.tsx b/src/components/Modal/Modal.test.tsx
index 7a423235e..c673eda58 100644
--- a/src/components/Modal/Modal.test.tsx
+++ b/src/components/Modal/Modal.test.tsx
@@ -4,6 +4,7 @@ import React, { FC, useEffect, useState } from "react";
 
 import Button from "components/Button";
 import Input from "components/Input";
+import ContextualMenu from "components/ContextualMenu";
 import Modal from "./Modal";
 
 describe("Modal ", () => {
@@ -223,6 +224,41 @@ describe("Modal ", () => {
     expect(input).toHaveValue("delete item1");
   });
 
+  it("should allow Escape to close a ContextualMenu inside the modal before closing the modal", async () => {
+    const handleCloseModal = jest.fn();
+    const handleMenuToggle = jest.fn();
+
+    render(
+      <Modal title="Test" close={handleCloseModal}>
+        <ContextualMenu
+          toggleLabel="Open menu"
+          links={[{ children: "Item 1" }]}
+          onToggleMenu={handleMenuToggle}
+          visible={true}
+        />
+      </Modal>,
+    );
+
+    // The contextual menu dropdown should be open (aria-hidden="false")
+    const dropdown = document.querySelector(
+      '.p-contextual-menu__dropdown[aria-hidden="false"]',
+    );
+    expect(dropdown).toBeInTheDocument();
+
+    // Press Escape — should close the menu, not the modal
+    await userEvent.keyboard("{Escape}");
+
+    // The modal close handler should NOT have been called
+    expect(handleCloseModal).not.toHaveBeenCalled();
+
+    // The dropdown should now be closed (no longer present with aria-hidden="false")
+    expect(
+      document.querySelector(
+        '.p-contextual-menu__dropdown[aria-hidden="false"]',
+      ),
+    ).not.toBeInTheDocument();
+  });
+
   it("updates focusable elements when an initially disabled button becomes enabled", async () => {
     const user = userEvent.setup();
 
diff --git a/src/components/Modal/Modal.tsx b/src/components/Modal/Modal.tsx
index 0294a101e..7ca08f566 100644
--- a/src/components/Modal/Modal.tsx
+++ b/src/components/Modal/Modal.tsx
@@ -91,6 +91,19 @@ export const Modal = ({
   const handleEscKey = (
     event: KeyboardEvent | React.KeyboardEvent<HTMLDivElement>,
   ) => {
+    // If there is an open contextual menu dropdown inside (or alongside) this
+    // modal, let the Escape event propagate so that the menu's own keydown
+    // handler can close it first. The modal should only intercept Escape when
+    // no child overlay is open. This fixes the bug where a ContextualMenu
+    // rendered inside a Modal cannot be closed with the Escape key because
+    // stopImmediatePropagation() was called unconditionally, preventing the
+    // menu's document-level keydown listener from ever firing.
+    const hasOpenDropdown = !!document.querySelector(
+      '.p-contextual-menu__dropdown[aria-hidden="false"]',
+    );
+    if (hasOpenDropdown) {
+      return;
+    }
     if ("nativeEvent" in event && event.nativeEvent.stopImmediatePropagation) {
       event.nativeEvent.stopImmediatePropagation();
     } else if ("stopImmediatePropagation" in event) {