diff --git a/quickstep/src/com/android/launcher3/taskbar/BaseTaskbarContext.java b/quickstep/src/com/android/launcher3/taskbar/BaseTaskbarContext.java
index 17635df..27e89ba 100644
--- a/quickstep/src/com/android/launcher3/taskbar/BaseTaskbarContext.java
+++ b/quickstep/src/com/android/launcher3/taskbar/BaseTaskbarContext.java
@@ -64,6 +64,9 @@
     /** Callback invoked when a drag is initiated within this context. */
     public abstract void onDragStart();
 
+    /** Callback invoked when a drag is finished within this context. */
+    public abstract void onDragEnd();
+
     /** Callback invoked when a popup is shown or closed within this context. */
     public abstract void onPopupVisibilityChanged(boolean isVisible);
 }
diff --git a/quickstep/src/com/android/launcher3/taskbar/TaskbarActivityContext.java b/quickstep/src/com/android/launcher3/taskbar/TaskbarActivityContext.java
index 2c2cc43..fa0a606 100644
--- a/quickstep/src/com/android/launcher3/taskbar/TaskbarActivityContext.java
+++ b/quickstep/src/com/android/launcher3/taskbar/TaskbarActivityContext.java
@@ -21,6 +21,7 @@
 import static android.view.WindowManager.LayoutParams.LAYOUT_IN_DISPLAY_CUTOUT_MODE_ALWAYS;
 import static android.view.WindowManager.LayoutParams.TYPE_NAVIGATION_BAR_PANEL;
 
+import static com.android.launcher3.AbstractFloatingView.TYPE_ALL;
 import static com.android.launcher3.logging.StatsLogManager.LauncherEvent.LAUNCHER_FOLDER_OPEN;
 import static com.android.systemui.shared.system.QuickStepContract.SYSUI_STATE_NOTIFICATION_PANEL_EXPANDED;
 import static com.android.systemui.shared.system.QuickStepContract.SYSUI_STATE_QUICK_SETTINGS_EXPANDED;
@@ -386,6 +387,11 @@
     }
 
     @Override
+    public void onDragEnd() {
+        maybeSetTaskbarWindowNotFullscreen();
+    }
+
+    @Override
     public void onPopupVisibilityChanged(boolean isVisible) {
         setTaskbarWindowFocusable(isVisible);
     }
@@ -488,6 +494,17 @@
         setTaskbarWindowHeight(fullscreen ? MATCH_PARENT : mLastRequestedNonFullscreenHeight);
     }
 
+    /**
+     * Reverts Taskbar window to its original size, if all floating views are closed and there is
+     * no system drag operation in progress.
+     */
+    void maybeSetTaskbarWindowNotFullscreen() {
+        if (AbstractFloatingView.getAnyView(this, TYPE_ALL) == null
+                && !mControllers.taskbarDragController.isSystemDragInProgress()) {
+            setTaskbarWindowFullscreen(false);
+        }
+    }
+
     public boolean isTaskbarWindowFullscreen() {
         return mIsFullscreen;
     }
diff --git a/quickstep/src/com/android/launcher3/taskbar/TaskbarDragController.java b/quickstep/src/com/android/launcher3/taskbar/TaskbarDragController.java
index 12b1195..24c5d0e 100644
--- a/quickstep/src/com/android/launcher3/taskbar/TaskbarDragController.java
+++ b/quickstep/src/com/android/launcher3/taskbar/TaskbarDragController.java
@@ -391,11 +391,17 @@
         return super.isDragging() || mIsSystemDragInProgress;
     }
 
+    /** {@code true} if the system is currently handling the drag. */
+    public boolean isSystemDragInProgress() {
+        return mIsSystemDragInProgress;
+    }
+
     private void maybeOnDragEnd() {
         if (!isDragging()) {
             ((BubbleTextView) mDragObject.originalView).getIcon().setIsDisabled(false);
             mControllers.taskbarAutohideSuspendController.updateFlag(
                     TaskbarAutohideSuspendController.FLAG_AUTOHIDE_SUSPEND_DRAGGING, false);
+            mActivity.onDragEnd();
         }
     }
 
diff --git a/quickstep/src/com/android/launcher3/taskbar/TaskbarDragLayerController.java b/quickstep/src/com/android/launcher3/taskbar/TaskbarDragLayerController.java
index 1bd76b9..cdac497 100644
--- a/quickstep/src/com/android/launcher3/taskbar/TaskbarDragLayerController.java
+++ b/quickstep/src/com/android/launcher3/taskbar/TaskbarDragLayerController.java
@@ -181,6 +181,9 @@
             } else if (!mControllers.uiController.isTaskbarTouchable()) {
                 // Let touches pass through us.
                 insetsInfo.setTouchableInsets(TOUCHABLE_INSETS_REGION);
+            } else if (mControllers.taskbarDragController.isSystemDragInProgress()) {
+                // Let touches pass through us.
+                insetsInfo.setTouchableInsets(TOUCHABLE_INSETS_REGION);
             } else if (mControllers.taskbarViewController.areIconsVisible()
                     || AbstractFloatingView.getOpenView(mActivity, TYPE_ALL) != null
                     || mActivity.isNavBarKidsModeActive()) {
@@ -208,9 +211,7 @@
          * Called when a child is removed from TaskbarDragLayer.
          */
         public void onDragLayerViewRemoved() {
-            if (AbstractFloatingView.getAnyView(mActivity, TYPE_ALL) == null) {
-                mActivity.setTaskbarWindowFullscreen(false);
-            }
+            mActivity.maybeSetTaskbarWindowNotFullscreen();
         }
 
         /**
diff --git a/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsContext.java b/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsContext.java
index 4245119..7f3add3 100644
--- a/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsContext.java
+++ b/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsContext.java
@@ -19,6 +19,8 @@
 import static android.view.KeyEvent.KEYCODE_BACK;
 import static android.view.WindowManager.LayoutParams.TYPE_APPLICATION_OVERLAY;
 
+import static com.android.systemui.shared.system.ViewTreeObserverWrapper.InsetsInfo.TOUCHABLE_INSETS_REGION;
+
 import android.content.Context;
 import android.view.KeyEvent;
 import android.view.View;
@@ -37,6 +39,9 @@
 import com.android.launcher3.util.OnboardingPrefs;
 import com.android.launcher3.util.TouchController;
 import com.android.launcher3.views.BaseDragLayer;
+import com.android.systemui.shared.system.ViewTreeObserverWrapper;
+import com.android.systemui.shared.system.ViewTreeObserverWrapper.InsetsInfo;
+import com.android.systemui.shared.system.ViewTreeObserverWrapper.OnComputeInsetsListener;
 
 /**
  * Window context for the taskbar all apps overlay.
@@ -48,6 +53,7 @@
     private final TaskbarActivityContext mTaskbarContext;
     private final OnboardingPrefs<TaskbarAllAppsContext> mOnboardingPrefs;
 
+    private final TaskbarAllAppsController mWindowController;
     private final TaskbarAllAppsViewController mAllAppsViewController;
     private final TaskbarDragController mDragController;
     private final TaskbarAllAppsDragLayer mDragLayer;
@@ -66,6 +72,7 @@
         mDragLayer = new TaskbarAllAppsDragLayer(this);
         TaskbarAllAppsSlideInView slideInView = (TaskbarAllAppsSlideInView) mLayoutInflater.inflate(
                 R.layout.taskbar_all_apps, mDragLayer, false);
+        mWindowController = windowController;
         mAllAppsViewController = new TaskbarAllAppsViewController(
                 this,
                 slideInView,
@@ -128,10 +135,16 @@
     public void onDragStart() {}
 
     @Override
+    public void onDragEnd() {
+        mWindowController.maybeCloseWindow();
+    }
+
+    @Override
     public void onPopupVisibilityChanged(boolean isVisible) {}
 
     /** Root drag layer for this context. */
-    private static class TaskbarAllAppsDragLayer extends BaseDragLayer<TaskbarAllAppsContext> {
+    private static class TaskbarAllAppsDragLayer extends
+            BaseDragLayer<TaskbarAllAppsContext> implements OnComputeInsetsListener {
 
         private TaskbarAllAppsDragLayer(Context context) {
             super(context, null, 1);
@@ -142,10 +155,18 @@
         @Override
         protected void onAttachedToWindow() {
             super.onAttachedToWindow();
+            ViewTreeObserverWrapper.addOnComputeInsetsListener(
+                    getViewTreeObserver(), this);
             mActivity.mAllAppsViewController.show();
         }
 
         @Override
+        protected void onDetachedFromWindow() {
+            super.onDetachedFromWindow();
+            ViewTreeObserverWrapper.removeOnComputeInsetsListener(this);
+        }
+
+        @Override
         public void recreateControllers() {
             mControllers = new TouchController[]{mActivity.mDragController};
         }
@@ -160,5 +181,13 @@
             }
             return super.dispatchKeyEvent(event);
         }
+
+        @Override
+        public void onComputeInsets(InsetsInfo inoutInfo) {
+            if (mActivity.mDragController.isSystemDragInProgress()) {
+                inoutInfo.touchableRegion.setEmpty();
+                inoutInfo.setTouchableInsets(TOUCHABLE_INSETS_REGION);
+            }
+        }
     }
 }
diff --git a/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsController.java b/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsController.java
index 9302452..87133fc 100644
--- a/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsController.java
+++ b/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsController.java
@@ -17,6 +17,8 @@
 
 import static android.view.WindowManager.LayoutParams.TYPE_APPLICATION_OVERLAY;
 
+import static com.android.launcher3.AbstractFloatingView.TYPE_ALL;
+
 import android.content.Context;
 import android.graphics.PixelFormat;
 import android.view.Gravity;
@@ -129,11 +131,16 @@
     }
 
     /**
-     * Removes the all apps window from the hierarchy.
+     * Removes the all apps window from the hierarchy, if all floating views are closed and there is
+     * no system drag operation in progress.
      * <p>
      * This method should be called after an exit animation finishes, if applicable.
      */
-    void closeWindow() {
+    void maybeCloseWindow() {
+        if (AbstractFloatingView.getOpenView(mAllAppsContext, TYPE_ALL) != null
+                || mAllAppsContext.getDragController().isSystemDragInProgress()) {
+            return;
+        }
         mProxyView.close(false);
         mTaskbarContext.removeOnDeviceProfileChangeListener(this);
         Optional.ofNullable(mAllAppsContext)
diff --git a/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsViewController.java b/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsViewController.java
index c1abaac..648c486 100644
--- a/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsViewController.java
+++ b/quickstep/src/com/android/launcher3/taskbar/allapps/TaskbarAllAppsViewController.java
@@ -49,7 +49,7 @@
         setUpIconLongClick();
         setUpAppDivider();
         setUpTaskbarStashing();
-        mSlideInView.addOnCloseListener(windowController::closeWindow);
+        mSlideInView.addOnCloseListener(windowController::maybeCloseWindow);
     }
 
     /** Starts the {@link TaskbarAllAppsSlideInView} enter transition. */