diff --git a/public/app/features/dashboard-scene/scene/layout-auto-grid/AutoGridItemRenderer.tsx b/public/app/features/dashboard-scene/scene/layout-auto-grid/AutoGridItemRenderer.tsx
index aefaf3fabb8..f3cee9f8b23 100644
--- a/public/app/features/dashboard-scene/scene/layout-auto-grid/AutoGridItemRenderer.tsx
+++ b/public/app/features/dashboard-scene/scene/layout-auto-grid/AutoGridItemRenderer.tsx
@@ -1,11 +1,13 @@
 import { css, cx } from '@emotion/css';
+import { memo, useMemo } from 'react';
 
 import { GrafanaTheme2 } from '@grafana/data/';
-import { SceneComponentProps } from '@grafana/scenes';
+import { LazyLoader, SceneComponentProps, VizPanel } from '@grafana/scenes';
 import { useStyles2 } from '@grafana/ui';
 
 import { useIsConditionallyHidden } from '../../conditional-rendering/useIsConditionallyHidden';
 import { useDashboardState } from '../../utils/utils';
+import { getIsLazy } from '../layouts-shared/utils';
 
 import { AutoGridItem } from './AutoGridItem';
 import { DRAGGED_ITEM_HEIGHT, DRAGGED_ITEM_LEFT, DRAGGED_ITEM_TOP, DRAGGED_ITEM_WIDTH } from './const';
@@ -13,11 +15,13 @@ import { DRAGGED_ITEM_HEIGHT, DRAGGED_ITEM_LEFT, DRAGGED_ITEM_TOP, DRAGGED_ITEM_
 export function AutoGridItemRenderer({ model }: SceneComponentProps<AutoGridItem>) {
   const { body, repeatedPanels, key } = model.useState();
   const { draggingKey } = model.getParentGrid().useState();
-  const { isEditing } = useDashboardState(model);
+  const { isEditing, preload } = useDashboardState(model);
   const [isConditionallyHidden, conditionalRenderingClass, conditionalRenderingOverlay] =
     useIsConditionallyHidden(model);
   const styles = useStyles2(getStyles);
 
+  const isLazy = useMemo(() => getIsLazy(preload), [preload]);
+
   if (isConditionallyHidden && !isEditing) {
     return null;
   }
@@ -25,37 +29,65 @@ export function AutoGridItemRenderer({ model }: SceneComponentProps<AutoGridItem
   const isDragging = !!draggingKey;
   const isDragged = draggingKey === key;
 
+  const Wrapper = useMemo(
+    () =>
+      memo(
+        ({
+          item,
+          addDndContainer,
+          isDragged,
+          isDragging,
+        }: {
+          item: VizPanel;
+          addDndContainer: boolean;
+          isDragged: boolean;
+          isDragging: boolean;
+        }) => (
+          <div
+            {...(addDndContainer
+              ? { ref: model.containerRef, ['data-auto-grid-item-drop-target']: isDragging ? key : undefined }
+              : {})}
+          >
+            {isDragged && <div className={styles.draggedPlaceholder} />}
+            {isLazy ? (
+              <LazyLoader
+                key={item.state.key!}
+                className={cx(conditionalRenderingClass, styles.wrapper, isDragged && styles.draggedWrapper)}
+              >
+                <item.Component model={item} />
+                {conditionalRenderingOverlay}
+              </LazyLoader>
+            ) : (
+              <div className={cx(conditionalRenderingClass, styles.wrapper, isDragged && styles.draggedWrapper)}>
+                <item.Component model={item} />
+                {conditionalRenderingOverlay}
+              </div>
+            )}
+          </div>
+        )
+      ),
+    [conditionalRenderingClass, conditionalRenderingOverlay, isLazy, key, model.containerRef, styles]
+  );
+
   return repeatedPanels ? (
     <>
-      {repeatedPanels.map((item) => (
-        <div className={cx(conditionalRenderingClass, styles.wrapper)} key={item.state.key}>
-          <item.Component model={item} />
-          {conditionalRenderingOverlay}
-        </div>
+      {repeatedPanels.map((item, index) => (
+        <Wrapper
+          item={item}
+          addDndContainer={index === 0}
+          key={item.state.key!}
+          isDragged={isDragged}
+          isDragging={isDragging}
+        />
       ))}
     </>
   ) : (
-    <div ref={model.containerRef} data-auto-grid-item-drop-target={isDragging ? key : undefined}>
-      {isDragged && <div className={styles.draggedPlaceholder} />}
-
-      <div className={cx(!isDragged && conditionalRenderingClass, styles.wrapper, isDragged && styles.draggedWrapper)}>
-        <body.Component model={body} />
-        {conditionalRenderingOverlay}
-      </div>
-    </div>
+    <Wrapper item={body} addDndContainer key={body.state.key!} isDragged={isDragged} isDragging={isDragging} />
   );
 }
 
 const getStyles = (theme: GrafanaTheme2) => ({
-  container: css({
-    width: '100%',
-    height: '100%',
-  }),
-  wrapper: css({
-    width: '100%',
-    height: '100%',
-    position: 'relative',
-  }),
+  wrapper: css({ width: '100%', height: '100%', position: 'relative' }),
   draggedWrapper: css({
     position: 'absolute',
     zIndex: 1000,
diff --git a/public/app/features/dashboard-scene/scene/layout-auto-grid/AutoGridLayoutRenderer.tsx b/public/app/features/dashboard-scene/scene/layout-auto-grid/AutoGridLayoutRenderer.tsx
index 2a44564b536..c70a3ef5200 100644
--- a/public/app/features/dashboard-scene/scene/layout-auto-grid/AutoGridLayoutRenderer.tsx
+++ b/public/app/features/dashboard-scene/scene/layout-auto-grid/AutoGridLayoutRenderer.tsx
@@ -1,15 +1,13 @@
 import { css, cx } from '@emotion/css';
-import { useMemo } from 'react';
 
 import { GrafanaTheme2 } from '@grafana/data';
-import { LazyLoader, SceneComponentProps, sceneGraph } from '@grafana/scenes';
+import { SceneComponentProps, sceneGraph } from '@grafana/scenes';
 import { useStyles2 } from '@grafana/ui';
 
 import { useHasClonedParents } from '../../utils/clone';
 import { useDashboardState } from '../../utils/utils';
 import { CanvasGridAddActions } from '../layouts-shared/CanvasGridAddActions';
 import { dashboardCanvasAddButtonHoverStyles } from '../layouts-shared/styles';
-import { getIsLazy } from '../layouts-shared/utils';
 
 import { AutoGridLayout, AutoGridLayoutState } from './AutoGridLayout';
 import { AutoGridLayoutManager } from './AutoGridLayoutManager';
@@ -18,12 +16,10 @@ export function AutoGridLayoutRenderer({ model }: SceneComponentProps<AutoGridLa
   const { children, isHidden } = model.useState();
   const hasClonedParents = useHasClonedParents(model);
   const styles = useStyles2(getStyles, model.state);
-  const { layoutOrchestrator, isEditing, preload } = useDashboardState(model);
+  const { layoutOrchestrator, isEditing } = useDashboardState(model);
   const layoutManager = sceneGraph.getAncestor(model, AutoGridLayoutManager);
   const { fillScreen } = layoutManager.useState();
 
-  const isLazy = useMemo(() => getIsLazy(preload), [preload]);
-
   if (isHidden || !layoutOrchestrator) {
     return null;
   }
@@ -35,15 +31,9 @@ export function AutoGridLayoutRenderer({ model }: SceneComponentProps<AutoGridLa
       className={cx(styles.container, fillScreen && styles.containerFillScreen, isEditing && styles.containerEditing)}
       ref={model.containerRef}
     >
-      {children.map((item) =>
-        isLazy ? (
-          <LazyLoader key={item.state.key!} className={styles.container}>
-            <item.Component key={item.state.key} model={item} />
-          </LazyLoader>
-        ) : (
-          <item.Component key={item.state.key} model={item} />
-        )
-      )}
+      {children.map((item) => (
+        <item.Component key={item.state.key} model={item} />
+      ))}
       {showCanvasActions && <CanvasGridAddActions layoutManager={layoutManager} />}
     </div>
   );
@@ -75,24 +65,6 @@ const getStyles = (theme: GrafanaTheme2, state: AutoGridLayoutState) => ({
     // Show add action when hovering over the grid
     ...dashboardCanvasAddButtonHoverStyles,
   }),
-  containerFillScreen: css({
-    flexGrow: 1,
-  }),
-  containerEditing: css({
-    paddingBottom: theme.spacing(5),
-    position: 'relative',
-  }),
-  wrapper: css({
-    display: 'grid',
-    position: 'relative',
-    width: '100%',
-    height: '100%',
-  }),
-  dragging: css({
-    position: 'fixed',
-    top: 0,
-    left: 0,
-    zIndex: theme.zIndex.portal + 1,
-    pointerEvents: 'none',
-  }),
+  containerFillScreen: css({ flexGrow: 1 }),
+  containerEditing: css({ paddingBottom: theme.spacing(5), position: 'relative' }),
 });