diff --git a/packages/grafana-data/src/types/featureToggles.gen.ts b/packages/grafana-data/src/types/featureToggles.gen.ts
index 79257c3d6da..6994d45fb40 100644
--- a/packages/grafana-data/src/types/featureToggles.gen.ts
+++ b/packages/grafana-data/src/types/featureToggles.gen.ts
@@ -396,6 +396,10 @@ export interface FeatureToggles {
   */
   dashboardUndoRedo?: boolean;
   /**
+  * Enables unlimited dashboard panel grouping
+  */
+  unlimitedLayoutsNesting?: boolean;
+  /**
   * Enables use of the `systemPanelFilterVar` variable to filter panels in a dashboard
   */
   panelFilterVariable?: boolean;
diff --git a/pkg/services/featuremgmt/registry.go b/pkg/services/featuremgmt/registry.go
index 567c6d566e7..01b37ad9386 100644
--- a/pkg/services/featuremgmt/registry.go
+++ b/pkg/services/featuremgmt/registry.go
@@ -657,6 +657,13 @@ var (
 			FrontendOnly: true,
 			Owner:        grafanaDashboardsSquad,
 		},
+		{
+			Name:         "unlimitedLayoutsNesting",
+			Description:  "Enables unlimited dashboard panel grouping",
+			Stage:        FeatureStageExperimental,
+			FrontendOnly: true,
+			Owner:        grafanaDashboardsSquad,
+		},
 		{
 			Name:         "panelFilterVariable",
 			Description:  "Enables use of the `systemPanelFilterVar` variable to filter panels in a dashboard",
diff --git a/pkg/services/featuremgmt/toggles_gen.csv b/pkg/services/featuremgmt/toggles_gen.csv
index 0118448325c..88af45a4d15 100644
--- a/pkg/services/featuremgmt/toggles_gen.csv
+++ b/pkg/services/featuremgmt/toggles_gen.csv
@@ -87,6 +87,7 @@ dashboardSceneSolo,GA,@grafana/dashboards-squad,false,false,true
 dashboardScene,GA,@grafana/dashboards-squad,false,false,true
 dashboardNewLayouts,experimental,@grafana/dashboards-squad,false,false,true
 dashboardUndoRedo,experimental,@grafana/dashboards-squad,false,false,true
+unlimitedLayoutsNesting,experimental,@grafana/dashboards-squad,false,false,true
 panelFilterVariable,experimental,@grafana/dashboards-squad,false,false,true
 pdfTables,preview,@grafana/grafana-operator-experience-squad,false,false,false
 canvasPanelPanZoom,preview,@grafana/dataviz-squad,false,false,true
diff --git a/pkg/services/featuremgmt/toggles_gen.go b/pkg/services/featuremgmt/toggles_gen.go
index fbc93fc3fc9..f26a754d574 100644
--- a/pkg/services/featuremgmt/toggles_gen.go
+++ b/pkg/services/featuremgmt/toggles_gen.go
@@ -359,6 +359,10 @@ const (
 	// Enables undo/redo in dynamic dashboards
 	FlagDashboardUndoRedo = "dashboardUndoRedo"
 
+	// FlagUnlimitedLayoutsNesting
+	// Enables unlimited dashboard panel grouping
+	FlagUnlimitedLayoutsNesting = "unlimitedLayoutsNesting"
+
 	// FlagPanelFilterVariable
 	// Enables use of the `systemPanelFilterVar` variable to filter panels in a dashboard
 	FlagPanelFilterVariable = "panelFilterVariable"
diff --git a/pkg/services/featuremgmt/toggles_gen.json b/pkg/services/featuremgmt/toggles_gen.json
index d60e4938bf0..caf8239adce 100644
--- a/pkg/services/featuremgmt/toggles_gen.json
+++ b/pkg/services/featuremgmt/toggles_gen.json
@@ -3897,6 +3897,19 @@
         "hideFromDocs": true
       }
     },
+    {
+      "metadata": {
+        "name": "unlimitedLayoutsNesting",
+        "resourceVersion": "1760013838902",
+        "creationTimestamp": "2025-10-09T12:43:58Z"
+      },
+      "spec": {
+        "description": "Enables unlimited dashboard panel grouping",
+        "stage": "experimental",
+        "codeowner": "@grafana/dashboards-squad",
+        "frontend": true
+      }
+    },
     {
       "metadata": {
         "name": "useKubernetesShortURLsAPI",
diff --git a/public/app/features/dashboard-scene/scene/layouts-shared/CanvasGridAddActions.tsx b/public/app/features/dashboard-scene/scene/layouts-shared/CanvasGridAddActions.tsx
index 47c5adb2453..d5d43c90ca1 100644
--- a/public/app/features/dashboard-scene/scene/layouts-shared/CanvasGridAddActions.tsx
+++ b/public/app/features/dashboard-scene/scene/layouts-shared/CanvasGridAddActions.tsx
@@ -1,8 +1,10 @@
 import { css, cx } from '@emotion/css';
+import { useMemo } from 'react';
 
 import { GrafanaTheme2 } from '@grafana/data';
 import { selectors } from '@grafana/e2e-selectors';
 import { Trans, t } from '@grafana/i18n';
+import { config } from '@grafana/runtime';
 import { Button, Dropdown, Menu, useStyles2 } from '@grafana/ui';
 
 import { dashboardSceneGraph } from '../../utils/dashboardSceneGraph';
@@ -11,7 +13,7 @@ import { getDefaultVizPanel } from '../../utils/utils';
 import { DashboardScene } from '../DashboardScene';
 import { RowsLayoutManager } from '../layout-rows/RowsLayoutManager';
 import { TabsLayoutManager } from '../layout-tabs/TabsLayoutManager';
-import { DashboardLayoutManager } from '../types/DashboardLayoutManager';
+import { DashboardLayoutManager, isDashboardLayoutManager } from '../types/DashboardLayoutManager';
 
 import { addNewRowTo, addNewTabTo } from './addNew';
 import { useClipboardState } from './useClipboardState';
@@ -25,6 +27,38 @@ export function CanvasGridAddActions({ layoutManager }: Props) {
   const styles = useStyles2(getStyles);
   const { hasCopiedPanel } = useClipboardState();
 
+  const { disableGrouping, disableTabs } = useMemo(() => {
+    if (config.featureToggles.unlimitedLayoutsNesting) {
+      return { disableGrouping: false, disableTabs: false };
+    }
+
+    let parent = layoutManager.parent;
+    const layouts = [];
+
+    while (parent) {
+      if (isDashboardLayoutManager(parent)) {
+        layouts.push(parent.descriptor.id);
+      }
+
+      if (layouts.length === 2) {
+        parent = undefined;
+        break;
+      }
+
+      parent = parent.parent;
+    }
+
+    if (layouts.length === 2) {
+      return { disableGrouping: true, disableTabs: true };
+    }
+
+    if (layouts.length === 1 && layouts[0] === TabsLayoutManager.descriptor.id) {
+      return { disableGrouping: false, disableTabs: true };
+    }
+
+    return { disableGrouping: false, disableTabs: false };
+  }, [layoutManager]);
+
   return (
     <div className={cx(styles.addAction, 'dashboard-canvas-add-button')}>
       <Button
@@ -55,6 +89,12 @@ export function CanvasGridAddActions({ layoutManager }: Props) {
               icon="layers"
               testId={selectors.components.CanvasGridAddActions.addTab}
               label={t('dashboard.canvas-actions.group-into-tab', 'Group into tab')}
+              disabled={disableTabs}
+              description={
+                disableTabs
+                  ? t('dashboard.canvas-actions.disabled-nested-tabs', 'Tabs cannot be nested inside other tabs')
+                  : undefined
+              }
               onClick={() => {
                 addNewTabTo(layoutManager);
                 DashboardInteractions.trackGroupTabClick();
@@ -68,6 +108,12 @@ export function CanvasGridAddActions({ layoutManager }: Props) {
           fill="text"
           icon="layers"
           data-testid={selectors.components.CanvasGridAddActions.groupPanels}
+          disabled={disableGrouping}
+          tooltip={
+            disableGrouping
+              ? t('dashboard.canvas-actions.disabled-nested-grouping', 'Grouping is limited to 2 levels')
+              : undefined
+          }
         >
           <Trans i18nKey="dashboard.canvas-actions.group-panels">Group panels</Trans>
         </Button>
diff --git a/public/app/features/dashboard-scene/scene/layouts-shared/DashboardLayoutSelector.tsx b/public/app/features/dashboard-scene/scene/layouts-shared/DashboardLayoutSelector.tsx
index 125bd380256..f4714e7d420 100644
--- a/public/app/features/dashboard-scene/scene/layouts-shared/DashboardLayoutSelector.tsx
+++ b/public/app/features/dashboard-scene/scene/layouts-shared/DashboardLayoutSelector.tsx
@@ -1,10 +1,12 @@
 import { useCallback, useMemo } from 'react';
 
 import { t } from '@grafana/i18n';
+import { config } from '@grafana/runtime';
 import { RadioButtonGroup, Box } from '@grafana/ui';
 import { OptionsPaneCategoryDescriptor } from 'app/features/dashboard/components/PanelEditor/OptionsPaneCategoryDescriptor';
 import { OptionsPaneItemDescriptor } from 'app/features/dashboard/components/PanelEditor/OptionsPaneItemDescriptor';
 
+import { TabsLayoutManager } from '../layout-tabs/TabsLayoutManager';
 import { DashboardLayoutManager } from '../types/DashboardLayoutManager';
 import { isLayoutParent } from '../types/LayoutParent';
 import { LayoutRegistryItem } from '../types/LayoutRegistryItem';
@@ -19,6 +21,21 @@ export function DashboardLayoutSelector({ layoutManager }: Props) {
   const isGridLayout = layoutManager.descriptor.isGridLayout;
   const options = layoutRegistry.list().filter((layout) => layout.isGridLayout === isGridLayout);
 
+  const disableTabs = useMemo(() => {
+    if (config.featureToggles.unlimitedLayoutsNesting) {
+      return false;
+    }
+    let parent = layoutManager.parent;
+    while (parent) {
+      if (parent instanceof TabsLayoutManager) {
+        return true;
+      }
+      parent = parent.parent;
+    }
+
+    return false;
+  }, [layoutManager]);
+
   const onChangeLayout = useCallback(
     (newLayout: LayoutRegistryItem) => {
       const layoutParent = layoutManager.parent;
@@ -30,17 +47,33 @@ export function DashboardLayoutSelector({ layoutManager }: Props) {
     [layoutManager]
   );
 
-  const radioOptions = options.map((opt) => ({
-    value: opt,
-    label: opt.name,
-    icon: opt.icon,
-    description: opt.description,
-    ariaLabel: `layout-selection-option-${opt.name}`,
-  }));
+  const disabledOptions: LayoutRegistryItem[] = [];
+
+  const radioOptions = options.map((opt) => {
+    let description = opt.description;
+    if (disableTabs && opt.id === TabsLayoutManager.descriptor.id) {
+      description = t('dashboard.canvas-actions.disabled-nested-tabs', 'Tabs cannot be nested inside other tabs');
+      disabledOptions.push(opt);
+    }
+
+    return {
+      value: opt,
+      label: opt.name,
+      icon: opt.icon,
+      description,
+      ariaLabel: `layout-selection-option-${opt.name}`,
+    };
+  });
 
   return (
     <Box paddingBottom={2} display="flex" grow={1} alignItems="center">
-      <RadioButtonGroup fullWidth value={layoutManager.descriptor} options={radioOptions} onChange={onChangeLayout} />
+      <RadioButtonGroup
+        fullWidth
+        value={layoutManager.descriptor}
+        options={radioOptions}
+        onChange={onChangeLayout}
+        disabledOptions={disabledOptions}
+      />
     </Box>
   );
 }
diff --git a/public/locales/en-US/grafana.json b/public/locales/en-US/grafana.json
index 865e80a7934..189ec56399c 100644
--- a/public/locales/en-US/grafana.json
+++ b/public/locales/en-US/grafana.json
@@ -4496,6 +4496,8 @@
     },
     "canvas-actions": {
       "add-panel": "Add panel",
+      "disabled-nested-grouping": "Grouping is limited to 2 levels",
+      "disabled-nested-tabs": "Tabs cannot be nested inside other tabs",
       "group-into-row": "Group into row",
       "group-into-tab": "Group into tab",
       "group-panels": "Group panels",