diff --git a/public/app/features/dashboard-scene/panel-edit/PanelEditor.test.ts b/public/app/features/dashboard-scene/panel-edit/PanelEditor.test.ts
index ee2bda935fd..89634322347 100644
--- a/public/app/features/dashboard-scene/panel-edit/PanelEditor.test.ts
+++ b/public/app/features/dashboard-scene/panel-edit/PanelEditor.test.ts
@@ -112,6 +112,37 @@ describe('PanelEditor', () => {
     });
   });
 
+  describe('Entering panel edit', () => {
+    it('should clear edit pane selection', () => {
+      pluginPromise = Promise.resolve(getPanelPlugin({ id: 'text', skipDataQuery: true }));
+
+      const panel = new VizPanel({
+        key: 'panel-1',
+        pluginId: 'text',
+        title: 'original title',
+      });
+      const gridItem = new DashboardGridItem({ body: panel });
+      const panelEditor = buildPanelEditScene(panel);
+      const dashboard = new DashboardScene({
+        editPanel: panelEditor,
+        isEditing: true,
+        $timeRange: new SceneTimeRange({ from: 'now-6h', to: 'now' }),
+        body: new DefaultGridLayoutManager({
+          grid: new SceneGridLayout({
+            children: [gridItem],
+          }),
+        }),
+      });
+
+      dashboard.state.editPane.selectObject(panel, panel.state.key!, { force: true });
+      expect(dashboard.state.editPane.getSelection()).toBe(panel);
+
+      deactivate = activateFullSceneTree(dashboard);
+
+      expect(dashboard.state.editPane.getSelection()).toBeUndefined();
+    });
+  });
+
   describe('When discarding', () => {
     it('should discard changes revert all changes', async () => {
       const { panelEditor, panel, dashboard } = await setup();
diff --git a/public/app/features/dashboard-scene/panel-edit/PanelEditor.tsx b/public/app/features/dashboard-scene/panel-edit/PanelEditor.tsx
index e656a39e6a1..497d58e505a 100644
--- a/public/app/features/dashboard-scene/panel-edit/PanelEditor.tsx
+++ b/public/app/features/dashboard-scene/panel-edit/PanelEditor.tsx
@@ -84,6 +84,11 @@ export class PanelEditor extends SceneObjectBase<PanelEditorState> {
 
   private _activationHandler() {
     const panel = this.state.panelRef.resolve();
+    const dashboard = getDashboardSceneFor(this);
+
+    // Clear any panel selection when entering panel edit mode.
+    // Need to clear selection here since selection is activated when panel edit mode is entered through the panel actions menu. This causes sidebar panel editor to be open when exiting panel edit mode
+    dashboard.state.editPane.clearSelection();
 
     if (panel.state.pluginId === UNCONFIGURED_PANEL_PLUGIN_ID) {
       if (config.featureToggles.newVizSuggestions) {