diff --git a/build/lib/stylelint/vscode-known-variables.json b/build/lib/stylelint/vscode-known-variables.json
index f8c2ba6c7f6..e41038072f5 100644
--- a/build/lib/stylelint/vscode-known-variables.json
+++ b/build/lib/stylelint/vscode-known-variables.json
@@ -1028,6 +1028,7 @@
 		"--model-hover-surface-background",
 		"--modern-ui-editor-tab-action-active-background",
 		"--modern-ui-editor-tab-action-hover-background",
+		"--modern-ui-shell-background",
 		"--modern-ui-tab-active-background",
 		"--modern-ui-tab-hover-background",
 		"--scroll-shadow-surface",
diff --git a/extensions/copilot/src/platform/ignore/node/test/mockCAPIClientService.ts b/extensions/copilot/src/platform/ignore/node/test/mockCAPIClientService.ts
index 622a6f61bb3..b52ff16b100 100644
--- a/extensions/copilot/src/platform/ignore/node/test/mockCAPIClientService.ts
+++ b/extensions/copilot/src/platform/ignore/node/test/mockCAPIClientService.ts
@@ -24,7 +24,6 @@ export function rulesResponse(rulesByRepo: ReadonlyMap<string, MockExclusionRule
 	});
 	return { ok: true, status: 200, statusText: 'OK', json: () => Promise.resolve(payload) };
 }
-
 /** Builds a failing response, optionally carrying GitHub's rate limit headers. */
 export function failureResponse(status: number, headers: Record<string, string> = {}): Partial<Response> {
 	return {
@@ -116,4 +115,3 @@ export class MockCAPIClientService {
 		return gate.then(() => ({ ...this._defaultResponse, ...this._responder(repos) }) as unknown as T);
 	}
 }
-
diff --git a/src/vs/platform/agentHost/common/cloudSandboxAgentHost.ts b/src/vs/platform/agentHost/common/cloudSandboxAgentHost.ts
index 8e8ec496d6d..b2e8d07e5d5 100644
--- a/src/vs/platform/agentHost/common/cloudSandboxAgentHost.ts
+++ b/src/vs/platform/agentHost/common/cloudSandboxAgentHost.ts
@@ -38,7 +38,6 @@ export const CLOUD_SANDBOX_SEALED_TOKEN_PREFIX = 'copilot-sealed.v1.';
 export function isCloudSandboxSealedToken(token: string | undefined): boolean {
 	return typeof token === 'string' && token.startsWith(CLOUD_SANDBOX_SEALED_TOKEN_PREFIX);
 }
-
 /** The Mission Control environment id encoded in a cloud sandbox connection address, if any. */
 export function cloudSandboxEnvironmentId(address: string): string | undefined {
 	return address.startsWith(CLOUD_SANDBOX_ADDRESS_PREFIX)
@@ -319,4 +318,3 @@ export interface ICloudSandboxAgentHostService {
 	 */
 	getSealedGitHubToken(environmentId: string): string | undefined;
 }
-
diff --git a/src/vs/workbench/browser/layout.ts b/src/vs/workbench/browser/layout.ts
index 2cf509d2dd3..d69f70777ec 100644
--- a/src/vs/workbench/browser/layout.ts
+++ b/src/vs/workbench/browser/layout.ts
@@ -34,6 +34,7 @@ import { coalesce } from '../../base/common/arrays.js';
 import { assertReturnsDefined } from '../../base/common/types.js';
 import { INotificationService, NotificationsFilter } from '../../platform/notification/common/notification.js';
 import { IThemeService } from '../../platform/theme/common/themeService.js';
+import { isHighContrast } from '../../platform/theme/common/theme.js';
 import { WINDOW_ACTIVE_BORDER, WINDOW_INACTIVE_BORDER } from '../common/theme.js';
 import { LineNumbersType } from '../../editor/common/config/editorOptions.js';
 import { URI } from '../../base/common/uri.js';
@@ -641,6 +642,7 @@ export abstract class Layout extends Disposable implements IWorkbenchLayoutServi
 		// card margins) to the main container so auxiliary windows — whose parts do
 		// not apply the matching content insets in code — are left untouched.
 		this.mainContainer.classList.toggle(LayoutClasses.FLOATING_PANELS, this.isFloatingPanelsEnabled());
+		this.updateWindowBorder();
 	}
 
 	private setSideBarPosition(position: Position): void {
@@ -677,6 +679,10 @@ export abstract class Layout extends Disposable implements IWorkbenchLayoutServi
 	}
 
 	private updateWindowBorder(skipLayout = false) {
+		const theme = this.themeService.getColorTheme();
+		const didHaveMainWindowBorder = this.hasMainWindowBorder();
+		const suppressMainWindowBorder = this.isFloatingPanelsEnabled() && !isHighContrast(theme.type);
+
 		if (
 			isWeb ||
 			isWindows || 											// not working well with zooming (border often not visible)
@@ -689,24 +695,22 @@ export abstract class Layout extends Disposable implements IWorkbenchLayoutServi
 			return;
 		}
 
-		const theme = this.themeService.getColorTheme();
-
 		const activeBorder = theme.getColor(WINDOW_ACTIVE_BORDER);
 		const inactiveBorder = theme.getColor(WINDOW_INACTIVE_BORDER);
 
-		const didHaveMainWindowBorder = this.hasMainWindowBorder();
-
 		for (const container of this.containers) {
 			const isMainContainer = container === this.mainContainer;
 			const isActiveContainer = this.activeContainer === container;
 
 			let windowBorder = false;
-			if (!this.state.runtime.mainWindowFullscreen && (activeBorder || inactiveBorder)) {
+			if (!(isMainContainer && suppressMainWindowBorder) && !this.state.runtime.mainWindowFullscreen && (activeBorder || inactiveBorder)) {
 				windowBorder = true;
 
 				// If the inactive color is missing, fallback to the active one
 				const borderColor = isActiveContainer && this.state.runtime.hasFocus ? activeBorder : inactiveBorder ?? activeBorder;
 				container.style.setProperty('--window-border-color', borderColor?.toString() ?? 'transparent');
+			} else {
+				container.style.removeProperty('--window-border-color');
 			}
 
 			if (isMainContainer) {
diff --git a/src/vs/workbench/browser/media/floatingPanels.css b/src/vs/workbench/browser/media/floatingPanels.css
index f1d3fc8b1f3..c8d82224823 100644
--- a/src/vs/workbench/browser/media/floatingPanels.css
+++ b/src/vs/workbench/browser/media/floatingPanels.css
@@ -23,7 +23,7 @@
 
 .monaco-workbench.floating-panels .part.sidebar,
 .monaco-workbench.floating-panels .part.auxiliarybar {
-	margin: 0 var(--vscode-spacing-size20) var(--vscode-spacing-size20) var(--vscode-spacing-size40);
+	margin: var(--vscode-spacing-size40) var(--vscode-spacing-size20) var(--vscode-spacing-size40) var(--vscode-spacing-size40);
 	border: 1px solid var(--vscode-surface-border, var(--vscode-widget-border, transparent)) !important;
 	border-radius: var(--vscode-cornerRadius-large);
 	background-color: var(--vscode-surface-background) !important;
@@ -32,13 +32,17 @@
 
 /* Keep the panel surface aligned with the panel theme background in light theme. */
 .monaco-workbench.floating-panels .part.panel {
-	margin: var(--vscode-spacing-size40) var(--vscode-spacing-size20) var(--vscode-spacing-size20) var(--vscode-spacing-size40);
+	margin: var(--vscode-spacing-size40) var(--vscode-spacing-size20) var(--vscode-spacing-size40) var(--vscode-spacing-size40);
 	border: 1px solid var(--vscode-surface-border, var(--vscode-widget-border, transparent)) !important;
 	border-radius: var(--vscode-cornerRadius-large);
 	background-color: var(--vscode-panel-background) !important;
 	color: var(--vscode-surface-foreground);
 }
 
+.monaco-workbench.floating-panels .part.panel.top {
+	margin-bottom: var(--vscode-spacing-size20);
+}
+
 .monaco-workbench.floating-panels .part.editor > .content {
 	border-radius: var(--vscode-cornerRadius-large, 8px);
 }
@@ -62,12 +66,6 @@
 	background-color: var(--vscode-sideBar-background) !important;
 }
 
-/* Side bars sit directly under the title bar — keep them flush (no top margin). */
-.monaco-workbench.floating-panels .part.sidebar,
-.monaco-workbench.floating-panels .part.auxiliarybar {
-	margin-top: 0;
-}
-
 /* With no title bar and no banner above them (`.top-window-edge`, e.g. native fullscreen
  * on macOS) the cards abut the window edge; double the top margin to match the outer
  * gutter on the other window edges. Mirrors the .nostatusbar pattern for the bottom. */
@@ -76,12 +74,7 @@
 	margin-top: calc(var(--vscode-spacing-size40) * 2);
 }
 
-/*
- * When panel is at TOP and sidebars are in the same grid row as the editor (sibling),
- * give them a top margin matching the editor's gap from the panel. Alignment determines
- * which bars are sibling — mirrors adjustPartPositions() in layout.ts.
- * Uses `.panel-alignment-*` and `.left`/`.right` classes set in layout.ts.
- */
+/* Side bars below a top panel use an inter-card gap rather than the window-edge gutter. */
 .monaco-workbench.floating-panels.panel-position-top:not(.nopanel).panel-alignment-justify .part.sidebar,
 .monaco-workbench.floating-panels.panel-position-top:not(.nopanel).panel-alignment-justify .part.auxiliarybar,
 .monaco-workbench.floating-panels.panel-position-top:not(.nopanel).panel-alignment-left .part.sidebar.left,
@@ -91,26 +84,12 @@
 	margin-top: var(--vscode-spacing-size40);
 }
 
-/* Panels in top/left/right positions are flush with the title bar (no top margin).
- * The panel element itself carries the position class (e.g. `.top`). */
-.monaco-workbench.floating-panels .part.panel.top,
-.monaco-workbench.floating-panels .part.panel.left,
-.monaco-workbench.floating-panels .part.panel.right {
-	margin-top: 0;
-}
-
 .monaco-workbench.floating-panels.top-window-edge .part.panel.top,
 .monaco-workbench.floating-panels.top-window-edge .part.panel.left,
 .monaco-workbench.floating-panels.top-window-edge .part.panel.right {
 	margin-top: calc(var(--vscode-spacing-size40) * 2);
 }
 
-/* When the bottom panel is maximized (editor hidden) it spans the full content height
- * and is flush with the title bar — remove the inter-card top margin. */
-.monaco-workbench.floating-panels.nomaineditorarea .part.panel.bottom {
-	margin-top: 0;
-}
-
 .monaco-workbench.floating-panels.top-window-edge.nomaineditorarea .part.panel.bottom {
 	margin-top: calc(var(--vscode-spacing-size40) * 2);
 }
@@ -129,9 +108,9 @@
 	margin-right: calc(var(--vscode-spacing-size40) * 2);
 }
 
-/* Main editor: float like the other cards, but stay flush with the title bar. */
+/* Main editor: float like the other cards. */
 .monaco-workbench.floating-panels > .monaco-grid-view .part.editor {
-	margin: 0 var(--vscode-spacing-size20) var(--vscode-spacing-size20) var(--vscode-spacing-size40);
+	margin: var(--vscode-spacing-size40) var(--vscode-spacing-size20) var(--vscode-spacing-size40) var(--vscode-spacing-size40);
 }
 
 .monaco-workbench.floating-panels.top-window-edge > .monaco-grid-view .part.editor {
@@ -158,20 +137,10 @@
 	margin-right: calc(var(--vscode-spacing-size40) * 2);
 }
 
-/* The shell backdrop behind the floating cards matches the editor background. */
+/* The title bar color forms the shell backdrop visible through the floating-card gutters. */
+.monaco-workbench.floating-panels,
 .monaco-workbench.floating-panels > .monaco-grid-view {
-	background-color: var(--vscode-editor-background);
-}
-
-/*
- * Activity bar, status bar and title bar blend into the shell: drop their own
- * background and borders so the editor-colored backdrop shows through.
- */
-.monaco-workbench.floating-panels .part.activitybar,
-.monaco-workbench.floating-panels .part.statusbar,
-.monaco-workbench.floating-panels .part.titlebar {
-	background-color: transparent !important;
-	border-color: transparent !important;
+	background-color: var(--modern-ui-shell-background, var(--vscode-titleBar-activeBackground));
 }
 
 /* Panel title composite receives an inline border-top color; suppress it in floating mode. */
@@ -179,21 +148,21 @@
 	border-top-color: transparent !important;
 }
 
-/* Activity bar (default position) gets a left and bottom gutter to match the cards. */
+/* The activity bar is an inset navigation rail between the full-width title and status bars. */
 .monaco-workbench.floating-panels .part.activitybar {
-	margin-left: var(--vscode-spacing-size40);
-	margin-bottom: var(--vscode-spacing-size40);
+	margin: var(--vscode-spacing-size40);
+	height: calc(100% - (var(--vscode-spacing-size40) * 2));
+	border-radius: var(--vscode-cornerRadius-medium);
+	overflow: hidden;
+}
+
+.monaco-workbench.floating-panels .part.activitybar.bordered::before {
+	display: none;
 }
 
 .monaco-workbench.floating-panels.top-window-edge .part.activitybar {
 	margin-top: calc(var(--vscode-spacing-size40) * 2);
-}
-
-/* When the activity bar is on the right, add the inner gutter missing from the
- * neighboring card while retaining the outer gutter at the window edge. */
-.monaco-workbench.floating-panels .part.activitybar.right {
-	margin-left: var(--vscode-spacing-size40);
-	margin-right: var(--vscode-spacing-size40);
+	height: calc(100% - (var(--vscode-spacing-size40) * 3));
 }
 
 .monaco-workbench.floating-panels .activitybar.compact > .content > .composite-bar {
@@ -206,27 +175,16 @@
 	margin-top: var(--vscode-spacing-size40);
 }
 
-/* The status bar draws its top border via a pseudo-element — hide it too. */
-.monaco-workbench.floating-panels .part.statusbar::after {
-	display: none !important;
-}
-
-/*
- * Modern UI paints the status bar transparent, which suppresses the whole-bar
- * recolor used to signal an active style override (e.g. an active debug session).
- * While an override is active, restore the whole-bar recolor so the cue reads as
- * clearly as it does in the classic UI.
- */
-.monaco-workbench.floating-panels .part.statusbar.has-style-override {
-	background-color: color-mix(in srgb, var(--vscode-statusBar-debuggingBackground) 30%, transparent) !important;
-}
-
-/* Inset and vertically center the status bar items within its floating gutter. */
+/* Inset and vertically center status bar items within the full-width bottom rail. */
 .monaco-workbench.floating-panels .part.statusbar {
 	padding-left: var(--vscode-spacing-size60);
 	padding-right: var(--vscode-spacing-size60);
-	padding-top: calc(var(--vscode-spacing-size40) - var(--vscode-strokeThickness)); /* offset for the border-top of the status bar */
-	padding-bottom: calc(var(--vscode-spacing-size40) + var(--vscode-strokeThickness)); /* offset for the border-bottom of the status bar */
+	padding-top: var(--vscode-spacing-size40);
+	padding-bottom: var(--vscode-spacing-size40);
+}
+
+.monaco-workbench.floating-panels .part.statusbar:not(:focus).status-border-top::after {
+	display: none;
 }
 
 /* With a compact activity bar the horizontal inset is tightened to match.
@@ -273,7 +231,7 @@
 
 /*
  * When a visible bottom panel directly abuts the sidebars and/or editor (they share
- * the same grid row), keep the normal trailing 2px margin instead of the doubled 8px.
+ * the same grid row), use the tighter 2px trailing margin instead of an outer gutter.
  * Which bars are in the same row as the editor depends on panel alignment:
  *   justify  → both sidebars are in the top row (above the full-width panel)
  *   left     → the bar on the LEFT is in the top row; the bar on the RIGHT is full-height
@@ -281,18 +239,23 @@
  *   center   → neither sidebar is in the top row (both span full height)
  * Uses `.panel-alignment-*` and `.left`/`.right` position classes set in layout.ts.
  */
-.monaco-workbench.floating-panels.nostatusbar.panel-position-bottom:not(.nopanel).panel-alignment-justify .part.sidebar,
-.monaco-workbench.floating-panels.nostatusbar.panel-position-bottom:not(.nopanel).panel-alignment-justify .part.auxiliarybar,
-.monaco-workbench.floating-panels.nostatusbar.panel-position-bottom:not(.nopanel).panel-alignment-left .part.sidebar.left,
-.monaco-workbench.floating-panels.nostatusbar.panel-position-bottom:not(.nopanel).panel-alignment-left .part.auxiliarybar.left,
-.monaco-workbench.floating-panels.nostatusbar.panel-position-bottom:not(.nopanel).panel-alignment-right .part.sidebar.right,
-.monaco-workbench.floating-panels.nostatusbar.panel-position-bottom:not(.nopanel).panel-alignment-right .part.auxiliarybar.right,
-.monaco-workbench.floating-panels.nostatusbar.panel-position-bottom:not(.nopanel) > .monaco-grid-view .part.editor {
+.monaco-workbench.floating-panels.panel-position-bottom:not(.nopanel).panel-alignment-justify .part.sidebar,
+.monaco-workbench.floating-panels.panel-position-bottom:not(.nopanel).panel-alignment-justify .part.auxiliarybar,
+.monaco-workbench.floating-panels.panel-position-bottom:not(.nopanel).panel-alignment-left .part.sidebar.left,
+.monaco-workbench.floating-panels.panel-position-bottom:not(.nopanel).panel-alignment-left .part.auxiliarybar.left,
+.monaco-workbench.floating-panels.panel-position-bottom:not(.nopanel).panel-alignment-right .part.sidebar.right,
+.monaco-workbench.floating-panels.panel-position-bottom:not(.nopanel).panel-alignment-right .part.auxiliarybar.right,
+.monaco-workbench.floating-panels.panel-position-bottom:not(.nopanel) > .monaco-grid-view .part.editor {
 	margin-bottom: var(--vscode-spacing-size20);
 }
 
 .monaco-workbench.floating-panels.nostatusbar .part.activitybar {
 	margin-bottom: calc(var(--vscode-spacing-size40) * 2);
+	height: calc(100% - (var(--vscode-spacing-size40) * 3));
+}
+
+.monaco-workbench.floating-panels.top-window-edge.nostatusbar .part.activitybar {
+	height: calc(100% - (var(--vscode-spacing-size40) * 4));
 }
 
 /*
@@ -324,26 +287,16 @@
  * region by the card margins. Left unadjusted, the hover highlight (`:before`)
  * overshoots into those gaps — the reported "sash extends past the panels". Anchor the
  * highlight with `top`/`bottom` (rather than `height`) so the two insets compose
- * independently across layouts. The base leaves the cards flush with the title bar
- * (`top: 0`) and insets the bottom by the 2px trailing card margin
- * (`--vscode-spacing-size20`). Only the highlight is inset; the sash hit region is
+ * independently across layouts. The base follows the 4px outer shell gutter on
+ * the top and bottom. Only the highlight is inset; the sash hit region is
  * unchanged. In non-justify alignments a full-height side bar (spanning both the panel
  * and editor rows) keeps its own margins, so its highlight may sit up to a card margin
  * short on the abutting edge — an accepted minor cosmetic gap.
  */
 .monaco-workbench.floating-panels .monaco-sash.vertical:not(.part .monaco-sash)::before {
-	top: 0;
-	bottom: var(--vscode-spacing-size20);
-	height: auto;
-}
-
-/*
- * Panel docked at the top: the editor and its sibling side/aux bars take a top margin
- * (`--vscode-spacing-size40`); inset the highlight's top to match so it does not
- * overshoot above the cards into that gap.
- */
-.monaco-workbench.floating-panels.panel-position-top:not(.nopanel) .monaco-sash.vertical:not(.part .monaco-sash)::before {
 	top: var(--vscode-spacing-size40);
+	bottom: var(--vscode-spacing-size40);
+	height: auto;
 }
 
 /* At the top window edge the cards take a doubled top gutter.
diff --git a/src/vs/workbench/browser/parts/activitybar/activitybarPart.ts b/src/vs/workbench/browser/parts/activitybar/activitybarPart.ts
index 3655423ade5..2c63e8ab5a6 100644
--- a/src/vs/workbench/browser/parts/activitybar/activitybarPart.ts
+++ b/src/vs/workbench/browser/parts/activitybar/activitybarPart.ts
@@ -69,8 +69,8 @@ export class ActivitybarPart extends Part {
 
 	//#region IView
 
-	get minimumWidth(): number { return this.baseWidth + this.floatingGutter; }
-	get maximumWidth(): number { return this.baseWidth + this.floatingGutter; }
+	get minimumWidth(): number { return this.baseWidth + this.floatingHorizontalGutter; }
+	get maximumWidth(): number { return this.baseWidth + this.floatingHorizontalGutter; }
 	readonly minimumHeight: number = 0;
 	readonly maximumHeight: number = Number.POSITIVE_INFINITY;
 
@@ -92,17 +92,8 @@ export class ActivitybarPart extends Part {
 		return this.layoutService.isFloatingPanelsEnabled() ? ActivitybarPart.FLOATING_ACTION_HEIGHT : ActivitybarPart.ACTION_HEIGHT;
 	}
 
-	/** Extra horizontal space reserved around the part when floating panels are enabled. */
-	private get floatingGutter(): number {
-		if (!this.layoutService.isFloatingPanelsEnabled()) {
-			return 0;
-		}
-
-		// Parts adjacent to a left activity bar already provide the inner gutter through
-		// their left margin. On the right, the activity bar owns both the inner and outer gutters.
-		return this.layoutService.getSideBarPosition() === Position.RIGHT
-			? ActivitybarPart.FLOATING_MARGIN * 2
-			: ActivitybarPart.FLOATING_MARGIN;
+	private get floatingHorizontalGutter(): number {
+		return this.layoutService.isFloatingPanelsEnabled() ? ActivitybarPart.FLOATING_MARGIN * 2 : 0;
 	}
 
 	private readonly compositeBar = this._register(new MutableDisposable<PaneCompositeBar>());
@@ -279,7 +270,7 @@ export class ActivitybarPart extends Part {
 		}
 
 		const { top, bottom } = this.getFloatingGutters();
-		const contentWidth = Math.max(0, width - this.floatingGutter);
+		const contentWidth = Math.max(0, width - this.floatingHorizontalGutter);
 		const contentHeight = Math.max(0, height - top - bottom);
 
 		// Layout contents
@@ -299,7 +290,7 @@ export class ActivitybarPart extends Part {
 		}
 
 		return {
-			top: isFloatingTopEdgeExposed(this.layoutService, mainWindow) ? FLOATING_PANEL_MARGIN * 2 : 0,
+			top: isFloatingTopEdgeExposed(this.layoutService, mainWindow) ? FLOATING_PANEL_MARGIN * 2 : FLOATING_PANEL_MARGIN,
 			bottom: this.layoutService.isVisible(Parts.STATUSBAR_PART, mainWindow) ? FLOATING_PANEL_MARGIN : FLOATING_PANEL_MARGIN * 2
 		};
 	}
diff --git a/src/vs/workbench/browser/parts/editor/editorPart.ts b/src/vs/workbench/browser/parts/editor/editorPart.ts
index d113781ba3d..cd3ad87a3a7 100644
--- a/src/vs/workbench/browser/parts/editor/editorPart.ts
+++ b/src/vs/workbench/browser/parts/editor/editorPart.ts
@@ -1424,10 +1424,8 @@ export class EditorPart extends Part<IEditorPartMemento> implements IEditorPart,
 		this.left = left;
 
 		// When the floating panels experiment is enabled, reserve a margin around the
-		// main editor so it floats like the side bar and panel cards. The editor has
-		// no top margin (it stays flush with the title bar). Scope to the main window
-		// (auxiliary editor windows do not apply the matching CSS). The matching
-		// `margin` is applied in CSS (`.floating-panels .part.editor`).
+		// main editor so it floats like the side bar and panel cards. Scope to the main
+		// window (auxiliary editor windows do not apply the matching CSS).
 		if (this.windowId === mainWindow.vscodeWindowId && this.layoutService.isFloatingPanelsEnabled()) {
 
 			// When the editor becomes the outermost card on a side (no floating part
diff --git a/src/vs/workbench/browser/parts/paneCompositePart.ts b/src/vs/workbench/browser/parts/paneCompositePart.ts
index 4c2d731f4be..01373daebbb 100644
--- a/src/vs/workbench/browser/parts/paneCompositePart.ts
+++ b/src/vs/workbench/browser/parts/paneCompositePart.ts
@@ -658,8 +658,7 @@ export abstract class AbstractPaneCompositePart extends CompositePart<PaneCompos
 	 * Amount (in pixels) to subtract from each axis when the floating panels
 	 * experiment is enabled: a margin on each side plus a 1px border on each side
 	 * (the border is drawn inside the box, as `.monaco-workbench .part` is
-	 * `box-sizing: border-box` in `part.css`). The side bars sit directly under the
-	 * title bar, so they have no top margin. On each window edge this part is the outermost
+	 * `box-sizing: border-box` in `part.css`). On each window edge this part is the outermost
 	 * floating card on (see {@link getFloatingOuterGutterEdges}) it gets a doubled outer
 	 * margin, so its width inset is larger on that side.
 	 */
diff --git a/src/vs/workbench/browser/parts/statusbar/statusbarPart.ts b/src/vs/workbench/browser/parts/statusbar/statusbarPart.ts
index ae4ca71de61..b22e3171cc9 100644
--- a/src/vs/workbench/browser/parts/statusbar/statusbarPart.ts
+++ b/src/vs/workbench/browser/parts/statusbar/statusbarPart.ts
@@ -225,6 +225,7 @@ class StatusbarPart extends Part implements IStatusbarEntryContainer {
 		this._register(this.configurationService.onDidChangeConfiguration(e => {
 			if (this.getId() === Parts.STATUSBAR_PART && e.affectsConfiguration(LayoutSettings.MODERN_UI)) {
 				this._onDidChange.fire(undefined);
+				this.updateStyles();
 			}
 		}));
 	}
@@ -699,6 +700,9 @@ class StatusbarPart extends Part implements IStatusbarEntryContainer {
 		// Background / foreground colors
 		const backgroundColor = this.getColor(styleOverride?.background ?? (this.contextService.getWorkbenchState() !== WorkbenchState.EMPTY ? STATUS_BAR_BACKGROUND : STATUS_BAR_NO_FOLDER_BACKGROUND)) || '';
 		container.style.backgroundColor = backgroundColor;
+		container.style.boxShadow = this.getId() === Parts.STATUSBAR_PART && this.layoutService.isFloatingPanelsEnabled() && !isHighContrast(this.theme.type) && backgroundColor
+			? `0 1px 0 ${backgroundColor}`
+			: '';
 		const foregroundColor = this.getColor(styleOverride?.foreground ?? (this.contextService.getWorkbenchState() !== WorkbenchState.EMPTY ? STATUS_BAR_FOREGROUND : STATUS_BAR_NO_FOLDER_FOREGROUND)) || '';
 		container.style.color = foregroundColor;
 		const itemBorderColor = this.getColor(STATUS_BAR_ITEM_FOCUS_BORDER);
@@ -706,11 +710,6 @@ class StatusbarPart extends Part implements IStatusbarEntryContainer {
 		// Update compact entries to refresh hover colors based on current theme
 		this.updateCompactEntries();
 
-		// Mark the bar when a style override is active (currently only the debugging
-		// color) so Modern UI can restore the recolor, which floating mode otherwise
-		// paints transparent.
-		container.classList.toggle('has-style-override', !!styleOverride?.background);
-
 		// Border color
 		const borderColor = this.getColor(styleOverride?.border ?? (this.contextService.getWorkbenchState() !== WorkbenchState.EMPTY ? STATUS_BAR_BORDER : STATUS_BAR_NO_FOLDER_BORDER)) || this.getColor(contrastBorder);
 		if (borderColor) {
diff --git a/src/vs/workbench/browser/parts/titlebar/titlebarPart.ts b/src/vs/workbench/browser/parts/titlebar/titlebarPart.ts
index 87993ec2913..4072ea0c456 100644
--- a/src/vs/workbench/browser/parts/titlebar/titlebarPart.ts
+++ b/src/vs/workbench/browser/parts/titlebar/titlebarPart.ts
@@ -8,7 +8,7 @@ import { localize, localize2 } from '../../../../nls.js';
 import { MultiWindowParts, Part } from '../../part.js';
 import { ITitleService } from '../../../services/title/browser/titleService.js';
 import { getWCOTitlebarAreaRect, getZoomFactor, isWCOEnabled } from '../../../../base/browser/browser.js';
-import { MenuBarVisibility, getTitleBarStyle, getMenuBarVisibility, hasCustomTitlebar, hasNativeTitlebar, DEFAULT_CUSTOM_TITLEBAR_HEIGHT, getWindowControlsStyle, useWindowControlsOverlay, WindowControlsStyle, TitlebarStyle, MenuSettings, hasNativeMenu } from '../../../../platform/window/common/window.js';
+import { MenuBarVisibility, getTitleBarStyle, getMenuBarVisibility, hasCustomTitlebar, hasNativeTitlebar, DEFAULT_CUSTOM_TITLEBAR_HEIGHT, getWindowControlsStyle, WindowControlsStyle, TitlebarStyle, MenuSettings, hasNativeMenu } from '../../../../platform/window/common/window.js';
 import { IContextMenuService } from '../../../../platform/contextview/browser/contextView.js';
 import { StandardMouseEvent } from '../../../../base/browser/mouseEvent.js';
 import { IConfigurationService, IConfigurationChangeEvent } from '../../../../platform/configuration/common/configuration.js';
@@ -846,16 +846,15 @@ export class BrowserTitlebarPart extends Part implements ITitlebarPart {
 				this.element.classList.remove('inactive');
 			}
 
-			const titleBackground = isNative && isWindows && useWindowControlsOverlay(this.configurationService) && this.configurationService.getValue<boolean>(LayoutSettings.MODERN_UI) === true
-				? WORKBENCH_BACKGROUND(this.theme).toString()
-				: this.getColor(this.isInactive ? TITLE_BAR_INACTIVE_BACKGROUND : TITLE_BAR_ACTIVE_BACKGROUND, (color, theme) => {
-					// LCD Rendering Support: the title bar part is a defining its own GPU layer.
-					// To benefit from LCD font rendering, we must ensure that we always set an
-					// opaque background color. As such, we compute an opaque color given we know
-					// the background color is the workbench background.
-					return color.isOpaque() ? color : color.makeOpaque(WORKBENCH_BACKGROUND(theme));
-				}) || '';
+			const titleBackground = this.getColor(this.isInactive ? TITLE_BAR_INACTIVE_BACKGROUND : TITLE_BAR_ACTIVE_BACKGROUND, (color, theme) => {
+				// LCD Rendering Support: the title bar part is a defining its own GPU layer.
+				// To benefit from LCD font rendering, we must ensure that we always set an
+				// opaque background color. As such, we compute an opaque color given we know
+				// the background color is the workbench background.
+				return color.isOpaque() ? color : color.makeOpaque(WORKBENCH_BACKGROUND(theme));
+			}) || '';
 			this.element.style.backgroundColor = titleBackground;
+			this.layoutService.getContainer(getWindow(this.element)).style.setProperty('--modern-ui-shell-background', titleBackground);
 
 			if (this.appIconBadge) {
 				this.appIconBadge.style.backgroundColor = titleBackground;
@@ -870,7 +869,7 @@ export class BrowserTitlebarPart extends Part implements ITitlebarPart {
 			const titleForeground = this.getColor(this.isInactive ? TITLE_BAR_INACTIVE_FOREGROUND : TITLE_BAR_ACTIVE_FOREGROUND);
 			this.element.style.color = titleForeground || '';
 
-			const titleBorder = this.getColor(TITLE_BAR_BORDER);
+			const titleBorder = !this.isAuxiliary && this.configurationService.getValue<boolean>(LayoutSettings.MODERN_UI) === true ? undefined : this.getColor(TITLE_BAR_BORDER);
 			this.element.style.borderBottom = titleBorder ? `1px solid ${titleBorder}` : '';
 		}
 	}
diff --git a/src/vs/workbench/browser/parts/views/viewPaneContainer.ts b/src/vs/workbench/browser/parts/views/viewPaneContainer.ts
index 72b446e0156..0502d5946e6 100644
--- a/src/vs/workbench/browser/parts/views/viewPaneContainer.ts
+++ b/src/vs/workbench/browser/parts/views/viewPaneContainer.ts
@@ -632,12 +632,8 @@ export class ViewPaneContainer<MementoType extends object = object> extends Comp
 			// pane does not sit flush against the part edge, matching the 4px
 			// horizontal margins on the pane headers. Add 1px for the part's bottom
 			// border so the visible gap lines up with the horizontal margins.
-			// Exception: when the panel is at the TOP, the bottom of the panel
-			// faces the editor card. A 1px inner gap keeps the pane content off the
-			// border, while the CSS inter-card margins (panel 4px + editor 4px)
-			// provide the remaining separation. This totals 10px (1 inner + 1 border
-			// + 4 + 4), matching the bottom panel's bottom-to-status-bar gap
-			// (5 inner + 1 border + 4 CSS = 10px) for visual consistency.
+			// Exception: when the panel is at the TOP, its bottom faces the editor
+			// card, so the tighter inner card gap is sufficient.
 			const bottomGap = !this.layoutService.isFloatingPanelsEnabled() ? 0
 				: (this.viewDescriptorService.getViewContainerLocation(this.viewContainer) === ViewContainerLocation.Panel
 					&& this.layoutService.getPanelPosition() === Position.TOP) ? 1
diff --git a/src/vs/workbench/contrib/chat/browser/agentSessions/experiments/media/agenttitlebarstatuswidget.css b/src/vs/workbench/contrib/chat/browser/agentSessions/experiments/media/agenttitlebarstatuswidget.css
index 6967b573671..4979dd90489 100644
--- a/src/vs/workbench/contrib/chat/browser/agentSessions/experiments/media/agenttitlebarstatuswidget.css
+++ b/src/vs/workbench/contrib/chat/browser/agentSessions/experiments/media/agenttitlebarstatuswidget.css
@@ -422,6 +422,7 @@
 	align-items: center;
 	justify-content: center;
 	background: none !important;
+	color: inherit;
 }
 
 .agent-status-badge-section.sparkle .action-container .action-label {
diff --git a/src/vs/workbench/contrib/chat/browser/voiceClient/voiceGlow.ts b/src/vs/workbench/contrib/chat/browser/voiceClient/voiceGlow.ts
index 23e95ffa391..a228aa93252 100644
--- a/src/vs/workbench/contrib/chat/browser/voiceClient/voiceGlow.ts
+++ b/src/vs/workbench/contrib/chat/browser/voiceClient/voiceGlow.ts
@@ -28,7 +28,6 @@ export type VoiceGlowState = 'idle' | 'listening' | 'processing' | 'speaking' |
 export function isGlowingVoiceState(voiceState: VoiceGlowState): boolean {
 	return voiceState === 'listening' || voiceState === 'speaking' || voiceState === 'confirmation';
 }
-
 /**
  * Reduce an analyser's frequency data to a normalized [0, 1] intensity. Returns
  * a small resting value when no analyser is available (before capture/playback).
diff --git a/src/vs/workbench/contrib/styleOverrides/browser/media/activityBar.css b/src/vs/workbench/contrib/styleOverrides/browser/media/activityBar.css
index 5cf550c1271..61b0305cfc1 100644
--- a/src/vs/workbench/contrib/styleOverrides/browser/media/activityBar.css
+++ b/src/vs/workbench/contrib/styleOverrides/browser/media/activityBar.css
@@ -28,7 +28,7 @@
 	width: calc(var(--activity-bar-action-height, 36px) - 4px);
 	height: calc(var(--activity-bar-action-height, 36px) - 4px);
 	border-radius: var(--vscode-cornerRadius-medium);
-	background-color: var(--vscode-activityBar-activeBackground, var(--vscode-list-inactiveSelectionBackground));
+	background-color: var(--vscode-activityBar-activeBackground, var(--vscode-toolbar-activeBackground));
 }
 
 /* Compact: minimal horizontal inset — 24×24px box centered in the 28px item. */
@@ -37,34 +37,6 @@
 	height: calc(var(--activity-bar-action-height, 28px) - 4px);
 }
 
-/*
- * Some color themes pick the activity bar foreground to contrast a distinctly
- * colored activity bar background. When that background is neutralized to match
- * the window, the theme's foreground can become invisible. Force the item
- * foreground (set inline by the part) to the general editor foreground so icons
- * stay legible across all themes, keeping inactive items dimmed for hierarchy.
- *
- * Codicon items are tinted via `color`. Image (iconUrl) items render as a
- * tinted SVG mask, so the part colors them via `background-color` instead — we
- * mirror the same tint there, scoped to `:not(.codicon)` so codicon items never
- * gain a filled background box.
- */
-.style-override .activitybar > .content :not(.monaco-menu) > .monaco-action-bar .action-item.checked .action-label.codicon {
-	color: var(--vscode-foreground) !important;
-}
-
-.style-override .activitybar > .content :not(.monaco-menu) > .monaco-action-bar .action-item:not(.checked) .action-label.codicon {
-	color: var(--vscode-icon-foreground) !important;
-}
-
-.style-override .activitybar > .content :not(.monaco-menu) > .monaco-action-bar .action-item.checked .action-label:not(.codicon) {
-	background-color: var(--vscode-foreground) !important;
-}
-
-.style-override .activitybar > .content :not(.monaco-menu) > .monaco-action-bar .action-item:not(.checked) .action-label:not(.codicon) {
-	background-color: var(--vscode-icon-foreground) !important;
-}
-
 /*
  * Give activity bar items a consistent hover background. By default the activity
  * bar only recolors the icon on hover, so themes without a hover tint give no
@@ -89,7 +61,7 @@
 	width: calc(var(--activity-bar-action-height, 36px) - 4px);
 	height: calc(var(--activity-bar-action-height, 36px) - 4px);
 	border-radius: var(--vscode-cornerRadius-medium);
-	background-color: var(--vscode-list-hoverBackground);
+	background-color: var(--vscode-toolbar-hoverBackground);
 }
 
 /* Compact: minimal horizontal inset — 24×24px box centered in the 28px item. */
@@ -165,7 +137,7 @@
 	width: 24px;
 	height: 24px;
 	border-radius: var(--vscode-cornerRadius-small);
-	background-color:  var(--modern-ui-tab-active-background);
+	background-color: var(--vscode-activityBarTop-activeBackground, var(--vscode-toolbar-activeBackground));
 	transform: translateY(-50%);
 }
 
@@ -181,30 +153,16 @@
 	width: 24px;
 	height: 24px;
 	border-radius: var(--vscode-cornerRadius-small);
-	background-color: var(--vscode-list-hoverBackground);
+	background-color: var(--vscode-toolbar-hoverBackground);
 	transform: translateY(-50%);
 }
 
-/*
- * Normalize the icon tint to match the default position: the active item uses
- * the editor foreground and inactive items stay dimmed for hierarchy. Codicon
- * items are tinted via `color`; image (iconUrl) items render as a tinted SVG
- * mask, so they are tinted via `background-color` instead.
- */
-.style-override .pane-composite-part > :is(.title, .header-or-footer) > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item.icon.checked .action-label.codicon {
-	color: var(--vscode-foreground) !important;
-}
-
 .style-override .pane-composite-part > :is(.title, .header-or-footer) > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item.icon .action-label.codicon::before,
 .style-override.monaco-workbench .part.sidebar > .header-or-footer > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item .action-label::before,
 .style-override.monaco-workbench .part.auxiliarybar > .header-or-footer > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item .action-label::before {
 	left: 0;
 }
 
-.style-override .pane-composite-part > :is(.title, .header-or-footer) > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item.icon:not(.checked) .action-label.codicon {
-	color: var(--vscode-descriptionForeground) !important;
-}
-
 .style-override .pane-composite-part > :is(.title, .header-or-footer) > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item.icon .action-label.uri-icon {
 	top: -2px;
 	left: -2px;
@@ -215,14 +173,6 @@
 	left: 0px;
 }
 
-.style-override .pane-composite-part > :is(.title, .header-or-footer) > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item.icon.checked .action-label.uri-icon {
-	background-color: var(--vscode-foreground) !important;
-}
-
-.style-override .pane-composite-part > :is(.title, .header-or-footer) > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item.icon:not(.checked) .action-label.uri-icon {
-	background-color: var(--vscode-descriptionForeground) !important;
-}
-
 /* Render the composite icons at the standard 16px size. */
 .style-override .pane-composite-part > :is(.title, .header-or-footer) > .composite-bar-container > .composite-bar > .monaco-action-bar .action-item.icon .action-label.codicon {
 	font-size: 16px;
diff --git a/src/vs/workbench/contrib/styleOverrides/browser/media/commandCenter.css b/src/vs/workbench/contrib/styleOverrides/browser/media/commandCenter.css
index 1a6bc0258f6..390595d0f20 100644
--- a/src/vs/workbench/contrib/styleOverrides/browser/media/commandCenter.css
+++ b/src/vs/workbench/contrib/styleOverrides/browser/media/commandCenter.css
@@ -18,13 +18,9 @@
  * the `workbench.experimental.modernUI` (Modern UI Update) setting is enabled.
  */
 
-/*
- * Command center box. Drop the solid `commandCenter-background` fill so it reads
- * transparent at rest; the base stylesheet's `:hover` rule (titlebarpart.css)
- * still reveals the active background/border on hover.
- */
-.style-override.monaco-workbench .part.titlebar > .titlebar-container > .titlebar-center > .window-title > .command-center .action-item.command-center-center {
-	background-color: transparent !important;
+/* Keep unavailable navigation actions on the contributed command-center foreground. */
+.style-override.monaco-workbench .part.titlebar .command-center > .monaco-toolbar > .monaco-action-bar > .actions-container > .action-item > .action-label:is(.codicon-arrow-left, .codicon-arrow-right) {
+	color: var(--vscode-commandCenter-foreground);
 }
 
 /*
diff --git a/src/vs/workbench/contrib/styleOverrides/browser/media/editorBorder.css b/src/vs/workbench/contrib/styleOverrides/browser/media/editorBorder.css
index a9f81e1bfae..28eff195720 100644
--- a/src/vs/workbench/contrib/styleOverrides/browser/media/editorBorder.css
+++ b/src/vs/workbench/contrib/styleOverrides/browser/media/editorBorder.css
@@ -28,6 +28,7 @@
 	border-radius: var(--vscode-cornerRadius-large);
 	box-sizing: border-box;
 	overflow: hidden;
+	background-color: var(--vscode-editor-background);
 }
 
 /*
diff --git a/src/vs/workbench/contrib/styleOverrides/browser/media/statusBar.css b/src/vs/workbench/contrib/styleOverrides/browser/media/statusBar.css
index e7b9ee1741a..82f1dc055d5 100644
--- a/src/vs/workbench/contrib/styleOverrides/browser/media/statusBar.css
+++ b/src/vs/workbench/contrib/styleOverrides/browser/media/statusBar.css
@@ -3,43 +3,6 @@
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
 
-/*
- * Status Bar — keep the status bar foreground legible.
- *
- * Some color themes pick the status bar foreground to contrast a distinctly
- * colored status bar background. When that background is neutralized to match
- * the window, the theme's foreground can become invisible. Force the status bar
- * text/icon color (set inline on the part by the workbench) to the general
- * editor foreground so it stays readable across all themes. Items that set
- * their own color (e.g. prominent, error or warning entries) keep theirs.
- */
-.style-override .part.statusbar {
-	color: var(--vscode-foreground) !important;
-}
-
-/*
- * Keep the hover foreground identical to the item's resting foreground. By
- * default hovering a status bar item swaps the text color (to
- * `statusBarItem-hoverForeground`, or the warning/error hover foreground for
- * kind items), which now clashes with the neutralized foreground above.
- * Forcing the hovered anchor to `inherit` makes it pick up its item's resting
- * color — `--vscode-foreground` for standard items, or the kind color for
- * warning/error items — so only the background changes on hover.
- */
-.style-override .part.statusbar > .items-container > .statusbar-item > a:hover:not(.disabled) {
-	color: inherit !important;
-}
-
-/*
- * Align the standard status bar item hover background with the workbench toolbar
- * hover background so hovering an item matches action buttons elsewhere in the
- * modernized UI. Kind items (warning/error/prominent/remote/offline) keep their
- * own hover backgrounds.
- */
-.style-override .part.statusbar > .items-container > .statusbar-item:not(.warning-kind, .error-kind, .prominent-kind, .remote-kind, .offline-kind) > a:hover:not(.disabled) {
-	background-color: var(--vscode-toolbar-hoverBackground) !important;
-}
-
 /*
  * Round the status bar item backgrounds to a control-sized pill. The interactive
  * hover/active background lives on the label (`a.statusbar-item-label`); custom
@@ -94,7 +57,7 @@
  * their own stacked tint.
  */
 .style-override .part.statusbar > .items-container > .statusbar-item:is(.compact-left, .compact-right) > a.statusbar-item-label:hover:not(.disabled) {
-	background-image: linear-gradient(var(--vscode-toolbar-hoverBackground), var(--vscode-toolbar-hoverBackground));
+	background-image: linear-gradient(var(--vscode-statusBarItem-compactHoverBackground), var(--vscode-statusBarItem-compactHoverBackground));
 }
 
 .style-override .part.statusbar > .items-container > .statusbar-item.right.last-visible-item > .statusbar-item-label {
diff --git a/src/vs/workbench/services/layout/browser/layoutService.ts b/src/vs/workbench/services/layout/browser/layoutService.ts
index dd506142695..54c782d8469 100644
--- a/src/vs/workbench/services/layout/browser/layoutService.ts
+++ b/src/vs/workbench/services/layout/browser/layoutService.ts
@@ -268,35 +268,26 @@ export function getFloatingPaneCompositeVerticalMargins(
 		return { top: 0, bottom: 0 };
 	}
 
+	const topEdgeExposed = isFloatingTopEdgeExposed(layoutService, targetWindow);
+
 	const panelPosition = layoutService.getPanelPosition();
 	const panelVisible = layoutService.isVisible(Parts.PANEL_PART);
 	const isSideBar = partId === Parts.SIDEBAR_PART || partId === Parts.AUXILIARYBAR_PART;
 	const siblingStatus = getFloatingSidebarSiblingToEditorStatus(layoutService);
 	const isSiblingToEditor = partId === Parts.SIDEBAR_PART ? siblingStatus.sideBar : siblingStatus.auxBar;
-	const topEdgeExposed = isFloatingTopEdgeExposed(layoutService, targetWindow);
-
-	let top: number;
-	if (partId === Parts.PANEL_PART && panelPosition === Position.BOTTOM) {
-		// A visible editor sits above the panel, so the gap is between two cards. When the
-		// panel is maximized the editor is gone and the panel takes over that row instead.
-		top = layoutService.isVisible(Parts.EDITOR_PART, targetWindow) ? FLOATING_PANEL_MARGIN
-			: topEdgeExposed ? FLOATING_PANEL_MARGIN * 2 : 0;
-	} else if (panelVisible && panelPosition === Position.TOP && isSideBar && isSiblingToEditor) {
-		// Sibling bars share the editor's row, so their top faces the panel card above.
-		top = FLOATING_PANEL_MARGIN;
-	} else {
-		top = topEdgeExposed ? FLOATING_PANEL_MARGIN * 2 : 0;
-	}
-
-	// A top panel faces the editor below it, and a sibling bar faces a bottom panel card,
-	// so in neither case does the bottom reach the window edge.
+	const facesPanelAbove = panelVisible && panelPosition === Position.TOP && isSideBar && isSiblingToEditor;
 	const facesEditorBelow = partId === Parts.PANEL_PART && panelPosition === Position.TOP;
 	const facesPanelBelow = panelVisible && panelPosition === Position.BOTTOM && isSideBar && isSiblingToEditor;
 	const atWindowBottom = !facesEditorBelow && !facesPanelBelow;
-	const bottom = !layoutService.isVisible(Parts.STATUSBAR_PART, targetWindow) && atWindowBottom
-		? FLOATING_PANEL_MARGIN * 2 : FLOATING_PANEL_INNER_MARGIN;
+	const statusBarVisible = layoutService.isVisible(Parts.STATUSBAR_PART, targetWindow);
 
-	return { top, bottom };
+	return {
+		top: facesPanelAbove ? FLOATING_PANEL_MARGIN
+			: topEdgeExposed ? FLOATING_PANEL_MARGIN * 2 : FLOATING_PANEL_MARGIN,
+		bottom: atWindowBottom
+			? statusBarVisible ? FLOATING_PANEL_MARGIN : FLOATING_PANEL_MARGIN * 2
+			: FLOATING_PANEL_INNER_MARGIN
+	};
 }
 
 /**
@@ -318,9 +309,9 @@ export function getFloatingEditorVerticalMargins(
 
 	return {
 		top: panelAtTop ? FLOATING_PANEL_MARGIN
-			: isFloatingTopEdgeExposed(layoutService, targetWindow) ? FLOATING_PANEL_MARGIN * 2 : 0,
-		bottom: !layoutService.isVisible(Parts.STATUSBAR_PART, targetWindow) && !panelAtBottom
-			? FLOATING_PANEL_MARGIN * 2 : FLOATING_PANEL_INNER_MARGIN
+			: isFloatingTopEdgeExposed(layoutService, targetWindow) ? FLOATING_PANEL_MARGIN * 2 : FLOATING_PANEL_MARGIN,
+		bottom: panelAtBottom ? FLOATING_PANEL_INNER_MARGIN
+			: layoutService.isVisible(Parts.STATUSBAR_PART, targetWindow) ? FLOATING_PANEL_MARGIN : FLOATING_PANEL_MARGIN * 2
 	};
 }
 
diff --git a/src/vs/workbench/services/layout/test/browser/layoutService.test.ts b/src/vs/workbench/services/layout/test/browser/layoutService.test.ts
index cbf2078445a..0039ecf10a6 100644
--- a/src/vs/workbench/services/layout/test/browser/layoutService.test.ts
+++ b/src/vs/workbench/services/layout/test/browser/layoutService.test.ts
@@ -228,10 +228,10 @@ suite('LayoutService - getFloatingPaneCompositeVerticalMargins', () => {
 		};
 
 		assert.deepStrictEqual(actual, {
-			editorVisible: { top: margin, bottom: inner },
-			maximizedUnderTitleBar: { top: 0, bottom: inner },
-			maximizedAtTopEdge: { top: outer, bottom: inner },
-			maximizedUnderBanner: { top: 0, bottom: inner },
+			editorVisible: { top: margin, bottom: margin },
+			maximizedUnderTitleBar: { top: margin, bottom: margin },
+			maximizedAtTopEdge: { top: outer, bottom: margin },
+			maximizedUnderBanner: { top: margin, bottom: margin },
 		});
 	});
 
@@ -260,12 +260,12 @@ suite('LayoutService - getFloatingPaneCompositeVerticalMargins', () => {
 		};
 
 		assert.deepStrictEqual(actual, {
-			topPanelStatusBarHidden: { top: 0, bottom: inner },
+			topPanelStatusBarHidden: { top: margin, bottom: inner },
 			leftPanelAtBothEdges: { top: outer, bottom: outer },
-			sideBarTopPanelCentered: { top: outer, bottom: inner },
-			sideBarTopPanelJustified: { top: margin, bottom: inner },
-			sideBarBottomPanelJustified: { top: 0, bottom: inner },
-			sideBarBottomPanelCentered: { top: 0, bottom: outer },
+			sideBarTopPanelCentered: { top: outer, bottom: margin },
+			sideBarTopPanelJustified: { top: margin, bottom: margin },
+			sideBarBottomPanelJustified: { top: margin, bottom: inner },
+			sideBarBottomPanelCentered: { top: margin, bottom: outer },
 			disabled: { top: 0, bottom: 0 },
 		});
 	});
@@ -310,12 +310,12 @@ suite('LayoutService - getFloatingEditorVerticalMargins', () => {
 		};
 
 		assert.deepStrictEqual(actual, {
-			titleAndStatusBarVisible: { top: 0, bottom: inner },
-			titleBarHidden: { top: outer, bottom: inner },
-			bannerInsteadOfTitleBar: { top: 0, bottom: inner },
-			topPanelAtTopEdge: { top: margin, bottom: inner },
-			statusBarHidden: { top: 0, bottom: outer },
-			bottomPanelStatusBarHidden: { top: 0, bottom: inner },
+			titleAndStatusBarVisible: { top: margin, bottom: margin },
+			titleBarHidden: { top: outer, bottom: margin },
+			bannerInsteadOfTitleBar: { top: margin, bottom: margin },
+			topPanelAtTopEdge: { top: margin, bottom: margin },
+			statusBarHidden: { top: margin, bottom: outer },
+			bottomPanelStatusBarHidden: { top: margin, bottom: inner },
 			disabled: { top: 0, bottom: 0 },
 		});
 	});
diff --git a/src/vs/workbench/test/browser/parts/activitybar/activitybarPart.test.ts b/src/vs/workbench/test/browser/parts/activitybar/activitybarPart.test.ts
index c5077a95aeb..3e032f0991d 100644
--- a/src/vs/workbench/test/browser/parts/activitybar/activitybarPart.test.ts
+++ b/src/vs/workbench/test/browser/parts/activitybar/activitybarPart.test.ts
@@ -182,14 +182,14 @@ suite('ActivitybarPart', () => {
 		assert.strictEqual(part.maximumHeight, Number.POSITIVE_INFINITY);
 	});
 
-	test('floating panels reserves additional width gutter', () => {
+	test('floating panels reserves symmetric width gutters', () => {
 		const { part } = createActivitybarPart(false, true);
 
 		assert.deepStrictEqual(
 			{ min: part.minimumWidth, max: part.maximumWidth },
 			{
-				min: ActivitybarPart.FLOATING_ACTIVITYBAR_WIDTH + ActivitybarPart.FLOATING_MARGIN,
-				max: ActivitybarPart.FLOATING_ACTIVITYBAR_WIDTH + ActivitybarPart.FLOATING_MARGIN,
+				min: ActivitybarPart.FLOATING_ACTIVITYBAR_WIDTH + ActivitybarPart.FLOATING_MARGIN * 2,
+				max: ActivitybarPart.FLOATING_ACTIVITYBAR_WIDTH + ActivitybarPart.FLOATING_MARGIN * 2,
 			}
 		);
 	});
@@ -278,7 +278,7 @@ suite('ActivitybarPart', () => {
 		fireConfigChange(configService, LayoutSettings.MODERN_UI);
 
 		assert.deepStrictEqual(events, [undefined]);
-		assert.strictEqual(part.minimumWidth, ActivitybarPart.FLOATING_ACTIVITYBAR_WIDTH + ActivitybarPart.FLOATING_MARGIN);
+		assert.strictEqual(part.minimumWidth, ActivitybarPart.FLOATING_ACTIVITYBAR_WIDTH + ActivitybarPart.FLOATING_MARGIN * 2);
 	});
 
 	// --- CSS custom properties on element -----------------------------------
@@ -399,10 +399,10 @@ suite('ActivitybarPart', () => {
 		};
 
 		assert.deepStrictEqual(actual, {
-			titleAndStatusBarVisible: 300 - margin,
+			titleAndStatusBarVisible: 300 - margin * 2,
 			titleBarHidden: 300 - margin * 2 - margin,
-			bannerInsteadOfTitleBar: 300 - margin,
-			statusBarHidden: 300 - margin * 2,
+			bannerInsteadOfTitleBar: 300 - margin * 2,
+			statusBarHidden: 300 - margin - margin * 2,
 			bothEdgesExposed: 300 - margin * 2 - margin * 2,
 			floatingPanelsDisabled: 300,
 		});