diff --git a/packages/react/src/AnchoredOverlay/AnchoredOverlay.tsx b/packages/react/src/AnchoredOverlay/AnchoredOverlay.tsx
index 7421e6a84d6..41122678791 100644
--- a/packages/react/src/AnchoredOverlay/AnchoredOverlay.tsx
+++ b/packages/react/src/AnchoredOverlay/AnchoredOverlay.tsx
@@ -7,7 +7,7 @@ import type {FocusTrapHookSettings} from '../hooks/useFocusTrap'
 import {useFocusTrap} from '../hooks/useFocusTrap'
 import type {FocusZoneHookSettings} from '../hooks/useFocusZone'
 import {useFocusZone} from '../hooks/useFocusZone'
-import {useAnchoredPosition, useProvidedRefOrCreate, useRenderForcingRef} from '../hooks'
+import {useAnchoredPosition, useProvidedRefOrCreate, useRenderForcingRef, useAnchorVisibility} from '../hooks'
 import {useId} from '../hooks/useId'
 import type {AnchorPosition, PositionSettings} from '@primer/behaviors'
 import {type ResponsiveValue} from '../hooks/useResponsiveValue'
@@ -120,6 +120,13 @@ interface AnchoredOverlayBaseProps extends Pick<OverlayProps, 'height' | 'width'
    * Props to be spread on the close button in the overlay.
    */
   closeButtonProps?: Partial<IconButtonProps>
+  /**
+   * When enabled (and CSS anchor positioning feature flag is on), hides the overlay
+   * when the anchor element scrolls out of the viewport. This uses IntersectionObserver
+   * to track anchor visibility.
+   * @default false
+   */
+  hideOnAnchorHidden?: boolean
 }
 
 export type AnchoredOverlayProps = AnchoredOverlayBaseProps &
@@ -162,6 +169,7 @@ export const AnchoredOverlay: React.FC<React.PropsWithChildren<AnchoredOverlayPr
   onPositionChange,
   displayCloseButton = true,
   closeButtonProps = defaultCloseButtonProps,
+  hideOnAnchorHidden = true,
 }) => {
   const cssAnchorPositioningFlag = useFeatureFlag('primer_react_css_anchor_positioning')
   const supportsNativeCSSAnchorPositioning = useRef(false)
@@ -170,6 +178,12 @@ export const AnchoredOverlay: React.FC<React.PropsWithChildren<AnchoredOverlayPr
   const [overlayRef, updateOverlayRef] = useRenderForcingRef<HTMLDivElement>()
   const anchorId = useId(externalAnchorId)
 
+  // Track anchor visibility to hide overlay when anchor scrolls out of viewport.
+  // This provides a JS fallback for CSS `position-visibility: anchors-visible`
+  // which only considers overflow clipping, not viewport visibility.
+  // Only enabled when both CSS anchor positioning is active AND hideOnAnchorHidden prop is true.
+  const isAnchorVisible = useAnchorVisibility(anchorRef, cssAnchorPositioning && open && hideOnAnchorHidden)
+
   const onClickOutside = useCallback(() => onClose?.('click-outside'), [onClose])
   const onEscape = useCallback(() => onClose?.('escape'), [onClose])
 
@@ -317,7 +331,7 @@ export const AnchoredOverlay: React.FC<React.PropsWithChildren<AnchoredOverlayPr
           ignoreClickRefs={[anchorRef]}
           onEscape={onEscape}
           role="none"
-          visibility={cssAnchorPositioning || position ? 'visible' : 'hidden'}
+          visibility={cssAnchorPositioning ? (isAnchorVisible ? 'visible' : 'hidden') : position ? 'visible' : 'hidden'}
           height={height}
           width={width}
           top={cssAnchorPositioning ? undefined : position?.top || 0}
diff --git a/packages/react/src/hooks/index.ts b/packages/react/src/hooks/index.ts
index 5938cacc2c0..8b91e2a7b9a 100644
--- a/packages/react/src/hooks/index.ts
+++ b/packages/react/src/hooks/index.ts
@@ -17,3 +17,4 @@ export {useRefObjectAsForwardedRef} from './useRefObjectAsForwardedRef'
 export {useId} from './useId'
 export {useIsMacOS} from './useIsMacOS'
 export {useMergedRefs} from './useMergedRefs'
+export {useAnchorVisibility} from './useAnchorVisibility'
diff --git a/packages/react/src/hooks/useAnchorVisibility.ts b/packages/react/src/hooks/useAnchorVisibility.ts
new file mode 100644
index 00000000000..06d480b3203
--- /dev/null
+++ b/packages/react/src/hooks/useAnchorVisibility.ts
@@ -0,0 +1,62 @@
+import {useState, useEffect} from 'react'
+
+/**
+ * Hook that uses IntersectionObserver to track whether an anchor element
+ * is visible in the viewport. This is used to hide positioned overlays
+ * when their anchor scrolls out of view - working around the limitation
+ * that CSS `position-visibility: anchors-visible` only considers clipping
+ * by overflow containers, not viewport visibility.
+ *
+ * @param anchorRef - Ref to the anchor element to observe
+ * @param enabled - Whether to enable the observer (default: true)
+ * @param threshold - Intersection threshold (default: 0, meaning any part visible)
+ * @returns Whether the anchor is currently visible in the viewport
+ */
+export function useAnchorVisibility(
+  anchorRef: React.RefObject<HTMLElement | null>,
+  enabled = true,
+  threshold = 0,
+): boolean {
+  const [isAnchorVisible, setIsAnchorVisible] = useState(true)
+
+  useEffect(() => {
+    // When disabled or no anchor, don't set up the observer
+    // The hook returns true by default, so the overlay stays visible
+    if (!enabled || !anchorRef.current) {
+      return
+    }
+
+    const anchor = anchorRef.current
+
+    const observer = new IntersectionObserver(
+      entries => {
+        for (const entry of entries) {
+          // isIntersecting is true when any part of the element is visible
+          // (based on threshold). When threshold is 0, this means any pixel.
+          setIsAnchorVisible(entry.isIntersecting)
+        }
+      },
+      {
+        // Use null for root to observe against the viewport
+        root: null,
+        // No margin adjustments needed
+        rootMargin: '0px',
+        // threshold of 0 means callback fires as soon as even one pixel is visible/hidden
+        threshold,
+      },
+    )
+
+    observer.observe(anchor)
+
+    return () => {
+      observer.disconnect()
+    }
+  }, [anchorRef, enabled, threshold])
+
+  // When disabled, always return true so overlay remains visible
+  if (!enabled) {
+    return true
+  }
+
+  return isAnchorVisible
+}