diff --git a/packages/block-editor/src/components/writing-flow/use-tab-nav.js b/packages/block-editor/src/components/writing-flow/use-tab-nav.js
index 00528be96aa79f..b94a6cfb86fb9d 100644
--- a/packages/block-editor/src/components/writing-flow/use-tab-nav.js
+++ b/packages/block-editor/src/components/writing-flow/use-tab-nav.js
@@ -91,6 +91,7 @@ export default function useTabNav() {
 	const ref = useRefEffect( ( node ) => {
 		function onKeyDown( event ) {
 			if ( event.keyCode === ESCAPE && ! hasMultiSelection() ) {
+				event.stopPropagation();
 				setNavigationMode( true );
 				return;
 			}
diff --git a/packages/components/src/popover/index.js b/packages/components/src/popover/index.js
index b0e8d4bccb7a37..befbb5b9139f78 100644
--- a/packages/components/src/popover/index.js
+++ b/packages/components/src/popover/index.js
@@ -23,6 +23,7 @@ import {
 	useConstrainedTabbing,
 	useFocusReturn,
 	useMergeRefs,
+	useRefEffect,
 } from '@wordpress/compose';
 import { close } from '@wordpress/icons';
 
@@ -232,7 +233,6 @@ const Popover = (
 	{
 		headerTitle,
 		onClose,
-		onKeyDown,
 		children,
 		className,
 		noArrow = true,
@@ -477,6 +477,26 @@ const Popover = (
 		__unstableBoundaryParent,
 	] );
 
+	// Event handlers for closing the popover.
+	const closeEventRef = useRefEffect(
+		( node ) => {
+			function maybeClose( event ) {
+				// Close on escape.
+				if ( event.keyCode === ESCAPE && onClose ) {
+					event.stopPropagation();
+					onClose();
+				}
+			}
+
+			node.addEventListener( 'keydown', maybeClose );
+
+			return () => {
+				node.removeEventListener( 'keydown', maybeClose );
+			};
+		},
+		[ onClose ]
+	);
+
 	const constrainedTabbingRef = useConstrainedTabbing();
 	const focusReturnRef = useFocusReturn();
 	const focusOnMountRef = useFocusOnMount( focusOnMount );
@@ -484,25 +504,13 @@ const Popover = (
 	const mergedRefs = useMergeRefs( [
 		ref,
 		containerRef,
+		// Don't register the event at all if there's no onClose callback.
+		onClose ? closeEventRef : null,
 		focusOnMount ? constrainedTabbingRef : null,
 		focusOnMount ? focusReturnRef : null,
 		focusOnMount ? focusOnMountRef : null,
 	] );
 
-	// Event handlers
-	const maybeClose = ( event ) => {
-		// Close on escape
-		if ( event.keyCode === ESCAPE && onClose ) {
-			event.stopPropagation();
-			onClose();
-		}
-
-		// Preserve original content prop behavior
-		if ( onKeyDown ) {
-			onKeyDown( event );
-		}
-	};
-
 	/**
 	 * Shims an onFocusOutside callback to be compatible with a deprecated
 	 * onClickOutside prop function, if provided.
@@ -587,7 +595,6 @@ const Popover = (
 				}
 			) }
 			{ ...contentProps }
-			onKeyDown={ maybeClose }
 			{ ...focusOutsideProps }
 			ref={ mergedRefs }
 			tabIndex="-1"
diff --git a/packages/e2e-tests/specs/widgets/customizing-widgets.test.js b/packages/e2e-tests/specs/widgets/customizing-widgets.test.js
index cf3a7b99e1dcd5..a2d38addfd7091 100644
--- a/packages/e2e-tests/specs/widgets/customizing-widgets.test.js
+++ b/packages/e2e-tests/specs/widgets/customizing-widgets.test.js
@@ -511,6 +511,57 @@ describe( 'Widgets Customizer', () => {
 			"The page delivered both an 'X-Frame-Options' header and a 'Content-Security-Policy' header with a 'frame-ancestors' directive. Although the 'X-Frame-Options' header alone would have blocked embedding, it has been ignored."
 		);
 	} );
+
+	it( 'should handle esc key events', async () => {
+		const widgetsPanel = await find( {
+			role: 'heading',
+			name: /Widgets/,
+			level: 3,
+		} );
+		await widgetsPanel.click();
+
+		const footer1Section = await find( {
+			role: 'heading',
+			name: /^Footer #1/,
+			level: 3,
+		} );
+		await footer1Section.click();
+
+		const paragraphBlock = await addBlock( 'Paragraph' );
+		await page.keyboard.type( 'First Paragraph' );
+		await showBlockToolbar();
+
+		// Open the more menu dropdown in block toolbar.
+		await clickBlockToolbarButton( 'Options' );
+		await expect( {
+			role: 'menu',
+			name: 'Options',
+		} ).toBeFound();
+
+		// Expect pressing the Escape key to close the dropdown,
+		// but not close the editor.
+		await page.keyboard.press( 'Escape' );
+		await expect( {
+			role: 'menu',
+			name: 'Options',
+		} ).not.toBeFound();
+		await expect( paragraphBlock ).toBeVisible();
+
+		await paragraphBlock.focus();
+
+		// Expect pressing the Escape key to enter navigation mode,
+		// but not close the editor.
+		await page.keyboard.press( 'Escape' );
+		await expect( {
+			text: /^You are currently in navigation mode\./,
+			selector: '*[aria-live="polite"][aria-relevant="additions text"]',
+		} ).toBeFound();
+		await expect( paragraphBlock ).toBeVisible();
+
+		expect( console ).toHaveWarned(
+			"The page delivered both an 'X-Frame-Options' header and a 'Content-Security-Policy' header with a 'frame-ancestors' directive. Although the 'X-Frame-Options' header alone would have blocked embedding, it has been ignored."
+		);
+	} );
 } );
 
 /**