diff --git a/crates/tab_switcher/src/tab_switcher_tests.rs b/crates/tab_switcher/src/tab_switcher_tests.rs
index 4c6cdce17ee32c558c203c51f608e3a654a344cd..7dc74ee7474ce98aac5b27c28ddb9e8308721433 100644
--- a/crates/tab_switcher/src/tab_switcher_tests.rs
+++ b/crates/tab_switcher/src/tab_switcher_tests.rs
@@ -549,3 +549,59 @@ async fn test_open_in_active_pane_closes_file_in_all_panes(cx: &mut gpui::TestAp
         );
     }
 }
+
+#[gpui::test]
+async fn test_toggle_all_stays_open_after_closing_last_tab_in_active_pane(
+    cx: &mut gpui::TestAppContext,
+) {
+    let app_state = init_test(cx);
+    app_state
+        .fs
+        .as_fake()
+        .insert_tree(
+            path!("/root"),
+            json!({
+                "a.txt": "",
+                "b.txt": "",
+            }),
+        )
+        .await;
+
+    let project = Project::test(app_state.fs.clone(), [path!("/root").as_ref()], cx).await;
+    let (multi_workspace, cx) =
+        cx.add_window_view(|window, cx| MultiWorkspace::test_new(project.clone(), window, cx));
+    let workspace = multi_workspace.read_with(cx, |mw, _| mw.workspace().clone());
+
+    let tab_a = open_buffer("a.txt", &workspace, cx).await;
+    workspace.update_in(cx, |workspace, window, cx| {
+        workspace.split_pane(
+            workspace.active_pane().clone(),
+            workspace::SplitDirection::Right,
+            window,
+            cx,
+        );
+    });
+    open_buffer("b.txt", &workspace, cx).await;
+
+    // Right pane (with b.txt) is now the active pane.
+    cx.dispatch_action(ToggleAll);
+    let tab_switcher = get_active_tab_switcher(&workspace, cx);
+
+    tab_switcher.update(cx, |picker, _| {
+        assert_eq!(picker.delegate.matches.len(), 2);
+        // Explicitly select b.txt (index 0, the most recently activated item)
+        // to close the last tab in the active (right) pane.
+        picker.delegate.selected_index = 0;
+    });
+
+    cx.dispatch_action(CloseSelectedItem);
+    cx.run_until_parked();
+
+    // Tab switcher must remain open with a.txt as the only match
+    let tab_switcher = get_active_tab_switcher(&workspace, cx);
+    tab_switcher.update(cx, |picker, cx| {
+        assert_eq!(picker.delegate.matches.len(), 1);
+        assert_match_at_position(picker, 0, tab_a.boxed_clone());
+        let _ = cx;
+    });
+}
diff --git a/crates/workspace/src/workspace.rs b/crates/workspace/src/workspace.rs
index 4256945ad01ddbd0dabc7502ada3edfa7a5e3120..f67a9b0e331e16afb026307cbeb49f0191cc5537 100644
--- a/crates/workspace/src/workspace.rs
+++ b/crates/workspace/src/workspace.rs
@@ -6497,10 +6497,12 @@ impl Workspace {
         if let Some(focus_on) = focus_on {
             focus_on.update(cx, |pane, cx| window.focus(&pane.focus_handle(cx), cx));
         } else if self.active_pane() == pane {
-            self.panes
-                .last()
-                .unwrap()
-                .update(cx, |pane, cx| window.focus(&pane.focus_handle(cx), cx));
+            let fallback_pane = self.panes.last().unwrap().clone();
+            if self.has_active_modal(window, cx) {
+                self.set_active_pane(&fallback_pane, window, cx);
+            } else {
+                fallback_pane.update(cx, |pane, cx| window.focus(&pane.focus_handle(cx), cx));
+            }
         }
         if self.last_active_center_pane == Some(pane.downgrade()) {
             self.last_active_center_pane = None;