diff --git a/.changeset/new-lamps-doubt.md b/.changeset/new-lamps-doubt.md
new file mode 100644
index 00000000000..9444d653662
--- /dev/null
+++ b/.changeset/new-lamps-doubt.md
@@ -0,0 +1,5 @@
+---
+"@primer/react": patch
+---
+
+Fix positioning of Autocomplete overlay menu when tokens are present
diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-colorblind-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-colorblind-linux.png
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-dimmed-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-dimmed-linux.png
index ff6a0219cb6..a919c5e23ac 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-high-contrast-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-high-contrast-linux.png
index d67fbd18ebf..375ac5f4441 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-linux.png
index 62ddfe43656..ab1b107ecf6 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-tritanopia-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-dark-tritanopia-linux.png
index 62ddfe43656..ab1b107ecf6 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-light-colorblind-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-light-colorblind-linux.png
index 56a90ace378..35e829b6dda 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-light-high-contrast-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-light-high-contrast-linux.png
index b45a0356c54..874df777029 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-light-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-light-linux.png
index 56a90ace378..35e829b6dda 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-light-tritanopia-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Callback-When-Overlay-Open-State-Changes-light-tritanopia-linux.png
index 56a90ace378..35e829b6dda 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-colorblind-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-colorblind-linux.png
index fb14840e742..ec6f3d89c01 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-dimmed-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-dimmed-linux.png
index 5be69e7cf10..34a12300bf0 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-high-contrast-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-high-contrast-linux.png
index e836067a5ea..d1d8f6a6483 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-linux.png
index fb14840e742..ec6f3d89c01 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-tritanopia-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-dark-tritanopia-linux.png
index fb14840e742..ec6f3d89c01 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-colorblind-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-colorblind-linux.png
index 3f8227b0613..b7f2fccc50e 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-high-contrast-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-high-contrast-linux.png
index 993c92adbf9..32e82fb20a4 100644
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diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-linux.png
index 3f8227b0613..b7f2fccc50e 100644
Binary files a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-linux.png and b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-linux.png differ
diff --git a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-tritanopia-linux.png b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-tritanopia-linux.png
index 3f8227b0613..b7f2fccc50e 100644
Binary files a/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-tritanopia-linux.png and b/.playwright/snapshots/components/Autocomplete.test.ts-snapshots/Autocomplete-With-Token-Input-light-tritanopia-linux.png differ
diff --git a/packages/react/src/Autocomplete/Autocomplete.features.stories.module.css b/packages/react/src/Autocomplete/Autocomplete.features.stories.module.css
index c12376dceeb..913e5e5cdfa 100644
--- a/packages/react/src/Autocomplete/Autocomplete.features.stories.module.css
+++ b/packages/react/src/Autocomplete/Autocomplete.features.stories.module.css
@@ -56,3 +56,14 @@
   overflow: auto;
   flex-grow: 1;
 }
+
+.InputWithStateLabel {
+  display: inline-flex;
+  align-items: flex-end;
+  gap: var(--base-size-24);
+}
+
+.StateLabelInline {
+  white-space: nowrap;
+  margin-bottom: var(--base-size-4);
+}
diff --git a/packages/react/src/Autocomplete/Autocomplete.features.stories.tsx b/packages/react/src/Autocomplete/Autocomplete.features.stories.tsx
index 55fa35d8389..bf7644c10c9 100644
--- a/packages/react/src/Autocomplete/Autocomplete.features.stories.tsx
+++ b/packages/react/src/Autocomplete/Autocomplete.features.stories.tsx
@@ -379,22 +379,27 @@ export const WithCallbackWhenOverlayOpenStateChanges = () => {
 
   return (
     <Stack as="form" padding="normal">
-      <FormControl>
-        <FormControl.Label id="autocompleteLabel">Default label</FormControl.Label>
-        <Autocomplete>
-          <Autocomplete.Input />
-          <Autocomplete.Overlay>
-            <Autocomplete.Menu
-              items={items}
-              selectedItemIds={[]}
-              onOpenChange={onOpenChange}
-              aria-labelledby="autocompleteLabel"
-            />
-          </Autocomplete.Overlay>
-        </Autocomplete>
-      </FormControl>
-      <div>
-        The menu is <strong>{isMenuOpen ? 'opened' : 'closed'}</strong>
+      <div className={classes.InputWithStateLabel}>
+        <div>
+          <FormControl>
+            <FormControl.Label id="autocompleteLabel">Default label</FormControl.Label>
+            <Autocomplete>
+              <Autocomplete.Input />
+              <Autocomplete.Overlay>
+                <Autocomplete.Menu
+                  items={items}
+                  selectedItemIds={[]}
+                  onOpenChange={onOpenChange}
+                  aria-labelledby="autocompleteLabel"
+                />
+              </Autocomplete.Overlay>
+            </Autocomplete>
+          </FormControl>
+        </div>
+
+        <div className={classes.StateLabelInline}>
+          The menu is <strong>{isMenuOpen ? 'open' : 'closed'}</strong>
+        </div>
       </div>
     </Stack>
   )
diff --git a/packages/react/src/Autocomplete/AutocompleteOverlay.tsx b/packages/react/src/Autocomplete/AutocompleteOverlay.tsx
index caa70236e7a..0755434225e 100644
--- a/packages/react/src/Autocomplete/AutocompleteOverlay.tsx
+++ b/packages/react/src/Autocomplete/AutocompleteOverlay.tsx
@@ -1,5 +1,5 @@
 import type React from 'react'
-import {useCallback, useContext} from 'react'
+import {useCallback, useContext, useEffect, useRef} from 'react'
 import {useAnchoredPosition} from '../hooks'
 import type {OverlayProps} from '../Overlay'
 import Overlay from '../Overlay'
@@ -37,11 +37,22 @@ function AutocompleteOverlay({
   }
   const overlayProps = {...oldOverlayProps, ...newOverlayProps}
   const {inputRef, scrollContainerRef, selectedItemLength, setShowMenu, showMenu = false} = autocompleteContext
+
+  const computedAnchorRef = useRef<HTMLElement | null>(null)
+  useEffect(() => {
+    const explicit = menuAnchorRef?.current ?? null
+    const tokensContainer = inputRef.current
+      ? (inputRef.current.closest('[data-prevent-token-wrapping]') as HTMLElement | null)
+      : null
+    const tokensRoot = tokensContainer?.parentElement ?? null
+    computedAnchorRef.current = explicit ?? tokensRoot ?? inputRef.current
+  }, [menuAnchorRef, inputRef])
+
   const {floatingElementRef, position} = useAnchoredPosition(
     {
       side: 'outside-bottom',
       align: 'start',
-      anchorElementRef: menuAnchorRef ? menuAnchorRef : inputRef,
+      anchorElementRef: computedAnchorRef as React.RefObject<HTMLElement>,
     },
     [showMenu, selectedItemLength],
   )