diff --git a/packages/main/cypress/specs/Panel.cy.tsx b/packages/main/cypress/specs/Panel.cy.tsx
index fedb0b269c42..f98faaa5db9f 100644
--- a/packages/main/cypress/specs/Panel.cy.tsx
+++ b/packages/main/cypress/specs/Panel.cy.tsx
@@ -323,6 +323,252 @@ describe("Events", () => {
 	});
 });
 
+describe("Keyboard Interactions", () => {
+	it("Enter key down expands/collapses panel", () => {
+		cy.mount(<Panel headerText="Panel" onToggle={cy.stub().as("toggleEvent")}>
+			<Title level={TitleLevel.H4}>Content</Title>
+		</Panel>);
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-header")
+			.as("header");
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-content")
+			.as("content");
+
+		// Initial state - expanded
+		cy.get("@content")
+			.should("be.visible");
+
+		// Press Enter - should trigger toggle immediately
+		cy.get("@header")
+			.focus()
+			.realPress("Enter");
+
+		// eslint-disable-next-line cypress/no-unnecessary-waiting
+		cy.wait(50);
+
+		// Content should be collapsed after Enter
+		cy.get("@content")
+			.should("not.be.visible");
+
+		cy.get("@toggleEvent")
+			.should("have.been.calledOnce");
+
+		// Press Enter again - should toggle back to expanded
+		cy.get("@header")
+			.realPress("Enter");
+
+		// eslint-disable-next-line cypress/no-unnecessary-waiting
+		cy.wait(50);
+
+		// Content should be visible again
+		cy.get("@content")
+			.should("be.visible");
+
+		cy.get("@toggleEvent")
+			.should("have.been.calledTwice");
+	});
+
+	it("Space key with Escape cancellation prevents toggle", () => {
+		cy.mount(<Panel headerText="Panel" onToggle={cy.stub().as("toggleEvent")}>
+			<Title level={TitleLevel.H4}>Content</Title>
+		</Panel>);
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-header")
+			.as("header");
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-content")
+			.as("content");
+
+		// Initial state - expanded
+		cy.get("@content")
+			.should("be.visible");
+
+		// Press and hold Space - this should set pending toggle but not execute yet
+		cy.get("@header")
+			.focus()
+			.realPress(["Space", "Escape"]);
+
+		// Content should still be visible (toggle was canceled by Escape)
+		cy.get("@content")
+			.should("be.visible");
+
+		cy.get("@toggleEvent")
+			.should("not.have.been.called");
+
+		// Verify panel is still in expanded state
+		cy.get("[ui5-panel]")
+			.should("not.have.attr", "collapsed");
+	});
+
+	it("Space key without Escape executes toggle", () => {
+		cy.mount(<Panel headerText="Panel" onToggle={cy.stub().as("toggleEvent")}>
+			<Title level={TitleLevel.H4}>Content</Title>
+		</Panel>);
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-header")
+			.as("header");
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-content")
+			.as("content");
+
+		// Initial state - expanded
+		cy.get("@content")
+			.should("be.visible");
+
+		// Press Space - should execute the toggle
+		cy.get("@header")
+			.focus()
+			.realPress("Space");
+
+		// eslint-disable-next-line cypress/no-unnecessary-waiting
+		cy.wait(50);
+
+		// Content should now be collapsed
+		cy.get("@content")
+			.should("not.be.visible");
+
+		cy.get("@toggleEvent")
+			.should("have.been.calledOnce");
+
+		// Verify panel is in collapsed state
+		cy.get("[ui5-panel]")
+			.should("have.attr", "collapsed");
+	});
+
+	it("Space key interrupted by Escape does not toggle", () => {
+		cy.mount(<Panel headerText="Panel" onToggle={cy.stub().as("toggleEvent")}>
+			<Title level={TitleLevel.H4}>Content</Title>
+		</Panel>);
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-header")
+			.as("header");
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-content")
+			.as("content");
+
+		// Test the Space + Escape cancellation behavior
+		cy.get("@header")
+			.focus()
+			.realPress(["Space", "Escape"]);
+
+		// Should not have toggled because Escape canceled the Space action
+		cy.get("@content")
+			.should("be.visible");
+
+		cy.get("@toggleEvent")
+			.should("not.have.been.called");
+	});
+
+	it("Fixed panel (should not toggle)", () => {
+		cy.mount(<Panel headerText="Fixed Panel" fixed={true} onToggle={cy.stub().as("toggleEvent")}>
+			<Title level={TitleLevel.H4}>Content</Title>
+		</Panel>);
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-header")
+			.as("header");
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-content")
+			.as("content");
+
+		// Content should be visible
+		cy.get("@content")
+			.should("be.visible");
+
+		// Try Enter - should not toggle fixed panel
+		cy.get("@header")
+			.focus()
+			.realPress("Enter");
+
+		cy.get("@content")
+			.should("be.visible");
+
+		cy.get("@toggleEvent")
+			.should("not.have.been.called");
+
+		// Try Space - should not toggle fixed panel
+		cy.get("@header")
+			.realPress("Space");
+
+		cy.get("@content")
+			.should("be.visible");
+
+		cy.get("@toggleEvent")
+			.should("not.have.been.called");
+	});
+
+	it("Custom header (only button should work)", () => {
+		cy.mount(<Panel onToggle={cy.stub().as("toggleEvent")}>
+			<div slot="header">
+				<Title level={TitleLevel.H2}>Custom Header</Title>
+            </div>
+			<Title level={TitleLevel.H3}>Content</Title>
+		</Panel>);
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-header")
+			.as("header");
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-header-button")
+			.as("toggleButton");
+
+		cy.get("[ui5-panel]")
+			.shadow()
+			.find(".ui5-panel-content")
+			.as("content");
+
+		// Enter on custom header area should not toggle
+		cy.get("@header")
+			.focus()
+			.realPress("Enter");
+
+		cy.get("@content")
+			.should("be.visible");
+
+		cy.get("@toggleEvent")
+			.should("not.have.been.called");
+
+		// Enter on toggle button should work
+		cy.get("@toggleButton")
+			.shadow()
+			.find(".ui5-button-root")
+			.focus()
+			.realPress("Enter");
+
+		// eslint-disable-next-line cypress/no-unnecessary-waiting
+		cy.wait(50);
+
+		cy.get("@content")
+			.should("not.be.visible");
+
+		cy.get("@toggleEvent")
+			.should("have.been.calledOnce");
+	});
+});
+
 describe("Accessibility", () => {
 	it("Aria attributes on default header", () => {
 		cy.mount(<Panel headerText="Panel" headerLevel={TitleLevel.H3}>
diff --git a/packages/main/src/Panel.ts b/packages/main/src/Panel.ts
index c5dae53b7e82..33e19b1ee0fa 100644
--- a/packages/main/src/Panel.ts
+++ b/packages/main/src/Panel.ts
@@ -6,7 +6,7 @@ import slot from "@ui5/webcomponents-base/dist/decorators/slot.js";
 import jsxRenderer from "@ui5/webcomponents-base/dist/renderer/JsxRenderer.js";
 import slideDown from "@ui5/webcomponents-base/dist/animations/slideDown.js";
 import slideUp from "@ui5/webcomponents-base/dist/animations/slideUp.js";
-import { isSpace, isEnter } from "@ui5/webcomponents-base/dist/Keys.js";
+import { isSpace, isEnter, isEscape } from "@ui5/webcomponents-base/dist/Keys.js";
 import AnimationMode from "@ui5/webcomponents-base/dist/types/AnimationMode.js";
 import { getAnimationMode } from "@ui5/webcomponents-base/dist/config/AnimationMode.js";
 import i18n from "@ui5/webcomponents-base/dist/decorators/i18n.js";
@@ -170,8 +170,8 @@ class Panel extends UI5Element {
 	 * @public
 	 * @since 1.16.0-rc.1
 	 */
-	 @property({ type: Boolean })
-	 stickyHeader = false;
+	@property({ type: Boolean })
+	stickyHeader = false;
 
 	/**
 	 * When set to `true`, the `accessibleName` property will be
@@ -195,6 +195,9 @@ class Panel extends UI5Element {
 	@property({ type: Boolean, noAttribute: true })
 	_animationRunning = false;
 
+	@property({ type: Boolean, noAttribute: true })
+	_pendingToggle = false;
+
 	/**
 	 * Defines the component header area.
 	 *
@@ -248,11 +251,18 @@ class Panel extends UI5Element {
 		}
 
 		if (isEnter(e)) {
-			e.preventDefault();
+			this._toggleOpen();
 		}
 
 		if (isSpace(e)) {
 			e.preventDefault();
+			this._pendingToggle = true;
+		}
+
+		// Cancel toggle if Escape is pressed
+		if (isEscape(e) && this._pendingToggle) {
+			e.preventDefault();
+			this._pendingToggle = false;
 		}
 	}
 
@@ -262,11 +272,15 @@ class Panel extends UI5Element {
 		}
 
 		if (isEnter(e)) {
-			this._toggleOpen();
+			e.preventDefault();
 		}
 
 		if (isSpace(e)) {
-			this._toggleOpen();
+			// Only toggle if space was pressed and escape wasn't pressed to cancel
+			if (this._pendingToggle) {
+				this._toggleOpen();
+			}
+			this._pendingToggle = false;
 		}
 	}