diff --git a/osu.Game.Tests/Visual/Multiplayer/TestSceneGameplayChatDisplay.cs b/osu.Game.Tests/Visual/Multiplayer/TestSceneGameplayChatDisplay.cs
index ffbc75ae15..51960680d6 100644
--- a/osu.Game.Tests/Visual/Multiplayer/TestSceneGameplayChatDisplay.cs
+++ b/osu.Game.Tests/Visual/Multiplayer/TestSceneGameplayChatDisplay.cs
@@ -83,13 +83,28 @@ namespace osu.Game.Tests.Visual.Multiplayer
         }
 
         [Test]
-        public void TestFocusOnTabKey()
+        public void TestFocusOnTabKeyWhenExpanded()
         {
             assertChatFocused(false);
             AddStep("press tab", () => InputManager.Key(Key.Tab));
             assertChatFocused(true);
         }
 
+        [Test]
+        public void TestFocusOnTabKeyWhenNotExpanded()
+        {
+            AddStep("set not expanded", () => chatDisplay.Expanded.Value = false);
+            AddUntilStep("is not visible", () => !chatDisplay.IsPresent);
+
+            AddStep("press tab", () => InputManager.Key(Key.Tab));
+            assertChatFocused(true);
+            AddUntilStep("is visible", () => chatDisplay.IsPresent);
+
+            AddStep("press enter", () => InputManager.Key(Key.Enter));
+            assertChatFocused(false);
+            AddUntilStep("is not visible", () => !chatDisplay.IsPresent);
+        }
+
         private void assertChatFocused(bool isFocused) =>
             AddAssert($"chat {(isFocused ? "focused" : "not focused")}", () => textBox.HasFocus == isFocused);
 
diff --git a/osu.Game/Online/Chat/StandAloneChatDisplay.cs b/osu.Game/Online/Chat/StandAloneChatDisplay.cs
index 9d23a089df..6ed2055e65 100644
--- a/osu.Game/Online/Chat/StandAloneChatDisplay.cs
+++ b/osu.Game/Online/Chat/StandAloneChatDisplay.cs
@@ -8,6 +8,7 @@ using osu.Framework.Graphics;
 using osu.Framework.Graphics.Containers;
 using osu.Framework.Graphics.Shapes;
 using osu.Framework.Graphics.UserInterface;
+using osu.Framework.Input.Events;
 using osu.Game.Graphics;
 using osu.Game.Graphics.UserInterface;
 using osu.Game.Overlays.Chat;
@@ -22,7 +23,7 @@ namespace osu.Game.Online.Chat
     {
         public readonly Bindable<Channel> Channel = new Bindable<Channel>();
 
-        protected readonly FocusedTextBox Textbox;
+        protected readonly ChatTextBox Textbox;
 
         protected ChannelManager ChannelManager;
 
@@ -121,6 +122,14 @@ namespace osu.Game.Online.Chat
                 BackgroundUnfocused = new Color4(10, 10, 10, 10);
                 BackgroundFocused = new Color4(10, 10, 10, 255);
             }
+
+            protected override void OnFocusLost(FocusLostEvent e)
+            {
+                base.OnFocusLost(e);
+                FocusLost?.Invoke();
+            }
+
+            public Action FocusLost;
         }
 
         public class StandAloneDrawableChannel : DrawableChannel
diff --git a/osu.Game/Screens/OnlinePlay/Multiplayer/GameplayChatDisplay.cs b/osu.Game/Screens/OnlinePlay/Multiplayer/GameplayChatDisplay.cs
index 94542fb804..5d494379e6 100644
--- a/osu.Game/Screens/OnlinePlay/Multiplayer/GameplayChatDisplay.cs
+++ b/osu.Game/Screens/OnlinePlay/Multiplayer/GameplayChatDisplay.cs
@@ -22,28 +22,20 @@ namespace osu.Game.Screens.OnlinePlay.Multiplayer
 
         public Bindable<bool> Expanded = new Bindable<bool>();
 
+        private readonly Bindable<bool> expandedFromTextboxFocus = new Bindable<bool>();
+
         private const float height = 100;
 
+        public override bool PropagateNonPositionalInputSubTree => true;
+
         public GameplayChatDisplay()
             : base(leaveChannelOnDispose: false)
         {
             RelativeSizeAxes = Axes.X;
 
             Background.Alpha = 0.2f;
-        }
 
-        private void expandedChanged(ValueChangedEvent<bool> expanded)
-        {
-            if (expanded.NewValue)
-            {
-                this.FadeIn(300, Easing.OutQuint);
-                this.ResizeHeightTo(height, 500, Easing.OutQuint);
-            }
-            else
-            {
-                this.FadeOut(300, Easing.OutQuint);
-                this.ResizeHeightTo(0, 500, Easing.OutQuint);
-            }
+            Textbox.FocusLost = () => expandedFromTextboxFocus.Value = false;
         }
 
         protected override void LoadComplete()
@@ -61,7 +53,18 @@ namespace osu.Game.Screens.OnlinePlay.Multiplayer
                 Textbox.ReleaseFocusOnCommit = playing.NewValue;
             }, true);
 
-            Expanded.BindValueChanged(expandedChanged, true);
+            Expanded.BindValueChanged(_ => updateExpandedState(), true);
+            expandedFromTextboxFocus.BindValueChanged(focus =>
+            {
+                if (focus.NewValue)
+                    updateExpandedState();
+                else
+                {
+                    // on finishing typing a message there should be a brief delay before hiding.
+                    using (BeginDelayedSequence(600))
+                        updateExpandedState();
+                }
+            }, true);
         }
 
         public bool OnPressed(GlobalAction action)
@@ -69,7 +72,10 @@ namespace osu.Game.Screens.OnlinePlay.Multiplayer
             switch (action)
             {
                 case GlobalAction.FocusChatInput:
-                    Textbox.TakeFocus();
+                    expandedFromTextboxFocus.Value = true;
+
+                    // schedule required to ensure the textbox has become present from above bindable update.
+                    Schedule(() => Textbox.TakeFocus());
                     return true;
             }
 
@@ -79,5 +85,19 @@ namespace osu.Game.Screens.OnlinePlay.Multiplayer
         public void OnReleased(GlobalAction action)
         {
         }
+
+        private void updateExpandedState()
+        {
+            if (Expanded.Value || expandedFromTextboxFocus.Value)
+            {
+                this.FadeIn(300, Easing.OutQuint);
+                this.ResizeHeightTo(height, 500, Easing.OutQuint);
+            }
+            else
+            {
+                this.FadeOut(300, Easing.OutQuint);
+                this.ResizeHeightTo(0, 500, Easing.OutQuint);
+            }
+        }
     }
 }