diff --git a/packages/components/dropdown/dropdown-trigger.directive.ts b/packages/components/dropdown/dropdown-trigger.directive.ts
index 5b380a508..c1804be31 100644
--- a/packages/components/dropdown/dropdown-trigger.directive.ts
+++ b/packages/components/dropdown/dropdown-trigger.directive.ts
@@ -592,21 +592,17 @@ export class KbqDropdownTrigger implements AfterContentInit, OnDestroy {
             }
         }
 
+        const resolvedOffsetY = this.offsetY ?? (overlayY === 'top' ? offsetY : -offsetY);
+        const resolvedFallbackOffsetY = this.offsetY ?? (overlayFallbackY === 'top' ? offsetY : -offsetY);
+
         positionStrategy.withPositions([
-            {
-                originX,
-                originY,
-                overlayX,
-                overlayY,
-                offsetY: this.offsetY ?? offsetY,
-                offsetX: this.offsetX ?? -offsetX
-            },
+            { originX, originY, overlayX, overlayY, offsetY: resolvedOffsetY, offsetX: this.offsetX ?? -offsetX },
             {
                 originX: originFallbackX,
                 originY,
                 overlayX: overlayFallbackX,
                 overlayY,
-                offsetY: this.offsetY ?? offsetY,
+                offsetY: resolvedOffsetY,
                 offsetX: this.offsetX ?? offsetX
             },
             {
@@ -614,7 +610,7 @@ export class KbqDropdownTrigger implements AfterContentInit, OnDestroy {
                 originY: originFallbackY,
                 overlayX,
                 overlayY: overlayFallbackY,
-                offsetY: this.offsetY ?? -offsetY,
+                offsetY: resolvedFallbackOffsetY,
                 offsetX: this.offsetX ?? -offsetX
             },
             {
@@ -622,7 +618,7 @@ export class KbqDropdownTrigger implements AfterContentInit, OnDestroy {
                 originY: originFallbackY,
                 overlayX: overlayFallbackX,
                 overlayY: overlayFallbackY,
-                offsetY: this.offsetY ?? -offsetY,
+                offsetY: resolvedFallbackOffsetY,
                 offsetX: this.offsetX ?? -offsetX
             }
         ]);
diff --git a/packages/components/dropdown/dropdown.spec.ts b/packages/components/dropdown/dropdown.spec.ts
index 917e4e0e8..3e9a8ace8 100644
--- a/packages/components/dropdown/dropdown.spec.ts
+++ b/packages/components/dropdown/dropdown.spec.ts
@@ -1,6 +1,6 @@
 import { FocusMonitor } from '@angular/cdk/a11y';
 import { Direction, Directionality } from '@angular/cdk/bidi';
-import { Overlay, OverlayContainer } from '@angular/cdk/overlay';
+import { FlexibleConnectedPositionStrategy, Overlay, OverlayContainer } from '@angular/cdk/overlay';
 import { ScrollDispatcher } from '@angular/cdk/scrolling';
 import {
     ChangeDetectionStrategy,
@@ -31,6 +31,7 @@ import {
     TAB,
     createKeyboardEvent,
     createMouseEvent,
+    defaultOffsetY,
     dispatchEvent,
     dispatchFakeEvent,
     dispatchKeyboardEvent,
@@ -961,11 +962,83 @@ describe('KbqDropdown', () => {
             expect(Math.floor(overlayRect.top)).toBe(Math.floor(triggerRect.bottom));
         });
 
+        it('should open above trigger when yPosition is above and there is space above', () => {
+            const fixture = createComponent(PositionedDropdown);
+
+            fixture.detectChanges();
+            const trigger = fixture.componentInstance.triggerEl().nativeElement;
+
+            // Push trigger down so it has space to open above
+            trigger.style.position = 'fixed';
+            trigger.style.top = '600px';
+            trigger.style.left = '100px';
+
+            fixture.componentInstance.trigger().open();
+            fixture.detectChanges();
+
+            const overlayPane = getOverlayPane();
+            const triggerRect = trigger.getBoundingClientRect();
+            const overlayRect = overlayPane.getBoundingClientRect();
+
+            // Panel is above: overlay bottom should not exceed trigger top
+            expect(Math.floor(overlayRect.bottom)).toBeLessThanOrEqual(Math.floor(triggerRect.top));
+        });
+
         function getOverlayPane(): HTMLElement {
             return overlayContainerElement.querySelector('.cdk-overlay-pane') as HTMLElement;
         }
     });
 
+    describe('y-position offsetY', () => {
+        afterEach(() => jest.restoreAllMocks());
+
+        it('should pass negative offsetY for primary positions when yPosition is above', () => {
+            const withPositionsSpy = jest.spyOn(FlexibleConnectedPositionStrategy.prototype, 'withPositions');
+            const fixture = createComponent(PositionedDropdown); // yPosition='above' by default
+
+            fixture.detectChanges();
+            fixture.componentInstance.trigger().open();
+            fixture.detectChanges();
+
+            const positions = withPositionsSpy.mock.calls[0][0];
+
+            // Primary positions: overlayY='bottom' means panel is above trigger.
+            // offsetY must be negative to push the panel UP and create a gap (not overlap).
+            expect(positions[0].overlayY).toBe('bottom');
+            expect(positions[0].offsetY).toBe(-defaultOffsetY);
+            expect(positions[1].overlayY).toBe('bottom');
+            expect(positions[1].offsetY).toBe(-defaultOffsetY);
+
+            // Fallback positions: overlayY='top' means panel is below trigger.
+            // offsetY must be positive to push the panel DOWN and create a gap.
+            expect(positions[2].overlayY).toBe('top');
+            expect(positions[2].offsetY).toBe(defaultOffsetY);
+            expect(positions[3].overlayY).toBe('top');
+            expect(positions[3].offsetY).toBe(defaultOffsetY);
+        });
+
+        it('should pass positive offsetY for primary positions when yPosition is below', () => {
+            const withPositionsSpy = jest.spyOn(FlexibleConnectedPositionStrategy.prototype, 'withPositions');
+            const fixture = createComponent(SimpleDropdown); // yPosition='below' by default
+
+            fixture.detectChanges();
+            fixture.componentInstance.trigger().open();
+            fixture.detectChanges();
+
+            const positions = withPositionsSpy.mock.calls[0][0];
+
+            // Primary positions: overlayY='top' means panel is below trigger.
+            // offsetY must be positive to push the panel DOWN and create a gap.
+            expect(positions[0].overlayY).toBe('top');
+            expect(positions[0].offsetY).toBe(defaultOffsetY);
+
+            // Fallback positions: overlayY='bottom' means panel is above trigger.
+            // offsetY must be negative to push the panel UP and create a gap.
+            expect(positions[2].overlayY).toBe('bottom');
+            expect(positions[2].offsetY).toBe(-defaultOffsetY);
+        });
+    });
+
     describe('overlapping trigger', () => {
         /**
          * This test class is used to create components containing a dropdown.