diff --git a/include/labwc.h b/include/labwc.h
index 8f5aa989..ee5d72d0 100644
--- a/include/labwc.h
+++ b/include/labwc.h
@@ -196,6 +196,7 @@ struct output {
 	struct wlr_scene_output *scene_output;
 	struct wl_list layers[LAB_NR_LAYERS];
 	struct wlr_scene_tree *layer_tree[LAB_NR_LAYERS];
+	struct wlr_scene_tree *layer_popup_tree;
 	struct wlr_box usable_area;
 
 	struct lab_data_buffer *osd_buffer;
diff --git a/src/layers.c b/src/layers.c
index 6f1d5292..060d5cca 100644
--- a/src/layers.c
+++ b/src/layers.c
@@ -247,12 +247,6 @@ create_popup(struct wlr_xdg_popup *wlr_popup, struct wlr_scene_node *parent)
 	popup->new_popup.notify = popup_handle_new_popup;
 	wl_signal_add(&wlr_popup->base->events.new_popup, &popup->new_popup);
 
-	/*
-	 * FIXME: should we put popups in ZWLR_LAYER_SHELL_V1_LAYER_OVERLAY
-	 * or a dedicated output->layer_popup_tree - so that for example
-	 * a panel in the bottom layer displays any popup above views.
-	 */
-
 	popup_unconstrain(popup);
 	return popup;
 }
@@ -272,7 +266,24 @@ new_popup_notify(struct wl_listener *listener, void *data)
 	struct lab_layer_surface *lab_layer_surface =
 		wl_container_of(listener, lab_layer_surface, new_popup);
 	struct wlr_xdg_popup *wlr_popup = data;
-	create_popup(wlr_popup, lab_layer_surface->scene_layer_surface->node);
+
+	/*
+	 * We always put popups in a special popup_tree so that for example a
+	 * panel in the bottom layer displays popups above views.
+	 */
+	struct server *server = lab_layer_surface->server;
+	struct wlr_output *wlr_output =
+		lab_layer_surface->scene_layer_surface->layer_surface->output;
+	struct output *output = output_from_wlr_output(server, wlr_output);
+	struct wlr_scene_node *node = &output->layer_popup_tree->node;
+
+	create_popup(wlr_popup, node);
+
+	struct wlr_box box = { 0 };
+	wlr_output_layout_get_box(server->output_layout, wlr_output, &box);
+	box.x += lab_layer_surface->scene_layer_surface->node->state.x;
+	box.y += lab_layer_surface->scene_layer_surface->node->state.y;
+	wlr_scene_node_set_position(node, box.x, box.y);
 }
 
 static void
diff --git a/src/output.c b/src/output.c
index c9981af3..fbd629a1 100644
--- a/src/output.c
+++ b/src/output.c
@@ -111,6 +111,10 @@ new_output_notify(struct wl_listener *listener, void *data)
 	output->frame.notify = output_frame_notify;
 	wl_signal_add(&wlr_output->events.frame, &output->frame);
 
+	/*
+	 * Create layer-trees (background, bottom, top and overlay) and
+	 * a layer-popup-tree.
+	 */
 	int nr_layers = sizeof(output->layers) / sizeof(output->layers[0]);
 	for (int i = 0; i < nr_layers; i++) {
 		wl_list_init(&output->layers[i]);
@@ -118,10 +122,23 @@ new_output_notify(struct wl_listener *listener, void *data)
 			wlr_scene_tree_create(&server->scene->node);
 		output->layer_tree[i]->node.data = output->wlr_output;
 	}
+	output->layer_popup_tree = wlr_scene_tree_create(&server->scene->node);
+
+	/*
+	 * Set the z-positions to achieve the following order (from top to
+	 * bottom):
+	 *	- layer-shell popups
+	 *	- overlay layer
+	 *	- top layer
+	 *	- views
+	 *	- bottom layer
+	 *	- background layer
+	 */
 	wlr_scene_node_lower_to_bottom(&output->layer_tree[1]->node);
 	wlr_scene_node_lower_to_bottom(&output->layer_tree[0]->node);
 	wlr_scene_node_raise_to_top(&output->layer_tree[2]->node);
 	wlr_scene_node_raise_to_top(&output->layer_tree[3]->node);
+	wlr_scene_node_raise_to_top(&output->layer_popup_tree->node);
 
 	if (rc.adaptive_sync) {
 		wlr_log(WLR_INFO, "enable adaptive sync on %s",