diff --git a/packages/calcite-components/src/components/list/list.e2e.ts b/packages/calcite-components/src/components/list/list.e2e.ts
index 5296eb23fe1..dffb14339ca 100755
--- a/packages/calcite-components/src/components/list/list.e2e.ts
+++ b/packages/calcite-components/src/components/list/list.e2e.ts
@@ -127,6 +127,112 @@ describe("calcite-list", () => {
       { focusTarget: "child" },
     );
 
+    it("should set the dragHandle property on items", async () => {
+      const page = await newE2EPage();
+      await page.setContent(
+        html`<calcite-list id="root" drag-enabled group="my-list">
+          <calcite-list-item open label="Depth 1" description="Item 1">
+            <calcite-list group="my-list">
+              <calcite-list-item open label="Depth 2" description="Item 2">
+                <calcite-list drag-enabled group="my-list">
+                  <calcite-list-item label="Depth 3" description="Item 3">
+                    <calcite-list drag-enabled group="my-list"></calcite-list>
+                  </calcite-list-item>
+                  <calcite-list-item label="Depth 3" description="Item 4"></calcite-list-item>
+                </calcite-list>
+              </calcite-list-item>
+              <calcite-list-item label="Depth 2" description="Item 5"></calcite-list-item>
+            </calcite-list>
+          </calcite-list-item>
+          <calcite-list-item label="Depth 1" description="Item 6"></calcite-list-item>
+          <calcite-list-item drag-disabled label="Depth 1" description="Item 7"></calcite-list-item>
+        </calcite-list>`,
+      );
+
+      await page.waitForChanges();
+      await page.waitForTimeout(listDebounceTimeout);
+
+      let dragHandleValues = [true, false, true, true, false, true, true];
+
+      const items = await page.findAll("calcite-list-item");
+
+      expect(items.length).toBe(dragHandleValues.length);
+
+      for (let i = 0; i < items.length; i++) {
+        expect(await items[i].getProperty("dragHandle")).toBe(dragHandleValues[i]);
+      }
+
+      const rootList = await page.find("#root");
+
+      rootList.setProperty("dragEnabled", false);
+      await page.waitForChanges();
+      await page.waitForTimeout(listDebounceTimeout);
+
+      dragHandleValues = [false, false, true, true, false, false, false];
+
+      expect(items.length).toBe(dragHandleValues.length);
+
+      for (let i = 0; i < items.length; i++) {
+        expect(await items[i].getProperty("dragHandle")).toBe(dragHandleValues[i]);
+      }
+    });
+
+    it("should set the dragHandle property on items which are not direct children", async () => {
+      const page = await newE2EPage();
+      await page.setContent(
+        html`<calcite-list id="root" drag-enabled group="my-list">
+          <div>
+            <calcite-list-item open label="Depth 1" description="Item 1">
+              <calcite-list group="my-list">
+                <div>
+                  <calcite-list-item open label="Depth 2" description="Item 2">
+                    <calcite-list drag-enabled group="my-list">
+                      <div>
+                        <calcite-list-item label="Depth 3" description="Item 3">
+                          <calcite-list drag-enabled group="my-list"></calcite-list>
+                        </calcite-list-item>
+                      </div>
+                      <div><calcite-list-item label="Depth 3" description="Item 4"></calcite-list-item></div>
+                    </calcite-list>
+                  </calcite-list-item>
+                </div>
+                <div><calcite-list-item label="Depth 2" description="Item 5"></calcite-list-item></div>
+              </calcite-list>
+            </calcite-list-item>
+          </div>
+          <div><calcite-list-item label="Depth 1" description="Item 6"></calcite-list-item></div>
+          <div><calcite-list-item drag-disabled label="Depth 1" description="Item 7"></calcite-list-item></div>
+        </calcite-list>`,
+      );
+
+      await page.waitForChanges();
+      await page.waitForTimeout(listDebounceTimeout);
+
+      let dragHandleValues = [true, false, true, true, false, true, true];
+
+      const items = await page.findAll("calcite-list-item");
+
+      expect(items.length).toBe(dragHandleValues.length);
+
+      for (let i = 0; i < items.length; i++) {
+        expect(await items[i].getProperty("dragHandle")).toBe(dragHandleValues[i]);
+      }
+
+      const rootList = await page.find("#root");
+
+      rootList.setProperty("dragEnabled", false);
+      await page.waitForChanges();
+      await page.waitForTimeout(listDebounceTimeout);
+
+      dragHandleValues = [false, false, true, true, false, false, false];
+
+      expect(items.length).toBe(dragHandleValues.length);
+
+      for (let i = 0; i < items.length; i++) {
+        expect(await items[i].getProperty("dragHandle")).toBe(dragHandleValues[i]);
+      }
+    });
+
     it("disabling and enabling an item restores actions from being tabbable", async () => {
       const page = await newE2EPage();
       await page.setContent(html`
diff --git a/packages/calcite-components/src/components/list/list.stories.ts b/packages/calcite-components/src/components/list/list.stories.ts
index 2a0cdb85903..82f6195d2d0 100644
--- a/packages/calcite-components/src/components/list/list.stories.ts
+++ b/packages/calcite-components/src/components/list/list.stories.ts
@@ -1077,3 +1077,47 @@ export const closedItems_TestOnly = (): string =>
     >
     </calcite-list-item>
   </calcite-list>`;
+
+export const dragEnabledNestedLists = (): string =>
+  html`<calcite-list id="root" drag-enabled group="my-list">
+    <calcite-list-item open label="Depth 1" description="Item 1">
+      <calcite-list group="my-list">
+        <calcite-list-item open label="Depth 2" description="Item 2">
+          <calcite-list drag-enabled group="my-list">
+            <calcite-list-item label="Depth 3" description="Item 3">
+              <calcite-list drag-enabled group="my-list"></calcite-list>
+            </calcite-list-item>
+            <calcite-list-item label="Depth 3" description="Item 4"></calcite-list-item>
+          </calcite-list>
+        </calcite-list-item>
+        <calcite-list-item label="Depth 2" description="Item 5"></calcite-list-item>
+      </calcite-list>
+    </calcite-list-item>
+    <calcite-list-item label="Depth 1" description="Item 6"></calcite-list-item>
+    <calcite-list-item drag-disabled label="Depth 1" description="Item 7"></calcite-list-item>
+  </calcite-list>`;
+
+export const dragEnabledNestedListsIndirectChildren = (): string =>
+  html`<calcite-list id="root" drag-enabled group="my-list">
+    <div>
+      <calcite-list-item open label="Depth 1" description="Item 1">
+        <calcite-list group="my-list">
+          <div>
+            <calcite-list-item open label="Depth 2" description="Item 2">
+              <calcite-list drag-enabled group="my-list">
+                <div>
+                  <calcite-list-item label="Depth 3" description="Item 3">
+                    <calcite-list drag-enabled group="my-list"></calcite-list>
+                  </calcite-list-item>
+                </div>
+                <div><calcite-list-item label="Depth 3" description="Item 4"></calcite-list-item></div>
+              </calcite-list>
+            </calcite-list-item>
+          </div>
+          <div><calcite-list-item label="Depth 2" description="Item 5"></calcite-list-item></div>
+        </calcite-list>
+      </calcite-list-item>
+    </div>
+    <div><calcite-list-item label="Depth 1" description="Item 6"></calcite-list-item></div>
+    <div><calcite-list-item drag-disabled label="Depth 1" description="Item 7"></calcite-list-item></div>
+  </calcite-list>`;
diff --git a/packages/calcite-components/src/components/list/list.tsx b/packages/calcite-components/src/components/list/list.tsx
index 7b8099201b5..1044d03ab84 100755
--- a/packages/calcite-components/src/components/list/list.tsx
+++ b/packages/calcite-components/src/components/list/list.tsx
@@ -58,7 +58,6 @@ import { ListMessages } from "./assets/list/t9n";
 import { ListDragDetail } from "./interfaces";
 
 const listItemSelector = "calcite-list-item";
-const listItemSelectorDirect = `:scope > calcite-list-item`;
 const parentSelector = "calcite-list-item-group, calcite-list-item";
 
 /**
@@ -837,17 +836,16 @@ export class List
   };
 
   private updateListItems = debounce((emit = false): void => {
-    const { selectionAppearance, selectionMode, dragEnabled } = this;
+    const { selectionAppearance, selectionMode, dragEnabled, el } = this;
+
+    const items = Array.from(this.el.querySelectorAll(listItemSelector));
 
-    const items = this.queryListItems();
     items.forEach((item) => {
       item.selectionAppearance = selectionAppearance;
       item.selectionMode = selectionMode;
-    });
-
-    const directItems = this.queryListItems(true);
-    directItems.forEach((item) => {
-      item.dragHandle = dragEnabled;
+      if (item.closest("calcite-list") === el) {
+        item.dragHandle = dragEnabled;
+      }
     });
 
     if (this.parentListEl) {
@@ -871,10 +869,6 @@ export class List
     this.setUpSorting();
   }, debounceTimeout);
 
-  private queryListItems = (direct = false): HTMLCalciteListItemElement[] => {
-    return Array.from(this.el.querySelectorAll(direct ? listItemSelectorDirect : listItemSelector));
-  };
-
   private focusRow = (focusEl: HTMLCalciteListItemElement): void => {
     const { focusableItems } = this;