diff --git a/packages/block-editor/src/components/block-popover/index.js b/packages/block-editor/src/components/block-popover/index.js
index 370959d1b145c..597f61eb94910 100644
--- a/packages/block-editor/src/components/block-popover/index.js
+++ b/packages/block-editor/src/components/block-popover/index.js
@@ -6,8 +6,9 @@ import classnames from 'classnames';
 /**
  * WordPress dependencies
  */
+import { useMergeRefs } from '@wordpress/compose';
 import { Popover } from '@wordpress/components';
-import { useMemo } from '@wordpress/element';
+import { forwardRef, useMemo } from '@wordpress/element';
 
 /**
  * Internal dependencies
@@ -15,19 +16,25 @@ import { useMemo } from '@wordpress/element';
 import { __unstableUseBlockElement as useBlockElement } from '../block-list/use-block-props/use-block-refs';
 import usePopoverScroll from './use-popover-scroll';
 
-export default function BlockPopover( {
-	clientId,
-	bottomClientId,
-	children,
-	__unstableRefreshSize,
-	__unstableCoverTarget = false,
-	__unstablePopoverSlot,
-	__unstableContentRef,
-	...props
-} ) {
+function BlockPopover(
+	{
+		clientId,
+		bottomClientId,
+		children,
+		__unstableRefreshSize,
+		__unstableCoverTarget = false,
+		__unstablePopoverSlot,
+		__unstableContentRef,
+		...props
+	},
+	ref
+) {
 	const selectedElement = useBlockElement( clientId );
 	const lastSelectedElement = useBlockElement( bottomClientId ?? clientId );
-	const popoverScrollRef = usePopoverScroll( __unstableContentRef );
+	const mergedRefs = useMergeRefs( [
+		ref,
+		usePopoverScroll( __unstableContentRef ),
+	] );
 	const style = useMemo( () => {
 		if ( ! selectedElement || lastSelectedElement !== selectedElement ) {
 			return {};
@@ -51,7 +58,7 @@ export default function BlockPopover( {
 
 	return (
 		<Popover
-			ref={ popoverScrollRef }
+			ref={ mergedRefs }
 			animate={ false }
 			position="top right left"
 			focusOnMount={ false }
@@ -74,3 +81,5 @@ export default function BlockPopover( {
 		</Popover>
 	);
 }
+
+export default forwardRef( BlockPopover );
diff --git a/packages/block-editor/src/components/block-tools/selected-block-popover.js b/packages/block-editor/src/components/block-tools/selected-block-popover.js
index 962063ba284b6..652c04efe6aed 100644
--- a/packages/block-editor/src/components/block-tools/selected-block-popover.js
+++ b/packages/block-editor/src/components/block-tools/selected-block-popover.js
@@ -20,6 +20,7 @@ import BlockSelectionButton from './block-selection-button';
 import BlockContextualToolbar from './block-contextual-toolbar';
 import { store as blockEditorStore } from '../../store';
 import BlockPopover from '../block-popover';
+import useBlockToolbarPopoverProps from './use-block-toolbar-popover-props';
 
 function selector( select ) {
 	const {
@@ -113,6 +114,11 @@ function SelectedBlockPopover( {
 	// to it when re-mounting.
 	const initialToolbarItemIndexRef = useRef();
 
+	const popoverProps = useBlockToolbarPopoverProps( {
+		contentElement: __unstableContentRef?.current,
+		clientId,
+	} );
+
 	if ( ! shouldShowBreadcrumb && ! shouldShowContextualToolbar ) {
 		return null;
 	}
@@ -126,6 +132,7 @@ function SelectedBlockPopover( {
 			} ) }
 			__unstablePopoverSlot={ __unstablePopoverSlot }
 			__unstableContentRef={ __unstableContentRef }
+			{ ...popoverProps }
 		>
 			{ shouldShowContextualToolbar && (
 				<BlockContextualToolbar
diff --git a/packages/block-editor/src/components/block-tools/use-block-toolbar-popover-props.js b/packages/block-editor/src/components/block-tools/use-block-toolbar-popover-props.js
new file mode 100644
index 0000000000000..3d42e994f5943
--- /dev/null
+++ b/packages/block-editor/src/components/block-tools/use-block-toolbar-popover-props.js
@@ -0,0 +1,123 @@
+/**
+ * WordPress dependencies
+ */
+import { useRefEffect } from '@wordpress/compose';
+import { useSelect } from '@wordpress/data';
+import { useCallback, useLayoutEffect, useState } from '@wordpress/element';
+
+/**
+ * Internal dependencies
+ */
+import { store as blockEditorStore } from '../../store';
+import { __unstableUseBlockElement as useBlockElement } from '../block-list/use-block-props/use-block-refs';
+
+// By default the toolbar sets the `shift` prop. If the user scrolls the page
+// down the toolbar will stay on screen by adopting a sticky position at the
+// top of the viewport.
+const DEFAULT_PROPS = { __unstableForcePosition: true, __unstableShift: true };
+
+// When there isn't enough height between the top of the block and the editor
+// canvas, the `shift` prop is set to `false`, as it will cause the block to be
+// obscured. The `flip` behavior is enabled (by setting `forcePosition` to
+// `false`), which positions the toolbar below the block.
+const RESTRICTED_HEIGHT_PROPS = {
+	__unstableForcePosition: false,
+	__unstableShift: false,
+};
+
+/**
+ * Get the popover props for the block toolbar, determined by the space at the top of the canvas and the toolbar height.
+ *
+ * @param {Element} contentElement       The DOM element that represents the editor content or canvas.
+ * @param {Element} selectedBlockElement The outer DOM element of the first selected block.
+ * @param {number}  toolbarHeight        The height of the toolbar in pixels.
+ *
+ * @return {Object} The popover props used to determine the position of the toolbar.
+ */
+function getProps( contentElement, selectedBlockElement, toolbarHeight ) {
+	if ( ! contentElement || ! selectedBlockElement ) {
+		return DEFAULT_PROPS;
+	}
+
+	const blockRect = selectedBlockElement.getBoundingClientRect();
+	const contentRect = contentElement.getBoundingClientRect();
+
+	if ( blockRect.top - contentRect.top > toolbarHeight ) {
+		return DEFAULT_PROPS;
+	}
+
+	return RESTRICTED_HEIGHT_PROPS;
+}
+
+/**
+ * Determines the desired popover positioning behavior, returning a set of appropriate props.
+ *
+ * @param {Object}  elements
+ * @param {Element} elements.contentElement The DOM element that represents the editor content or canvas.
+ * @param {string}  elements.clientId       The clientId of the first selected block.
+ *
+ * @return {Object} The popover props used to determine the position of the toolbar.
+ */
+export default function useBlockToolbarPopoverProps( {
+	contentElement,
+	clientId,
+} ) {
+	const selectedBlockElement = useBlockElement( clientId );
+	const [ toolbarHeight, setToolbarHeight ] = useState( 0 );
+	const [ props, setProps ] = useState( () =>
+		getProps( contentElement, selectedBlockElement, toolbarHeight )
+	);
+	const blockIndex = useSelect(
+		( select ) => select( blockEditorStore ).getBlockIndex( clientId ),
+		[ clientId ]
+	);
+
+	const popoverRef = useRefEffect( ( popoverNode ) => {
+		setToolbarHeight( popoverNode.offsetHeight );
+	}, [] );
+
+	const updateProps = useCallback(
+		() =>
+			setProps(
+				getProps( contentElement, selectedBlockElement, toolbarHeight )
+			),
+		[ contentElement, selectedBlockElement, toolbarHeight ]
+	);
+
+	// Update props when the block is moved. This also ensures the props are
+	// correct on initial mount, and when the selected block or content element
+	// changes (since the callback ref will update).
+	useLayoutEffect( updateProps, [ blockIndex, updateProps ] );
+
+	// Update props when the viewport is resized or the block is resized.
+	useLayoutEffect( () => {
+		if ( ! contentElement || ! selectedBlockElement ) {
+			return;
+		}
+
+		// Update the toolbar props on viewport resize.
+		const contentView = contentElement?.ownerDocument?.defaultView;
+		contentView?.addEventHandler?.( 'resize', updateProps );
+
+		// Update the toolbar props on block resize.
+		let resizeObserver;
+		const blockView = selectedBlockElement?.ownerDocument?.defaultView;
+		if ( blockView.ResizeObserver ) {
+			resizeObserver = new blockView.ResizeObserver( updateProps );
+			resizeObserver.observe( selectedBlockElement );
+		}
+
+		return () => {
+			contentView?.removeEventHandler?.( 'resize', updateProps );
+
+			if ( resizeObserver ) {
+				resizeObserver.disconnect();
+			}
+		};
+	}, [ updateProps, contentElement, selectedBlockElement ] );
+
+	return {
+		...props,
+		ref: popoverRef,
+	};
+}