diff --git a/lib/sdk/panel/utils.js b/lib/sdk/panel/utils.js
index c502b1795..2afbab40e 100644
--- a/lib/sdk/panel/utils.js
+++ b/lib/sdk/panel/utils.js
@@ -236,7 +236,12 @@ function make(document) {
   let viewFrame = createFrame(panel, frameOptions);
   setupPanelFrame(viewFrame);
 
-  function onDisplayChange({type}) {
+  function onDisplayChange({type, target}) {
+    // Events from child element like <select /> may propagate (dropdowns are
+    // popups too), in which case frame loader shouldn't be swapped.
+    // See Bug 886329
+    if (target !== this) return;
+
     try { swapFrameLoaders(backgroundFrame, viewFrame); }
     catch(error) { console.exception(error); }
     events.emit(type, { subject: panel });
diff --git a/lib/sdk/window/helpers.js b/lib/sdk/window/helpers.js
index 43a11b14b..b69ffeba9 100644
--- a/lib/sdk/window/helpers.js
+++ b/lib/sdk/window/helpers.js
@@ -5,7 +5,8 @@
 
 const { defer } = require('../core/promise');
 const events = require('../system/events');
-const { open: openWindow, onFocus, getToplevelWindow } = require('./utils');
+const { open: openWindow, onFocus, getToplevelWindow,
+        isInteractive } = require('./utils');
 
 function open(uri, options) {
   return promise(openWindow.apply(null, arguments), 'load');
@@ -36,6 +37,18 @@ function focus(window) {
 }
 exports.focus = focus;
 
+function ready(window) {
+  let { promise: result, resolve } = defer();
+
+  if (isInteractive(window))
+    resolve(window);
+  else
+    resolve(promise(window, 'DOMContentLoaded'));
+
+  return result;
+}
+exports.ready = ready;
+
 function promise(target, evt, capture) {
   let deferred = defer();
   capture = !!capture;
@@ -47,4 +60,4 @@ function promise(target, evt, capture) {
 
   return deferred.promise;
 }
-exports.promise = promise;
\ No newline at end of file
+exports.promise = promise;
diff --git a/test/test-panel.js b/test/test-panel.js
index 5d4bd4754..eab3720b7 100644
--- a/test/test-panel.js
+++ b/test/test-panel.js
@@ -14,7 +14,7 @@ const { Loader } = require('sdk/test/loader');
 const { LoaderWithHookedConsole } = require("sdk/test/loader");
 const timer = require("sdk/timers");
 const self = require('sdk/self');
-const { open, close, focus } = require('sdk/window/helpers');
+const { open, close, focus, ready } = require('sdk/window/helpers');
 const { isPrivate } = require('sdk/private-browsing');
 const { isWindowPBSupported, isGlobalPBSupported } = require('sdk/private-browsing/utils');
 const { defer, all } = require('sdk/core/promise');
@@ -896,6 +896,43 @@ exports['test passing DOM node as first argument'] = function (assert, done) {
   panel.show(widgetNode);
 };
 
+// This test is checking that `onpupshowing` events emitted by panel's children
+// are not considered.
+// See Bug 886329
+exports['test nested popups'] = function (assert, done) {
+  let loader = Loader(module);
+  let { Panel } = loader.require('sdk/panel');
+  let { getActiveView } = loader.require('sdk/view/core');
+  let url = '<select><option>1<option>2<option>3</select>';
+
+  let getContentWindow = panel => {
+    return getActiveView(panel).querySelector('iframe').contentWindow;
+  }
+
+  let panel = Panel({
+    contentURL: 'data:text/html;charset=utf-8,' + encodeURIComponent(url),
+    onShow: () => {
+      ready(getContentWindow(panel)).then(({ window, document }) => {
+        let select = document.querySelector('select');
+        let event = document.createEvent('UIEvent');
+
+        event.initUIEvent('popupshowing', true, true, window, null);
+        select.dispatchEvent(event);
+
+        assert.equal(
+          select,
+          getContentWindow(panel).document.querySelector('select'),
+          'select is still loaded in panel'
+        );
+
+        done();
+      });
+    }
+  });
+
+  panel.show();
+};
+
 if (isWindowPBSupported) {
   exports.testGetWindow = function(assert, done) {
     let activeWindow = getMostRecentBrowserWindow();