diff --git a/packages/boilerplate/api-client/src/api/getCategory/index.ts b/packages/boilerplate/api-client/src/api/getCategory/index.ts
index 4f42f4ad66..9c8fc90b2b 100644
--- a/packages/boilerplate/api-client/src/api/getCategory/index.ts
+++ b/packages/boilerplate/api-client/src/api/getCategory/index.ts
@@ -5,25 +5,70 @@ export default async function getCategory(context, params, customQuery?: CustomQ
   return Promise.resolve([
     {
       id: 1,
+      name: 'New',
+      slug: 'new',
+      children: [
+        {
+          id: 15,
+          name: 'Women',
+          slug: 'new-women',
+          children: [
+            {
+              id: 16,
+              name: 'Clothing',
+              slug: 'new-women-clothing',
+              children: []
+            },
+            {
+              id: 17,
+              name: 'Shoes',
+              slug: 'new-women-shoes',
+              children: []
+            }
+          ]
+        },
+        {
+          id: 11,
+          name: 'Men',
+          slug: 'new-men',
+          children: [
+            {
+              id: 18,
+              name: 'Clothing',
+              slug: 'new-men-clothing',
+              children: []
+            },
+            {
+              id: 19,
+              name: 'Shoes',
+              slug: 'new-men-shoes',
+              children: []
+            }
+          ]
+        }
+      ]
+    },
+    {
+      id: 2,
       name: 'Women',
       slug: 'women',
-      items: [
+      children: [
         {
           id: 4,
           name: 'Women jackets',
           slug: 'women-jackets',
-          items: [
+          children: [
             {
               id: 9,
               name: 'Winter jackets',
               slug: 'winter-jackets',
-              items: []
+              children: []
             },
             {
               id: 10,
               name: 'Autumn jackets',
               slug: 'autmun-jackets',
-              items: []
+              children: []
             }
           ]
         },
@@ -31,44 +76,44 @@ export default async function getCategory(context, params, customQuery?: CustomQ
           id: 5,
           name: 'Skirts',
           slug: 'skirts',
-          items: []
+          children: []
         }
       ]
     },
     {
-      id: 2,
+      id: 3,
       name: 'Men',
       slug: 'men',
-      items: [
+      children: [
         {
           id: 6,
           name: 'Men T-shirts',
           slug: 'men-tshirts',
-          items: []
+          children: []
         }
       ]
     },
     {
-      id: 3,
+      id: 4,
       name: 'Kids',
       slug: 'kids',
-      items: [
+      children: [
         {
           id: 7,
           name: 'Toys',
           slug: 'toys',
-          items: [
+          children: [
             {
               id: 8,
               name: 'Toy Cars',
               slug: 'toy-cars',
-              items: []
+              children: []
             },
             {
               id: 8,
               name: 'Dolls',
               slug: 'dolls',
-              items: []
+              children: []
             }
           ]
         }
diff --git a/packages/boilerplate/theme/static/megamenu/bannerA.webp b/packages/boilerplate/theme/static/megamenu/bannerA.webp
new file mode 100644
index 0000000000..a5ab92d266
Binary files /dev/null and b/packages/boilerplate/theme/static/megamenu/bannerA.webp differ
diff --git a/packages/boilerplate/theme/static/megamenu/bannerB.webp b/packages/boilerplate/theme/static/megamenu/bannerB.webp
new file mode 100644
index 0000000000..32290c8e35
Binary files /dev/null and b/packages/boilerplate/theme/static/megamenu/bannerB.webp differ
diff --git a/packages/commercetools/api-client/src/api/getCategory/defaultQuery.ts b/packages/commercetools/api-client/src/api/getCategory/defaultQuery.ts
index 36c9492c37..a14f60eb1c 100644
--- a/packages/commercetools/api-client/src/api/getCategory/defaultQuery.ts
+++ b/packages/commercetools/api-client/src/api/getCategory/defaultQuery.ts
@@ -1,27 +1,14 @@
 import gql from 'graphql-tag';
+import { CategoryFragment } from './../../fragments';
 
 export default gql`
-  fragment Children on Category {
-    id
-    slug(acceptLanguage: $acceptLanguage)
-    name(acceptLanguage: $acceptLanguage)
-    childCount
-  }
+  ${CategoryFragment}
 
-  fragment DefaultCategory on Category {
+  fragment Children on Category {
     id
     slug(acceptLanguage: $acceptLanguage)
     name(acceptLanguage: $acceptLanguage)
     childCount
-    children {
-      ...Children
-      children {
-        ...Children
-        children {
-          ...Children
-        }
-      }
-    }
   }
 
   query categories($where: String, $sort: [String!], $limit: Int, $offset: Int, $acceptLanguage: [Locale!]) {
diff --git a/packages/commercetools/api-client/src/fragments/index.ts b/packages/commercetools/api-client/src/fragments/index.ts
index debd2940d8..71328cd0c5 100644
--- a/packages/commercetools/api-client/src/fragments/index.ts
+++ b/packages/commercetools/api-client/src/fragments/index.ts
@@ -297,3 +297,20 @@ export const OrderFragment = `
   }
 `;
 
+export const CategoryFragment = `
+  fragment DefaultCategory on Category {
+    id
+    slug(acceptLanguage: $acceptLanguage)
+    name(acceptLanguage: $acceptLanguage)
+    childCount
+    children {
+      ...Children
+      children {
+        ...Children
+        children {
+          ...Children
+        }
+      }
+    }
+  }
+`;
diff --git a/packages/commercetools/theme/components/header/HeaderNav.vue b/packages/commercetools/theme/components/header/HeaderNav.vue
new file mode 100644
index 0000000000..584c6cf90d
--- /dev/null
+++ b/packages/commercetools/theme/components/header/HeaderNav.vue
@@ -0,0 +1,95 @@
+<template>
+  <SfHeaderNavigation>
+    <SfHeaderNavigationItem
+      v-for="(category, index) in categories"
+      :key="index"
+      :label="category.name"
+      @mouseenter="() => handleMouseEnter(category.slug)"
+      @mouseleave="() => handleMouseLeave()"
+      @click="handleMouseLeave()"
+      :link="localePath(`/c/${category.slug}`)"
+    >
+      <SfMegaMenu
+        :is-absolute="true"
+        :visible="currentCatSlug === category.slug"
+        :title="category.name"
+        @close="currentCatSlug = ''"
+        v-if="category && category.children.length"
+      >
+        <SfMegaMenuColumn
+          v-for="(subCategory, subIndex) in category.children"
+          :key="subIndex"
+          :title="subCategory.name"
+        >
+          <SfLoader :loading="subCategoriesLoading">
+            <SfList>
+              <SfListItem
+                v-for="(subCategoryChild, childIndex) in subCategory.children"
+                :key="childIndex"
+              >
+                <SfMenuItem :label="subCategoryChild.name" :link="localePath(`/c/${subCategoryChild.slug}`)">
+                  <SfLink>
+                    {{ subCategoryChild.name }}
+                  </SfLink>
+                </SfMenuItem>
+              </SfListItem>
+            </SfList>
+          </SfLoader>
+        </SfMegaMenuColumn>
+        <NewCatBanners v-if="currentCatSlug === 'new'" />
+      </SfMegaMenu>
+    </SfHeaderNavigationItem>
+  </SfHeaderNavigation>
+</template>
+
+<script>
+import { SfMegaMenu, SfMenuItem, SfList, SfBanner, SfLoader } from '@storefront-ui/vue';
+import { useCategory } from '@vue-storefront/commercetools';
+import { onSSR } from '@vue-storefront/core';
+import { ref } from '@vue/composition-api';
+import { rootCategoriesQuery } from '../../queries/topCategories';
+import debounce from 'lodash.debounce';
+
+export default {
+  name: 'HeaderNav',
+  components: {
+    SfMegaMenu,
+    SfMenuItem,
+    SfList,
+    SfBanner,
+    SfLoader,
+    NewCatBanners: () => import('./NewCatBanners')
+  },
+  setup (_, { emit }) {
+    const { categories, search } = useCategory('menu-categories');
+    const { categories: subCategories, search: subCategoriesSearch, loading: subCategoriesLoading } = useCategory('menu-subCategories');
+    const currentCatSlug = ref('');
+
+    const handleMouseEnter = debounce((slug) => {
+      if (currentCatSlug.value) return;
+
+      emit('setOverlay', true);
+      currentCatSlug.value = slug;
+      subCategoriesSearch({ slug });
+    }, 200);
+
+    const handleMouseLeave = debounce(() => {
+      emit('setOverlay', false);
+      currentCatSlug.value = '';
+    }, 200);
+
+    onSSR(async () => {
+      await search({ customQuery: rootCategoriesQuery });
+    });
+
+    return {
+      categories,
+      subCategories,
+      currentCatSlug,
+      subCategoriesLoading,
+      handleMouseEnter,
+      handleMouseLeave
+    };
+  }
+};
+</script>
diff --git a/packages/commercetools/theme/queries/topCategories.ts b/packages/commercetools/theme/queries/topCategories.ts
new file mode 100644
index 0000000000..6c0021b53a
--- /dev/null
+++ b/packages/commercetools/theme/queries/topCategories.ts
@@ -0,0 +1,36 @@
+import gql from 'graphql-tag';
+import { CategoryFragment } from '@vue-storefront/commercetools-api';
+
+const customQuery = gql`
+  ${CategoryFragment}
+
+  fragment Children on Category {
+    id
+    slug(acceptLanguage: $acceptLanguage)
+    name(acceptLanguage: $acceptLanguage)
+    childCount
+  }
+
+  query categories($where: String, $sort: [String!], $limit: Int, $offset: Int, $acceptLanguage: [Locale!]) {
+    categories(where: $where, sort: $sort, limit: $limit, offset: $offset) {
+      offset
+      count
+      total
+      results {
+        ...DefaultCategory
+      }
+    }
+  }
+`;
+
+export const rootCategoriesQuery = (query, variables) => {
+  const customVariables = {
+    ...variables,
+    where: 'parent is not defined'
+  };
+
+  return {
+    query: customQuery,
+    variables: customVariables
+  };
+};
diff --git a/packages/commercetools/theme/static/megamenu/bannerA.webp b/packages/commercetools/theme/static/megamenu/bannerA.webp
new file mode 100644
index 0000000000..a5ab92d266
Binary files /dev/null and b/packages/commercetools/theme/static/megamenu/bannerA.webp differ
diff --git a/packages/commercetools/theme/static/megamenu/bannerB.webp b/packages/commercetools/theme/static/megamenu/bannerB.webp
new file mode 100644
index 0000000000..32290c8e35
Binary files /dev/null and b/packages/commercetools/theme/static/megamenu/bannerB.webp differ
diff --git a/packages/core/docs/commercetools/changelog.md b/packages/core/docs/commercetools/changelog.md
index 66974c4107..e1a3f8c968 100644
--- a/packages/core/docs/commercetools/changelog.md
+++ b/packages/core/docs/commercetools/changelog.md
@@ -1,6 +1,7 @@
 # Changelog
 
 ## 1.1.0 (not released)
+- added MegaMenu to theme ([#5267](https://github.com/vuestorefront/vue-storefront/issues/5267))
 - fix getOrders api ([#5328](https://github.com/DivanteLtd/vue-storefront/issues/5328))
 - added bottom margin to fix visibility of last footer category ([#5253](https://github.com/DivanteLtd/vue-storefront/issues/5253))
 - [BREAKING] refactored names of many factory methods and composable methods, details in linked PR ([#5299](https://github.com/DivanteLtd/vue-storefront/pull/5299))
diff --git a/packages/core/docs/contributing/changelog.md b/packages/core/docs/contributing/changelog.md
index 09adfc3408..40e60826cc 100644
--- a/packages/core/docs/contributing/changelog.md
+++ b/packages/core/docs/contributing/changelog.md
@@ -1,6 +1,7 @@
 # Changelog
 
 ## 2.2.0 (not released)
+- added MegaMenu to theme ([#5267](https://github.com/vuestorefront/vue-storefront/issues/5267))
 - added bottom margin to fix visibility of last footer category ([#5253](https://github.com/DivanteLtd/vue-storefront/issues/5253))
 - [BREAKING] refactored names of many factory methods and composable methods, details in linked PR ([#5299](https://github.com/DivanteLtd/vue-storefront/pull/5299))
 - [BREAKING] changed signatures of factory methods to always 2 arguments, details in linked PR ([#5299](https://github.com/DivanteLtd/vue-storefront/pull/5299))
diff --git a/packages/core/nuxt-theme-module/package.json b/packages/core/nuxt-theme-module/package.json
index 22888860a6..f53d45d850 100644
--- a/packages/core/nuxt-theme-module/package.json
+++ b/packages/core/nuxt-theme-module/package.json
@@ -23,6 +23,7 @@
     "access": "public"
   },
   "dependencies": {
+    "lodash.debounce": "^4.0.8",
     "lodash.merge": "^4.6.2"
   }
 }
diff --git a/packages/core/nuxt-theme-module/theme/components/AppHeader.vue b/packages/core/nuxt-theme-module/theme/components/header/AppHeader.vue
similarity index 57%
rename from packages/core/nuxt-theme-module/theme/components/AppHeader.vue
rename to packages/core/nuxt-theme-module/theme/components/header/AppHeader.vue
index f3dc30da32..b7c1fa7609 100644
--- a/packages/core/nuxt-theme-module/theme/components/AppHeader.vue
+++ b/packages/core/nuxt-theme-module/theme/components/header/AppHeader.vue
@@ -1,47 +1,52 @@
 <template>
-  <SfHeader
-    data-cy="app-header"
-    @click:cart="toggleCartSidebar"
-    @click:wishlist="toggleWishlistSidebar"
-    @click:account="handleAccountClick"
-    @enter:search="changeSearchTerm"
-    @change:search="p => term = p"
-    :searchValue="term"
-    :cartItemsQty="cartTotalItems"
-    :accountIcon="accountIcon"
-    class="sf-header--has-mobile-search"
-  >
-    <!-- TODO: add mobile view buttons after SFUI team PR -->
-    <template #logo>
-      <nuxt-link data-cy="app-header-url_logo" :to="localePath('/')" class="sf-header__logo">
-        <SfImage src="/icons/logo.svg" alt="Vue Storefront Next" class="sf-header__logo-image"/>
-      </nuxt-link>
-    </template>
-    <template #navigation>
-      <SfHeaderNavigationItem class="nav-item" data-cy="app-header-url_women" label="WOMEN" :link="localePath('/c/women')" />
-      <SfHeaderNavigationItem class="nav-item"  data-cy="app-header-url_men" label="MEN" :link="localePath('/c/men')" />
-      <SfHeaderNavigationItem class="nav-item" data-cy="app-header-url_kids" label="KIDS" :link="localePath('/c/kids')" />
-    </template>
-    <template #aside>
-      <LocaleSelector class="smartphone-only" />
-    </template>
-  </SfHeader>
+  <div>
+    <SfOverlay :visible="!!isOverlayVisible" />
+    <SfHeader
+      data-cy="app-header"
+      @click:cart="toggleCartSidebar"
+      @click:wishlist="toggleWishlistSidebar"
+      @click:account="handleAccountClick"
+      @enter:search="changeSearchTerm"
+      @change:search="p => term = p"
+      :searchValue="term"
+      :cartItemsQty="cartTotalItems"
+      :accountIcon="accountIcon"
+      class="sf-header--has-mobile-search"
+    >
+      <!-- TODO: add mobile view buttons after SFUI team PR -->
+      <template #logo>
+        <nuxt-link data-cy="app-header-url_logo" :to="localePath('/')" class="sf-header__logo">
+          <SfImage src="/icons/logo.svg" alt="Vue Storefront Next" class="sf-header__logo-image"/>
+        </nuxt-link>
+      </template>
+      <template #navigation>
+        <HeaderNav @setOverlay="isOverlayVisible = $event" />
+      </template>
+      <template #aside>
+        <LocaleSelector class="smartphone-only" />
+      </template>
+    </SfHeader>
+  </div>
 </template>
 
 <script>
-import { SfHeader, SfImage } from '@storefront-ui/vue';
+import { SfHeader, SfImage, SfLink, SfOverlay } from '@storefront-ui/vue';
 import { useUiState } from '~/composables';
 import { useCart, useWishlist, useUser, cartGetters } from '<%= options.generate.replace.composables %>';
 import { computed, ref } from '@vue/composition-api';
 import { onSSR } from '@vue-storefront/core';
 import { useUiHelpers } from '~/composables';
-import LocaleSelector from './LocaleSelector';
+import LocaleSelector from '../LocaleSelector';
+import HeaderNav from './HeaderNav';
 
 export default {
   components: {
     SfHeader,
     SfImage,
-    LocaleSelector
+    SfLink,
+    SfOverlay,
+    LocaleSelector,
+    HeaderNav
   },
   setup(props, { root }) {
     const { toggleCartSidebar, toggleWishlistSidebar, toggleLoginModal } = useUiState();
@@ -50,6 +55,7 @@ export default {
     const { cart, load: loadCart } = useCart();
     const { load: loadWishlist } = useWishlist();
     const term = ref(getFacetsFromURL().term);
+    const isOverlayVisible = ref(false);
 
     const cartTotalItems = computed(() => {
       const count = cartGetters.getTotalItems(cart.value);
@@ -80,7 +86,8 @@ export default {
       toggleCartSidebar,
       toggleWishlistSidebar,
       changeSearchTerm,
-      term
+      term,
+      isOverlayVisible
     };
   }
 };
@@ -91,9 +98,10 @@ export default {
   --header-padding:  var(--spacer-sm);
   @include for-desktop {
     --header-padding: 0;
+    z-index: var(--header-wrapper-z-index, 1);
   }
   &__logo-image {
-      height: 100%;
+    height: 100%;
   }
 }
 
diff --git a/packages/core/nuxt-theme-module/theme/components/header/HeaderNav.vue b/packages/core/nuxt-theme-module/theme/components/header/HeaderNav.vue
new file mode 100644
index 0000000000..269665c920
--- /dev/null
+++ b/packages/core/nuxt-theme-module/theme/components/header/HeaderNav.vue
@@ -0,0 +1,85 @@
+<template>
+  <SfHeaderNavigation>
+    <SfHeaderNavigationItem
+      v-for="(category, index) in categories"
+      :key="index"
+      :label="category.name"
+      @mouseenter="() => handleMouseEnter(category.slug)"
+      @mouseleave="() => handleMouseLeave()"
+      @click="handleMouseLeave()"
+      :link="localePath(`/c/${category.slug}`)"
+    >
+      <SfMegaMenu
+        :is-absolute="true"
+        :visible="currentCatSlug === category.slug"
+        :title="category.name"
+        @close="currentCatSlug = ''"
+        v-if="category && category.children.length"
+      >
+        <SfMegaMenuColumn
+          v-for="(subCategory, subIndex) in category.children"
+          :key="subIndex"
+          :title="subCategory.name"
+        >
+          <SfList>
+            <SfListItem
+              v-for="(subCategoryChild, childIndex) in subCategory.children"
+              :key="childIndex"
+            >
+              <SfMenuItem :label="subCategoryChild.name" :link="localePath(`/c/${subCategoryChild.slug}`)">
+                <SfLink>
+                  {{ subCategoryChild.name }}
+                </SfLink>
+              </SfMenuItem>
+            </SfListItem>
+          </SfList>
+        </SfMegaMenuColumn>
+        <NewCatBanners v-if="currentCatSlug === 'new'" />
+      </SfMegaMenu>
+    </SfHeaderNavigationItem>
+  </SfHeaderNavigation>
+</template>
+
+<script>
+import { SfMegaMenu, SfMenuItem, SfList } from '@storefront-ui/vue';
+import { useCategory } from '<%= options.generate.replace.composables %>';
+import { onSSR } from '@vue-storefront/core';
+import { ref } from '@vue/composition-api';
+
+export default {
+  name: 'HeaderNav',
+  components: {
+    SfMegaMenu,
+    SfMenuItem,
+    SfList,
+    NewCatBanners: () => import('./NewCatBanners')
+  },
+  setup (_, { emit }) {
+    const { categories, search } = useCategory('menu-categories');
+    const currentCatSlug = ref('');
+
+    const handleMouseEnter = (slug) => {
+      if (currentCatSlug.value) return;
+
+      emit('setOverlay', true);
+      currentCatSlug.value = slug;
+    };
+
+    const handleMouseLeave = () => {
+      emit('setOverlay', false);
+      currentCatSlug.value = '';
+    };
+
+    onSSR(async () => {
+      await search({});
+    });
+
+    return {
+      categories,
+      currentCatSlug,
+      handleMouseEnter,
+      handleMouseLeave
+    };
+  }
+};
+</script>
diff --git a/packages/core/nuxt-theme-module/theme/components/header/NewCatBanners.vue b/packages/core/nuxt-theme-module/theme/components/header/NewCatBanners.vue
new file mode 100644
index 0000000000..44a236eb1c
--- /dev/null
+++ b/packages/core/nuxt-theme-module/theme/components/header/NewCatBanners.vue
@@ -0,0 +1,75 @@
+<template>
+  <SfMegaMenuColumn
+    title="Featured"
+    class="sf-mega-menu-column--pined-content-on-mobile sf-mega-menu-column--hide-header-on-mobile sb-mega-menu__featured"
+  >
+    <div class="sb-mega-menu__banners">
+      <SfBanner
+        v-for="(banner, key) in banners"
+        :key="key"
+        :title="banner.title"
+        :subtitle="banner.subtitle"
+        :image="banner.pictures"
+        class="sb-mega-menu__banner"
+      />
+    </div>
+  </SfMegaMenuColumn>
+</template>
+
+<script>
+import { SfBanner } from '@storefront-ui/vue';
+
+export default {
+  name: 'NewCatBanners',
+  components: {
+    SfBanner
+  },
+  data() {
+    return {
+      banners: [
+        {
+          title: 'THE OFFICE LIFE',
+          subtitle: 'T-shirts',
+          pictures: {
+            mobile: '/megamenu/bannerA.webp',
+            desktop: '/megamenu/bannerA.webp'
+          }
+        },
+        {
+          title: 'ECO SANDALS',
+          subtitle: 'T-shirts',
+          pictures: {
+            mobile: '/megamenu/bannerB.webp',
+            desktop: '/megamenu/bannerB.webp'
+          }
+        }
+      ]
+    };
+  }
+};
+</script>
+
+<style scoped lang='scss'>
+.sb-mega-menu {
+  &__featured {
+    flex: 0 0 43.125rem;
+  }
+  &__banners {
+    display: flex;
+    flex-direction: column;
+    padding: var(--spacer-base);
+    @include for-desktop {
+      flex-direction: row;
+      padding: 0;
+    }
+  }
+  &__banner{
+    &:first-child{
+      margin: 0 0 var(--spacer-sm) 0;
+      @include for-desktop {
+        margin: 0 var(--spacer-sm) 0 0;
+      }
+    }
+  }
+}
+</style>
diff --git a/packages/core/nuxt-theme-module/theme/layouts/account.vue b/packages/core/nuxt-theme-module/theme/layouts/account.vue
index 8e2755e7ad..052251f4b6 100644
--- a/packages/core/nuxt-theme-module/theme/layouts/account.vue
+++ b/packages/core/nuxt-theme-module/theme/layouts/account.vue
@@ -12,7 +12,7 @@
 </template>
 
 <script>
-import AppHeader from '~/components/AppHeader.vue';
+import AppHeader from '~/components/header/AppHeader.vue';
 import BottomNavigation from '~/components/BottomNavigation.vue';
 import TopBar from '~/components/TopBar.vue';
 import CartSidebar from '~/components/CartSidebar.vue';
diff --git a/packages/core/nuxt-theme-module/theme/layouts/default.vue b/packages/core/nuxt-theme-module/theme/layouts/default.vue
index 0c352a57f6..f08a138965 100644
--- a/packages/core/nuxt-theme-module/theme/layouts/default.vue
+++ b/packages/core/nuxt-theme-module/theme/layouts/default.vue
@@ -4,11 +4,11 @@
       <TopBar class="desktop-only" />
     </LazyHydrate>
 
-    <div id="layout">
-      <LazyHydrate when-idle>
-        <AppHeader />
-      </LazyHydrate>
+    <LazyHydrate when-idle>
+      <AppHeader />
+    </LazyHydrate>
 
+    <div id="layout">
       <nuxt :key="$route.fullPath"/>
 
       <LazyHydrate when-visible>
@@ -27,7 +27,7 @@
 </template>
 
 <script>
-import AppHeader from '~/components/AppHeader.vue';
+import AppHeader from '~/components/header/AppHeader.vue';
 import BottomNavigation from '~/components/BottomNavigation.vue';
 import AppFooter from '~/components/AppFooter.vue';
 import TopBar from '~/components/TopBar.vue';