diff --git a/src/modules/Workspaces/WorkspacesEditor/OverlayWindow.xaml.cs b/src/modules/Workspaces/WorkspacesEditor/OverlayWindow.xaml.cs
index 54e892d9bd..d1646e7282 100644
--- a/src/modules/Workspaces/WorkspacesEditor/OverlayWindow.xaml.cs
+++ b/src/modules/Workspaces/WorkspacesEditor/OverlayWindow.xaml.cs
@@ -2,8 +2,11 @@
 // The Microsoft Corporation licenses this file to you under the MIT license.
 // See the LICENSE file in the project root for more information.
 
+using System;
 using System.Windows;
 
+using WorkspacesEditor.Utils;
+
 namespace WorkspacesEditor
 {
     /// <summary>
@@ -11,9 +14,40 @@ namespace WorkspacesEditor
     /// </summary>
     public partial class OverlayWindow : Window
     {
+        private int _targetX;
+        private int _targetY;
+        private int _targetWidth;
+        private int _targetHeight;
+
         public OverlayWindow()
         {
             InitializeComponent();
+            SourceInitialized += OnWindowSourceInitialized;
+        }
+
+        /// <summary>
+        /// Sets the target bounds for the overlay window.
+        /// The window will be positioned using DPI-unaware context after initialization.
+        /// </summary>
+        public void SetTargetBounds(int x, int y, int width, int height)
+        {
+            _targetX = x;
+            _targetY = y;
+            _targetWidth = width;
+            _targetHeight = height;
+
+            // Set initial WPF properties (will be corrected after HWND creation)
+            Left = x;
+            Top = y;
+            Width = width;
+            Height = height;
+        }
+
+        private void OnWindowSourceInitialized(object sender, EventArgs e)
+        {
+            // Reposition window using DPI-unaware context to match the virtual coordinates.
+            // This fixes overlay positioning on mixed-DPI multi-monitor setups.
+            NativeMethods.SetWindowPositionDpiUnaware(this, _targetX, _targetY, _targetWidth, _targetHeight);
         }
     }
 }
diff --git a/src/modules/Workspaces/WorkspacesEditor/Utils/NativeMethods.cs b/src/modules/Workspaces/WorkspacesEditor/Utils/NativeMethods.cs
index 4105cbe959..9687aeac63 100644
--- a/src/modules/Workspaces/WorkspacesEditor/Utils/NativeMethods.cs
+++ b/src/modules/Workspaces/WorkspacesEditor/Utils/NativeMethods.cs
@@ -4,6 +4,8 @@
 
 using System;
 using System.Runtime.InteropServices;
+using System.Windows;
+using System.Windows.Interop;
 
 namespace WorkspacesEditor.Utils
 {
@@ -17,6 +19,39 @@ namespace WorkspacesEditor.Utils
         [return: MarshalAs(UnmanagedType.Bool)]
         public static extern bool MoveWindow(IntPtr hWnd, int X, int Y, int nWidth, int nHeight, bool bRepaint);
 
+        [DllImport("user32.dll", SetLastError = true)]
+        private static extern bool SetWindowPos(IntPtr hWnd, IntPtr hWndInsertAfter, int X, int Y, int cx, int cy, uint uFlags);
+
+        [DllImport("user32.dll")]
+        private static extern IntPtr SetThreadDpiAwarenessContext(IntPtr dpiContext);
+
+        private const uint SWP_NOZORDER = 0x0004;
+        private const uint SWP_NOACTIVATE = 0x0010;
+
+        private static readonly IntPtr DPI_AWARENESS_CONTEXT_UNAWARE = new IntPtr(-1);
+
+        /// <summary>
+        /// Positions a WPF window using DPI-unaware context to match the virtual coordinates.
+        /// This fixes overlay positioning on mixed-DPI multi-monitor setups.
+        /// </summary>
+        public static void SetWindowPositionDpiUnaware(Window window, int x, int y, int width, int height)
+        {
+            var helper = new WindowInteropHelper(window).Handle;
+            if (helper != IntPtr.Zero)
+            {
+                // Temporarily switch to DPI-unaware context to position window.
+                IntPtr oldContext = SetThreadDpiAwarenessContext(DPI_AWARENESS_CONTEXT_UNAWARE);
+                try
+                {
+                    SetWindowPos(helper, IntPtr.Zero, x, y, width, height, SWP_NOZORDER | SWP_NOACTIVATE);
+                }
+                finally
+                {
+                    SetThreadDpiAwarenessContext(oldContext);
+                }
+            }
+        }
+
         [DllImport("USER32.DLL")]
         public static extern bool SetForegroundWindow(IntPtr hWnd);
 
diff --git a/src/modules/Workspaces/WorkspacesEditor/ViewModels/MainViewModel.cs b/src/modules/Workspaces/WorkspacesEditor/ViewModels/MainViewModel.cs
index 9c76c26fa0..5741fd65ab 100644
--- a/src/modules/Workspaces/WorkspacesEditor/ViewModels/MainViewModel.cs
+++ b/src/modules/Workspaces/WorkspacesEditor/ViewModels/MainViewModel.cs
@@ -495,10 +495,10 @@ namespace WorkspacesEditor.ViewModels
             {
                 var bounds = screen.Bounds;
                 OverlayWindow overlayWindow = new OverlayWindow();
-                overlayWindow.Top = bounds.Top;
-                overlayWindow.Left = bounds.Left;
-                overlayWindow.Width = bounds.Width;
-                overlayWindow.Height = bounds.Height;
+
+                // Use DPI-unaware positioning to fix overlay on mixed-DPI multi-monitor setups
+                overlayWindow.SetTargetBounds(bounds.Left, bounds.Top, bounds.Width, bounds.Height);
+
                 overlayWindow.ShowActivated = true;
                 overlayWindow.Topmost = true;
                 overlayWindow.Show();