diff --git a/CHANGELOG.md b/CHANGELOG.md
index a941333fae..5928a9e0cc 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -27,6 +27,7 @@ This project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.htm
 - Fix bidirectional `FocusZone` to land focus correctly on DOWN key press after series of UP arrow keys @sophieH29 ([#1794](https://github.com/stardust-ui/react/pull/1794))
 - Fix `hand` icon in Teams theme @lucivpav ([#1782](https://github.com/stardust-ui/react/pull/1782))
 - Use `target` from `Provider` in `ReactDOM.createPortal()` calls @layershifter ([#1810](https://github.com/stardust-ui/react/pull/1810))
+- ESC key should close the last opened `Popup` or `Dialog` if body has focus @sophieH29 ([#1807](https://github.com/stardust-ui/react/pull/1807))
 
 ### Features
 - Add `overwrite` prop to `Provider` @layershifter ([#1780](https://github.com/stardust-ui/react/pull/1780))
diff --git a/e2e/tests/dialogInDialog-test.ts b/e2e/tests/dialogInDialog-test.ts
index 6f9ae05b22..a47a55bd43 100644
--- a/e2e/tests/dialogInDialog-test.ts
+++ b/e2e/tests/dialogInDialog-test.ts
@@ -59,4 +59,31 @@ describe('Dialog in Dialog', () => {
     expect(await e2e.exists(outerHeader)).toBe(false)
     expect(await e2e.exists(innerHeader)).toBe(false)
   })
+
+  it('A click on content and pressing ESC button should close the last opened dialog', async () => {
+    await e2e.clickOn(outerTrigger) // opens dialog
+    expect(await e2e.exists(outerHeader)).toBe(true)
+
+    await e2e.clickOn(innerTrigger) // opens nested dialog
+    expect(await e2e.exists(innerHeader)).toBe(true)
+
+    await e2e.clickOn(innerHeader)
+
+    // check that focus moved to body after clicking on Dialog content
+    expect(await e2e.isFocused('body')).toBe(true)
+
+    // press ESC and check if nested dialog is closed and focus is on nested trigger
+    await e2e.pressKey('Escape')
+    expect(await e2e.exists(innerHeader)).toBe(false)
+    expect(await e2e.isFocused(innerTrigger)).toBe(true)
+
+    // click on dialog content to move focus to body
+    await e2e.clickOn(outerHeader)
+    expect(await e2e.isFocused('body')).toBe(true)
+
+    // press ESC again and check if the last dialog is closed and focus is on trigger
+    await e2e.pressKey('Escape')
+    expect(await e2e.exists(outerHeader)).toBe(false)
+    expect(await e2e.isFocused(outerTrigger)).toBe(true)
+  })
 })
diff --git a/e2e/tests/dialogInPopup-example.tsx b/e2e/tests/dialogInPopup-example.tsx
index 9426385c98..61b79348c5 100644
--- a/e2e/tests/dialogInPopup-example.tsx
+++ b/e2e/tests/dialogInPopup-example.tsx
@@ -6,18 +6,21 @@ export const selectors = {
   dialogHeader: Dialog.slotClassNames.header,
   dialogOverlay: Dialog.slotClassNames.overlay,
   dialogTrigger: 'dialog-trigger',
-  popupContent: Popup.Content.className,
+  popupContent: 'popup-content',
   popupTrigger: 'popup-trigger',
 }
 
 const DialogInPopupExample = () => (
   <Popup
     content={
-      <Dialog
-        cancelButton={{ content: 'Close', id: selectors.dialogCancel }}
-        header="A dialog"
-        trigger={<Button id={selectors.dialogTrigger} content="Open a dialog" />}
-      />
+      <>
+        <div id={selectors.popupContent}>Popup content</div>
+        <Dialog
+          cancelButton={{ content: 'Close', id: selectors.dialogCancel }}
+          header="A dialog"
+          trigger={<Button id={selectors.dialogTrigger} content="Open a dialog" />}
+        />
+      </>
     }
     trigger={<Button id={selectors.popupTrigger} content="Open a popup" />}
   />
diff --git a/e2e/tests/dialogInPopup-test.ts b/e2e/tests/dialogInPopup-test.ts
index ba87eaa0aa..4d91f8f4a3 100644
--- a/e2e/tests/dialogInPopup-test.ts
+++ b/e2e/tests/dialogInPopup-test.ts
@@ -4,7 +4,7 @@ const dialogCancel = `#${selectors.dialogCancel}`
 const dialogHeader = `.${selectors.dialogHeader}`
 const dialogOverlay = `.${selectors.dialogOverlay}`
 const dialogTrigger = `#${selectors.dialogTrigger}`
-const popupContent = `.${selectors.popupContent}`
+const popupContent = `#${selectors.popupContent}`
 const popupTrigger = `#${selectors.popupTrigger}`
 
 // https://github.com/stardust-ui/react/issues/1674
@@ -48,4 +48,31 @@ describe('Dialog in Popup', () => {
     expect(await e2e.exists(popupContent)).toBe(true)
     expect(await e2e.exists(dialogHeader)).toBe(false)
   })
+
+  it('A click on content and pressing ESC button should close the first opened dialog', async () => {
+    await e2e.clickOn(popupTrigger) // opens popup
+    await e2e.clickOn(dialogTrigger) // opens dialog
+
+    expect(await e2e.exists(popupContent)).toBe(true)
+    expect(await e2e.exists(dialogHeader)).toBe(true)
+
+    await e2e.clickOn(dialogHeader)
+
+    // check that focus moved to body after clicking on Dialog content
+    expect(await e2e.isFocused('body')).toBe(true)
+
+    // press ESC and check if nested popup is closed and focus is on nested trigger
+    await e2e.pressKey('Escape')
+    expect(await e2e.exists(dialogHeader)).toBe(false)
+    expect(await e2e.isFocused(dialogTrigger)).toBe(true)
+
+    // click on popup content to move focus to body
+    await e2e.clickOn(popupContent)
+    expect(await e2e.isFocused('body')).toBe(true)
+
+    // press ESC again and check if the last popup is closed and focus is on trigger
+    await e2e.pressKey('Escape')
+    expect(await e2e.exists(popupContent)).toBe(false)
+    expect(await e2e.isFocused(popupTrigger)).toBe(true)
+  })
 })
diff --git a/e2e/tests/popupInPopup-example.tsx b/e2e/tests/popupInPopup-example.tsx
new file mode 100644
index 0000000000..9c22e5cff0
--- /dev/null
+++ b/e2e/tests/popupInPopup-example.tsx
@@ -0,0 +1,26 @@
+import * as React from 'react'
+import { Button, Popup } from '@stardust-ui/react'
+
+export const selectors = {
+  popupContentId: 'popup-content-id',
+  popupTriggerId: 'popup-trigger-id',
+  popupContentNestedId: 'popup-content-nested-id',
+  popupTriggerNestedId: 'popup-trigger-nested-id',
+}
+
+const PopupInPopupExample = () => (
+  <Popup
+    content={
+      <>
+        <div id={selectors.popupContentId}>content</div>
+        <Popup
+          content={<div id={selectors.popupContentNestedId}>nested content</div>}
+          trigger={<Button id={selectors.popupTriggerNestedId} content="Open a nested popup" />}
+        />
+      </>
+    }
+    trigger={<Button id={selectors.popupTriggerId} content="Open a popup" />}
+  />
+)
+
+export default PopupInPopupExample
diff --git a/e2e/tests/popupInPopup-test.ts b/e2e/tests/popupInPopup-test.ts
new file mode 100644
index 0000000000..46fe3ec818
--- /dev/null
+++ b/e2e/tests/popupInPopup-test.ts
@@ -0,0 +1,39 @@
+import { selectors } from './popupInPopup-example'
+
+const popupTrigger = `#${selectors.popupTriggerId}`
+const popupContent = `#${selectors.popupContentId}`
+const popupTriggerNested = `#${selectors.popupTriggerNestedId}`
+const popupContentNested = `#${selectors.popupContentNestedId}`
+
+describe('Popup in Popup', () => {
+  beforeEach(async () => {
+    await e2e.gotoTestCase(__filename, popupTrigger)
+  })
+
+  it('A click on content and pressing ESC button should close the last opened popup', async () => {
+    await e2e.clickOn(popupTrigger) // opens popup
+    expect(await e2e.exists(popupContent)).toBe(true)
+
+    await e2e.clickOn(popupTriggerNested) // opens nested popup
+    expect(await e2e.exists(popupContentNested)).toBe(true)
+
+    await e2e.clickOn(popupContentNested)
+
+    // check that focus moved to body after clicking on Popup content
+    expect(await e2e.isFocused('body')).toBe(true)
+
+    // press ESC and check if nested popup is closed and focus is on nested trigger
+    await e2e.pressKey('Escape')
+    expect(await e2e.exists(popupContentNested)).toBe(false)
+    expect(await e2e.isFocused(popupTriggerNested)).toBe(true)
+
+    // click on popup content to move focus to body
+    await e2e.clickOn(popupContent)
+    expect(await e2e.isFocused('body')).toBe(true)
+
+    // press ESC again and check if the last popup is closed and focus is on trigger
+    await e2e.pressKey('Escape')
+    expect(await e2e.exists(popupContent)).toBe(false)
+    expect(await e2e.isFocused(popupTrigger)).toBe(true)
+  })
+})
diff --git a/packages/react/src/components/Dialog/Dialog.tsx b/packages/react/src/components/Dialog/Dialog.tsx
index 9710081dc5..ab4656d3d1 100644
--- a/packages/react/src/components/Dialog/Dialog.tsx
+++ b/packages/react/src/components/Dialog/Dialog.tsx
@@ -5,6 +5,7 @@ import * as customPropTypes from '@stardust-ui/react-proptypes'
 import * as _ from 'lodash'
 import * as PropTypes from 'prop-types'
 import * as React from 'react'
+import * as keyboardKey from 'keyboard-key'
 
 import {
   UIComponentProps,
@@ -203,6 +204,19 @@ class Dialog extends AutoControlledComponent<WithAsProp<DialogProps>, DialogStat
     }
   }
 
+  handleDocumentKeydown = (getRefs: Function) => (e: KeyboardEvent) => {
+    // if focus was lost from Dialog, for e.g. when click on Dialog's content
+    // and ESC is pressed, the opened Dialog should get closed and the trigger should get focus
+    const lastOverlayRef = getRefs().pop()
+    const isLastOpenedDialog: boolean =
+      lastOverlayRef && lastOverlayRef.current === this.overlayRef.current
+
+    if (keyboardKey.getCode(e) === keyboardKey.Escape && isLastOpenedDialog) {
+      this.handleDialogCancel(e)
+      _.invoke(this.triggerRef, 'current.focus')
+    }
+  }
+
   renderComponent({ accessibility, classes, ElementType, styles, unhandledProps }) {
     const {
       actions,
@@ -312,6 +326,12 @@ class Dialog extends AutoControlledComponent<WithAsProp<DialogProps>, DialogStat
                 type="click"
                 capture
               />
+              <EventListener
+                listener={this.handleDocumentKeydown(getRefs)}
+                targetRef={targetRef}
+                type="keydown"
+                capture
+              />
             </>
           )}
         </Unstable_NestingAuto>
diff --git a/packages/react/src/components/Popup/Popup.tsx b/packages/react/src/components/Popup/Popup.tsx
index 4bd46e78c6..5c0d2e27f9 100644
--- a/packages/react/src/components/Popup/Popup.tsx
+++ b/packages/react/src/components/Popup/Popup.tsx
@@ -267,6 +267,17 @@ export default class Popup extends AutoControlledComponent<PopupProps, PopupStat
     if (isMatchingKey && this.isOutsidePopupElementAndOutsideTriggerElement(getRefs(), e)) {
       this.trySetOpen(false, e)
     }
+
+    // if focus was lost from Popup and moved to body, for e.g. when click on popup content
+    // and ESC is pressed, the last opened Popup should get closed and the trigger should get focus
+    const lastContentRef = getRefs().pop()
+    const isLastOpenedPopup: boolean =
+      lastContentRef && lastContentRef.current === this.popupDomElement
+    const bodyHasFocus: boolean = document.activeElement === document.body
+
+    if (keyCode === keyboardKey.Escape && bodyHasFocus && isLastOpenedPopup) {
+      this.close(e, () => _.invoke(this.triggerFocusableDomElement, 'focus'))
+    }
   }
 
   isOutsidePopupElementAndOutsideTriggerElement(refs: NodeRef[], e) {