diff --git a/src/server/event.rs b/src/server/event.rs
index 1ad6038..abd74f1 100644
--- a/src/server/event.rs
+++ b/src/server/event.rs
@@ -464,6 +464,7 @@ impl HandleEvent for Pointer {
                 };
 
                 self.scale = surface_data.scale_factor;
+                let surface_is_popup = matches!(surface_data.role, Some(SurfaceRole::Popup(_)));
                 let mut do_enter = || {
                     debug!("pointer entering {} ({serial})", surface_data.server.id());
                     self.server.enter(
@@ -474,10 +475,12 @@ impl HandleEvent for Pointer {
                     );
                     let window = surface_data.window.unwrap();
                     state.connection.as_mut().unwrap().raise_to_top(window);
-                    state.last_hovered = Some(window);
+                    if !surface_is_popup {
+                        state.last_hovered = Some(window);
+                    }
                 };
 
-                if matches!(surface_data.role, Some(SurfaceRole::Popup(_))) {
+                if surface_is_popup {
                     match self.pending_enter.0.take() {
                         Some(e) => {
                             let client::wl_pointer::Event::Enter {
diff --git a/src/server/mod.rs b/src/server/mod.rs
index 0d00346..5c14c75 100644
--- a/src/server/mod.rs
+++ b/src/server/mod.rs
@@ -1202,8 +1202,8 @@ impl<C: XConnection> ServerState<C> {
 
             initial_scale = parent_surface.scale_factor;
             debug!(
-                "creating popup ({:?}) {:?} {:?} {:?} {surface_key:?} (scale: {initial_scale})",
-                window.window, parent, window.attrs.dims, surface_id
+                "creating popup ({:?}) {:?} {:?} {:?} {:?} {surface_key:?} (scale: {initial_scale})",
+                window.window, parent, window.attrs.dims, surface_id, xdg_surface.id()
             );
 
             let positioner = self.xdg_wm_base.create_positioner(&self.qh, ());
diff --git a/src/server/tests.rs b/src/server/tests.rs
index 22887a2..baa68f6 100644
--- a/src/server/tests.rs
+++ b/src/server/tests.rs
@@ -703,6 +703,7 @@ impl TestFixture {
         (surface, id)
     }
 
+    #[track_caller]
     fn create_popup(
         &mut self,
         comp: &Compositor,
@@ -746,13 +747,13 @@ impl TestFixture {
                 surface_data.role
             );
 
-            let toplevel_xdg = &self
+            let parent_xdg = &self
                 .testwl
                 .get_surface_data(parent_surface)
                 .unwrap()
                 .xdg()
                 .surface;
-            assert_eq!(&surface_data.popup().parent, toplevel_xdg);
+            assert_eq!(surface_data.popup().parent.id(), parent_xdg.id());
 
             let pos = &surface_data.popup().positioner_state;
             if check_size_and_pos {
@@ -2146,6 +2147,43 @@ fn toplevel_size_limits_scaled() {
     assert_eq!(toplevel.max_size, Some(testwl::Vec2 { x: 100, y: 100 }));
 }
 
+#[test]
+fn subpopup_positioning() {
+    let (mut f, comp) = TestFixture::new_with_compositor();
+    TestObject::<WlPointer>::from_request(&comp.seat.obj, wl_seat::Request::GetPointer {});
+    let win_toplevel = unsafe { Window::new(1) };
+    let (_, id_toplevel) = f.create_toplevel(&comp, win_toplevel);
+
+    f.testwl.move_pointer_to(id_toplevel, 0.0, 0.0);
+    f.run();
+
+    let win_popup = unsafe { Window::new(2) };
+    let (_, id_popup) = f.create_popup(
+        &comp,
+        PopupBuilder::new(win_popup, win_toplevel, id_toplevel)
+            .x(25)
+            .y(25),
+    );
+
+    f.testwl.move_pointer_to(id_popup, 1.0, 1.0);
+    f.run();
+
+    println!("{:?}", f.satellite.last_hovered);
+
+    let win_subpopup = unsafe { Window::new(3) };
+
+    f.create_popup(
+        &comp,
+        PopupBuilder::new(win_subpopup, win_toplevel, id_toplevel)
+            .x(50)
+            .y(50),
+    );
+
+    let dims = f.connection().window(win_subpopup).dims;
+    assert_eq!(dims.x, 50);
+    assert_eq!(dims.y, 50);
+}
+
 /// See Pointer::handle_event for an explanation.
 #[test]
 fn popup_pointer_motion_workaround() {}