diff --git a/packages/tui/CHANGELOG.md b/packages/tui/CHANGELOG.md
index edd62bb4..157864ef 100644
--- a/packages/tui/CHANGELOG.md
+++ b/packages/tui/CHANGELOG.md
@@ -6,10 +6,13 @@
 
 - `SettingsListOptions` with `enableSearch` for fuzzy filtering in `SettingsList` ([#643](https://github.com/badlogic/pi-mono/pull/643) by [@ninlds](https://github.com/ninlds))
 - `pageUp` and `pageDown` key support with `selectPageUp`/`selectPageDown` editor actions ([#662](https://github.com/badlogic/pi-mono/pull/662) by [@aliou](https://github.com/aliou))
+- `OverlayOptions` API for overlay positioning and sizing: `width`, `widthPercent`, `minWidth`, `maxHeight`, `maxHeightPercent`, `anchor`, `offsetX`, `offsetY`, `rowPercent`, `colPercent`, `row`, `col`, `margin`
+- New exported types: `OverlayAnchor`, `OverlayMargin`, `OverlayOptions`
 
 ### Fixed
 
 - Numbered list items showing "1." for all items when code blocks break list continuity ([#660](https://github.com/badlogic/pi-mono/pull/660) by [@ogulcancelik](https://github.com/ogulcancelik))
+- Overlay compositing crash when rendered lines exceed terminal width due to complex ANSI/OSC sequences (e.g., hyperlinks in subagent output)
 
 ## [0.43.0] - 2026-01-11
 
diff --git a/packages/tui/README.md b/packages/tui/README.md
index 4f14a2fb..41e35883 100644
--- a/packages/tui/README.md
+++ b/packages/tui/README.md
@@ -56,6 +56,56 @@ tui.requestRender(); // Request a re-render
 tui.onDebug = () => console.log("Debug triggered");
 ```
 
+### Overlays
+
+Overlays render components on top of existing content without replacing it. Useful for dialogs, menus, and modal UI.
+
+```typescript
+// Show overlay with default options (centered, max 80 cols)
+tui.showOverlay(component);
+
+// Show overlay with custom positioning and sizing
+tui.showOverlay(component, {
+  // Sizing
+  width: 60,              // Fixed width in columns
+  widthPercent: 80,       // Width as percentage of terminal (0-100)
+  minWidth: 40,           // Minimum width floor
+  maxHeight: 20,          // Maximum height in rows
+  maxHeightPercent: 50,   // Maximum height as percentage of terminal
+
+  // Anchor-based positioning (default: 'center')
+  anchor: 'bottom-right', // Position relative to anchor point
+  offsetX: 2,             // Horizontal offset from anchor
+  offsetY: -1,            // Vertical offset from anchor
+
+  // Percentage-based positioning (alternative to anchor)
+  rowPercent: 25,         // Vertical position (0=top, 100=bottom)
+  colPercent: 50,         // Horizontal position (0=left, 100=right)
+
+  // Absolute positioning (overrides anchor/percent)
+  row: 5,                 // Exact row position
+  col: 10,                // Exact column position
+
+  // Margin from terminal edges
+  margin: 2,              // All sides
+  margin: { top: 1, right: 2, bottom: 1, left: 2 }
+});
+
+// Hide topmost overlay
+tui.hideOverlay();
+
+// Check if any overlay is active
+tui.hasOverlay();
+```
+
+**Anchor values**: `'center'`, `'top-left'`, `'top-right'`, `'bottom-left'`, `'bottom-right'`, `'top-center'`, `'bottom-center'`, `'left-center'`, `'right-center'`
+
+**Resolution order**:
+1. `width` takes precedence over `widthPercent`
+2. `minWidth` is applied as a floor after width calculation
+3. For position: `row`/`col` > `rowPercent`/`colPercent` > `anchor`
+4. `margin` clamps final position to stay within terminal bounds
+
 ### Component Interface
 
 All components implement:
diff --git a/packages/tui/src/index.ts b/packages/tui/src/index.ts
index b1b3cdff..ba158353 100644
--- a/packages/tui/src/index.ts
+++ b/packages/tui/src/index.ts
@@ -72,6 +72,13 @@ export {
 	setCellDimensions,
 	type TerminalCapabilities,
 } from "./terminal-image.js";
-export { type Component, Container, TUI } from "./tui.js";
+export {
+	type Component,
+	Container,
+	type OverlayAnchor,
+	type OverlayMargin,
+	type OverlayOptions,
+	TUI,
+} from "./tui.js";
 // Utilities
 export { truncateToWidth, visibleWidth, wrapTextWithAnsi } from "./utils.js";
diff --git a/packages/tui/src/tui.ts b/packages/tui/src/tui.ts
index 648b0ff4..c9e42f4f 100644
--- a/packages/tui/src/tui.ts
+++ b/packages/tui/src/tui.ts
@@ -41,6 +41,73 @@ export interface Component {
 
 export { visibleWidth };
 
+/**
+ * Anchor position for overlays
+ */
+export type OverlayAnchor =
+	| "center"
+	| "top-left"
+	| "top-right"
+	| "bottom-left"
+	| "bottom-right"
+	| "top-center"
+	| "bottom-center"
+	| "left-center"
+	| "right-center";
+
+/**
+ * Margin configuration for overlays
+ */
+export interface OverlayMargin {
+	top?: number;
+	right?: number;
+	bottom?: number;
+	left?: number;
+}
+
+/**
+ * Options for overlay positioning and sizing
+ */
+export interface OverlayOptions {
+	// === Sizing (absolute) ===
+	/** Fixed width in columns */
+	width?: number;
+	/** Minimum width in columns */
+	minWidth?: number;
+	/** Maximum height in rows */
+	maxHeight?: number;
+
+	// === Sizing (relative to terminal) ===
+	/** Width as percentage of terminal width (0-100) */
+	widthPercent?: number;
+	/** Maximum height as percentage of terminal height (0-100) */
+	maxHeightPercent?: number;
+
+	// === Positioning - anchor-based ===
+	/** Anchor point for positioning (default: 'center') */
+	anchor?: OverlayAnchor;
+	/** Horizontal offset from anchor position (positive = right) */
+	offsetX?: number;
+	/** Vertical offset from anchor position (positive = down) */
+	offsetY?: number;
+
+	// === Positioning - percentage-based (alternative to anchor) ===
+	/** Vertical position as percentage (0 = top, 100 = bottom) */
+	rowPercent?: number;
+	/** Horizontal position as percentage (0 = left, 100 = right) */
+	colPercent?: number;
+
+	// === Positioning - absolute (low-level) ===
+	/** Absolute row position (overrides anchor/percent) */
+	row?: number;
+	/** Absolute column position (overrides anchor/percent) */
+	col?: number;
+
+	// === Margin from terminal edges ===
+	/** Margin from terminal edges. Number applies to all sides. */
+	margin?: OverlayMargin | number;
+}
+
 /**
  * Container - a component that contains other components
  */
@@ -96,7 +163,7 @@ export class TUI extends Container {
 	// Overlay stack for modal components rendered on top of base content
 	private overlayStack: {
 		component: Component;
-		options?: { row?: number; col?: number; width?: number };
+		options?: OverlayOptions;
 		preFocus: Component | null;
 	}[] = [];
 
@@ -109,8 +176,8 @@ export class TUI extends Container {
 		this.focusedComponent = component;
 	}
 
-	/** Show an overlay component centered (or at specified position). */
-	showOverlay(component: Component, options?: { row?: number; col?: number; width?: number }): void {
+	/** Show an overlay component with configurable positioning and sizing. */
+	showOverlay(component: Component, options?: OverlayOptions): void {
 		this.overlayStack.push({ component, options, preFocus: this.focusedComponent });
 		this.setFocus(component);
 		this.terminal.hideCursor();
@@ -260,30 +327,202 @@ export class TUI extends Container {
 		return line.includes("\x1b_G") || line.includes("\x1b]1337;File=");
 	}
 
+	/**
+	 * Resolve overlay layout from options.
+	 * Returns { width, row, col, maxHeight } for rendering.
+	 */
+	private resolveOverlayLayout(
+		options: OverlayOptions | undefined,
+		overlayHeight: number,
+		termWidth: number,
+		termHeight: number,
+	): { width: number; row: number; col: number; maxHeight: number | undefined } {
+		const opt = options ?? {};
+
+		// Parse margin (clamp to non-negative)
+		const margin =
+			typeof opt.margin === "number"
+				? { top: opt.margin, right: opt.margin, bottom: opt.margin, left: opt.margin }
+				: (opt.margin ?? {});
+		const marginTop = Math.max(0, margin.top ?? 0);
+		const marginRight = Math.max(0, margin.right ?? 0);
+		const marginBottom = Math.max(0, margin.bottom ?? 0);
+		const marginLeft = Math.max(0, margin.left ?? 0);
+
+		// Available space after margins
+		const availWidth = Math.max(1, termWidth - marginLeft - marginRight);
+		const availHeight = Math.max(1, termHeight - marginTop - marginBottom);
+
+		// === Resolve width ===
+		let width: number;
+		if (opt.width !== undefined) {
+			width = opt.width;
+		} else if (opt.widthPercent !== undefined) {
+			width = Math.floor((termWidth * opt.widthPercent) / 100);
+		} else {
+			width = Math.min(80, availWidth);
+		}
+		// Apply minWidth
+		if (opt.minWidth !== undefined) {
+			width = Math.max(width, opt.minWidth);
+		}
+		// Clamp to available space
+		width = Math.max(1, Math.min(width, availWidth));
+
+		// === Resolve maxHeight ===
+		let maxHeight: number | undefined;
+		if (opt.maxHeight !== undefined) {
+			maxHeight = opt.maxHeight;
+		} else if (opt.maxHeightPercent !== undefined) {
+			maxHeight = Math.floor((termHeight * opt.maxHeightPercent) / 100);
+		}
+		// Clamp to available space
+		if (maxHeight !== undefined) {
+			maxHeight = Math.max(1, Math.min(maxHeight, availHeight));
+		}
+
+		// Effective overlay height (may be clamped by maxHeight)
+		const effectiveHeight = maxHeight !== undefined ? Math.min(overlayHeight, maxHeight) : overlayHeight;
+
+		// === Resolve position ===
+		let row: number;
+		let col: number;
+
+		// Absolute positioning takes precedence
+		if (opt.row !== undefined) {
+			row = opt.row;
+		} else if (opt.rowPercent !== undefined) {
+			// Percentage: 0 = top, 100 = bottom
+			const maxRow = Math.max(0, availHeight - effectiveHeight);
+			row = marginTop + Math.floor((maxRow * opt.rowPercent) / 100);
+		} else {
+			// Anchor-based (default: center)
+			const anchor = opt.anchor ?? "center";
+			row = this.resolveAnchorRow(anchor, effectiveHeight, availHeight, marginTop);
+		}
+
+		if (opt.col !== undefined) {
+			col = opt.col;
+		} else if (opt.colPercent !== undefined) {
+			// Percentage: 0 = left, 100 = right
+			const maxCol = Math.max(0, availWidth - width);
+			col = marginLeft + Math.floor((maxCol * opt.colPercent) / 100);
+		} else {
+			// Anchor-based (default: center)
+			const anchor = opt.anchor ?? "center";
+			col = this.resolveAnchorCol(anchor, width, availWidth, marginLeft);
+		}
+
+		// Apply offsets
+		if (opt.offsetY !== undefined) row += opt.offsetY;
+		if (opt.offsetX !== undefined) col += opt.offsetX;
+
+		// Clamp to terminal bounds (respecting margins)
+		row = Math.max(marginTop, Math.min(row, termHeight - marginBottom - effectiveHeight));
+		col = Math.max(marginLeft, Math.min(col, termWidth - marginRight - width));
+
+		return { width, row, col, maxHeight };
+	}
+
+	private resolveAnchorRow(anchor: OverlayAnchor, height: number, availHeight: number, marginTop: number): number {
+		switch (anchor) {
+			case "top-left":
+			case "top-center":
+			case "top-right":
+				return marginTop;
+			case "bottom-left":
+			case "bottom-center":
+			case "bottom-right":
+				return marginTop + availHeight - height;
+			case "left-center":
+			case "center":
+			case "right-center":
+				return marginTop + Math.floor((availHeight - height) / 2);
+		}
+	}
+
+	private resolveAnchorCol(anchor: OverlayAnchor, width: number, availWidth: number, marginLeft: number): number {
+		switch (anchor) {
+			case "top-left":
+			case "left-center":
+			case "bottom-left":
+				return marginLeft;
+			case "top-right":
+			case "right-center":
+			case "bottom-right":
+				return marginLeft + availWidth - width;
+			case "top-center":
+			case "center":
+			case "bottom-center":
+				return marginLeft + Math.floor((availWidth - width) / 2);
+		}
+	}
+
 	/** Composite all overlays into content lines (in stack order, later = on top). */
 	private compositeOverlays(lines: string[], termWidth: number, termHeight: number): string[] {
 		if (this.overlayStack.length === 0) return lines;
 		const result = [...lines];
-		const viewportStart = Math.max(0, result.length - termHeight);
+
+		// Pre-render all overlays and calculate positions
+		const rendered: { overlayLines: string[]; row: number; col: number; w: number }[] = [];
+		let minLinesNeeded = result.length;
 
 		for (const { component, options } of this.overlayStack) {
-			const w =
-				options?.width !== undefined
-					? Math.max(1, Math.min(options.width, termWidth - 4))
-					: Math.max(1, Math.min(80, termWidth - 4));
-			const overlayLines = component.render(w);
-			const h = overlayLines.length;
+			// Get layout with height=0 first to determine width and maxHeight
+			// (width and maxHeight don't depend on overlay height)
+			const { width, maxHeight } = this.resolveOverlayLayout(options, 0, termWidth, termHeight);
 
-			const row = Math.max(0, Math.min(options?.row ?? Math.floor((termHeight - h) / 2), termHeight - h));
-			const col = Math.max(0, Math.min(options?.col ?? Math.floor((termWidth - w) / 2), termWidth - w));
+			// Render component at calculated width
+			let overlayLines = component.render(width);
 
-			for (let i = 0; i < h; i++) {
+			// Apply maxHeight if specified
+			if (maxHeight !== undefined && overlayLines.length > maxHeight) {
+				overlayLines = overlayLines.slice(0, maxHeight);
+			}
+
+			// Get final row/col with actual overlay height
+			const { row, col } = this.resolveOverlayLayout(options, overlayLines.length, termWidth, termHeight);
+
+			rendered.push({ overlayLines, row, col, w: width });
+			minLinesNeeded = Math.max(minLinesNeeded, row + overlayLines.length);
+		}
+
+		// Extend result with empty lines if content is too short for overlay placement
+		while (result.length < minLinesNeeded) {
+			result.push("");
+		}
+
+		const viewportStart = Math.max(0, result.length - termHeight);
+
+		// Track which lines were modified for final verification
+		const modifiedLines = new Set<number>();
+
+		// Composite each overlay
+		for (const { overlayLines, row, col, w } of rendered) {
+			for (let i = 0; i < overlayLines.length; i++) {
 				const idx = viewportStart + row + i;
 				if (idx >= 0 && idx < result.length) {
-					result[idx] = this.compositeLineAt(result[idx], overlayLines[i], col, w, termWidth);
+					// Defensive: truncate overlay line to declared width before compositing
+					// (components should already respect width, but this ensures it)
+					const truncatedOverlayLine =
+						visibleWidth(overlayLines[i]) > w ? sliceByColumn(overlayLines[i], 0, w, true) : overlayLines[i];
+					result[idx] = this.compositeLineAt(result[idx], truncatedOverlayLine, col, w, termWidth);
+					modifiedLines.add(idx);
 				}
 			}
 		}
+
+		// Final verification: ensure no composited line exceeds terminal width
+		// This is a belt-and-suspenders safeguard - compositeLineAt should already
+		// guarantee this, but we verify here to prevent crashes from any edge cases
+		// Only check lines that were actually modified (optimization)
+		for (const idx of modifiedLines) {
+			const lineWidth = visibleWidth(result[idx]);
+			if (lineWidth > termWidth) {
+				result[idx] = sliceByColumn(result[idx], 0, termWidth, true);
+			}
+		}
+
 		return result;
 	}
 
@@ -308,8 +547,8 @@ export class TUI extends Container {
 		const afterStart = startCol + overlayWidth;
 		const base = extractSegments(baseLine, startCol, afterStart, totalWidth - afterStart, true);
 
-		// Extract overlay with width tracking
-		const overlay = sliceWithWidth(overlayLine, 0, overlayWidth);
+		// Extract overlay with width tracking (strict=true to exclude wide chars at boundary)
+		const overlay = sliceWithWidth(overlayLine, 0, overlayWidth, true);
 
 		// Pad segments to target widths
 		const beforePad = Math.max(0, startCol - base.beforeWidth);
@@ -319,7 +558,7 @@ export class TUI extends Container {
 		const afterTarget = Math.max(0, totalWidth - actualBeforeWidth - actualOverlayWidth);
 		const afterPad = Math.max(0, afterTarget - base.afterWidth);
 
-		// Compose result - widths are tracked so no final visibleWidth check needed
+		// Compose result
 		const r = TUI.SEGMENT_RESET;
 		const result =
 			base.before +
@@ -331,9 +570,18 @@ export class TUI extends Container {
 			base.after +
 			" ".repeat(afterPad);
 
-		// Only truncate if wide char at after boundary caused overflow (rare)
-		const resultWidth = actualBeforeWidth + actualOverlayWidth + Math.max(afterTarget, base.afterWidth);
-		return resultWidth <= totalWidth ? result : sliceByColumn(result, 0, totalWidth, true);
+		// CRITICAL: Always verify and truncate to terminal width.
+		// This is the final safeguard against width overflow which would crash the TUI.
+		// Width tracking can drift from actual visible width due to:
+		// - Complex ANSI/OSC sequences (hyperlinks, colors)
+		// - Wide characters at segment boundaries
+		// - Edge cases in segment extraction
+		const resultWidth = visibleWidth(result);
+		if (resultWidth <= totalWidth) {
+			return result;
+		}
+		// Truncate with strict=true to ensure we don't exceed totalWidth
+		return sliceByColumn(result, 0, totalWidth, true);
 	}
 
 	private doRender(): void {
@@ -362,8 +610,8 @@ export class TUI extends Container {
 			}
 			buffer += "\x1b[?2026l"; // End synchronized output
 			this.terminal.write(buffer);
-			// After rendering N lines, cursor is at end of last line (line N-1)
-			this.cursorRow = newLines.length - 1;
+			// After rendering N lines, cursor is at end of last line (clamp to 0 for empty)
+			this.cursorRow = Math.max(0, newLines.length - 1);
 			this.previousLines = newLines;
 			this.previousWidth = width;
 			return;
@@ -379,7 +627,7 @@ export class TUI extends Container {
 			}
 			buffer += "\x1b[?2026l"; // End synchronized output
 			this.terminal.write(buffer);
-			this.cursorRow = newLines.length - 1;
+			this.cursorRow = Math.max(0, newLines.length - 1);
 			this.previousLines = newLines;
 			this.previousWidth = width;
 			return;
@@ -410,8 +658,8 @@ export class TUI extends Container {
 		if (firstChanged >= newLines.length) {
 			if (this.previousLines.length > newLines.length) {
 				let buffer = "\x1b[?2026h";
-				// Move to end of new content
-				const targetRow = newLines.length - 1;
+				// Move to end of new content (clamp to 0 for empty content)
+				const targetRow = Math.max(0, newLines.length - 1);
 				const lineDiff = targetRow - this.cursorRow;
 				if (lineDiff > 0) buffer += `\x1b[${lineDiff}B`;
 				else if (lineDiff < 0) buffer += `\x1b[${-lineDiff}A`;
@@ -424,7 +672,7 @@ export class TUI extends Container {
 				buffer += `\x1b[${extraLines}A`;
 				buffer += "\x1b[?2026l";
 				this.terminal.write(buffer);
-				this.cursorRow = newLines.length - 1;
+				this.cursorRow = targetRow;
 			}
 			this.previousLines = newLines;
 			this.previousWidth = width;
@@ -446,7 +694,7 @@ export class TUI extends Container {
 			}
 			buffer += "\x1b[?2026l"; // End synchronized output
 			this.terminal.write(buffer);
-			this.cursorRow = newLines.length - 1;
+			this.cursorRow = Math.max(0, newLines.length - 1);
 			this.previousLines = newLines;
 			this.previousWidth = width;
 			return;
diff --git a/packages/tui/test/overlay-options.test.ts b/packages/tui/test/overlay-options.test.ts
new file mode 100644
index 00000000..b5dbc5c4
--- /dev/null
+++ b/packages/tui/test/overlay-options.test.ts
@@ -0,0 +1,538 @@
+import assert from "node:assert";
+import { describe, it } from "node:test";
+import type { Component } from "../src/tui.js";
+import { TUI } from "../src/tui.js";
+import { VirtualTerminal } from "./virtual-terminal.js";
+
+class StaticOverlay implements Component {
+	constructor(
+		private lines: string[],
+		public requestedWidth?: number,
+	) {}
+
+	render(width: number): string[] {
+		// Store the width we were asked to render at for verification
+		this.requestedWidth = width;
+		return this.lines;
+	}
+
+	invalidate(): void {}
+}
+
+class EmptyContent implements Component {
+	render(): string[] {
+		return [];
+	}
+	invalidate(): void {}
+}
+
+async function renderAndFlush(tui: TUI, terminal: VirtualTerminal): Promise<void> {
+	tui.requestRender(true);
+	await new Promise<void>((resolve) => process.nextTick(resolve));
+	await terminal.flush();
+}
+
+describe("TUI overlay options", () => {
+	describe("width overflow protection", () => {
+		it("should truncate overlay lines that exceed declared width", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			// Overlay declares width 20 but renders lines much wider
+			const overlay = new StaticOverlay(["X".repeat(100)]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { width: 20 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			// Should not crash, and no line should exceed terminal width
+			const viewport = terminal.getViewport();
+			for (const line of viewport) {
+				// visibleWidth not available here, but line length is a rough check
+				// The important thing is it didn't crash
+				assert.ok(line !== undefined);
+			}
+			tui.stop();
+		});
+
+		it("should handle overlay with complex ANSI sequences without crashing", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			// Simulate complex ANSI content like the crash log showed
+			const complexLine =
+				"\x1b[48;2;40;50;40m \x1b[38;2;128;128;128mSome styled content\x1b[39m\x1b[49m" +
+				"\x1b]8;;http://example.com\x07link\x1b]8;;\x07" +
+				" more content ".repeat(10);
+			const overlay = new StaticOverlay([complexLine, complexLine, complexLine]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { width: 60 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			// Should not crash
+			const viewport = terminal.getViewport();
+			assert.ok(viewport.length > 0);
+			tui.stop();
+		});
+
+		it("should handle overlay composited on styled base content", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+
+			// Base content with styling
+			class StyledContent implements Component {
+				render(width: number): string[] {
+					const styledLine = `\x1b[1m\x1b[38;2;255;0;0m${"X".repeat(width)}\x1b[0m`;
+					return [styledLine, styledLine, styledLine];
+				}
+				invalidate(): void {}
+			}
+
+			const overlay = new StaticOverlay(["OVERLAY"]);
+
+			tui.addChild(new StyledContent());
+			tui.showOverlay(overlay, { width: 20, anchor: "center" });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			// Should not crash and overlay should be visible
+			const viewport = terminal.getViewport();
+			const hasOverlay = viewport.some((line) => line?.includes("OVERLAY"));
+			assert.ok(hasOverlay, "Overlay should be visible");
+			tui.stop();
+		});
+
+		it("should handle wide characters at overlay boundary", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			// Wide chars (each takes 2 columns) at the edge of declared width
+			const wideCharLine = "中文日本語한글テスト漢字"; // Mix of CJK chars
+			const overlay = new StaticOverlay([wideCharLine]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { width: 15 }); // Odd width to potentially hit boundary
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			// Should not crash
+			const viewport = terminal.getViewport();
+			assert.ok(viewport.length > 0);
+			tui.stop();
+		});
+
+		it("should handle overlay positioned at terminal edge", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			// Overlay positioned at right edge with content that exceeds declared width
+			const overlay = new StaticOverlay(["X".repeat(50)]);
+
+			tui.addChild(new EmptyContent());
+			// Position at col 60 with width 20 - should fit exactly at right edge
+			tui.showOverlay(overlay, { col: 60, width: 20 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			// Should not crash
+			const viewport = terminal.getViewport();
+			assert.ok(viewport.length > 0);
+			tui.stop();
+		});
+
+		it("should handle overlay on base content with OSC sequences", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+
+			// Base content with OSC 8 hyperlinks (like file paths in agent output)
+			class HyperlinkContent implements Component {
+				render(width: number): string[] {
+					const link = `\x1b]8;;file:///path/to/file.ts\x07file.ts\x1b]8;;\x07`;
+					const line = `See ${link} for details ${"X".repeat(width - 30)}`;
+					return [line, line, line];
+				}
+				invalidate(): void {}
+			}
+
+			const overlay = new StaticOverlay(["OVERLAY-TEXT"]);
+
+			tui.addChild(new HyperlinkContent());
+			tui.showOverlay(overlay, { anchor: "center", width: 20 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			// Should not crash - this was the original bug scenario
+			const viewport = terminal.getViewport();
+			assert.ok(viewport.length > 0);
+			tui.stop();
+		});
+	});
+
+	describe("widthPercent", () => {
+		it("should render overlay at percentage of terminal width", async () => {
+			const terminal = new VirtualTerminal(100, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["test"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { widthPercent: 50 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			assert.strictEqual(overlay.requestedWidth, 50);
+			tui.stop();
+		});
+
+		it("should respect minWidth when widthPercent results in smaller width", async () => {
+			const terminal = new VirtualTerminal(100, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["test"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { widthPercent: 10, minWidth: 30 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			assert.strictEqual(overlay.requestedWidth, 30);
+			tui.stop();
+		});
+	});
+
+	describe("anchor positioning", () => {
+		it("should position overlay at top-left", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["TOP-LEFT"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { anchor: "top-left", width: 10 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			assert.ok(viewport[0]?.startsWith("TOP-LEFT"), `Expected TOP-LEFT at start, got: ${viewport[0]}`);
+			tui.stop();
+		});
+
+		it("should position overlay at bottom-right", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["BTM-RIGHT"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { anchor: "bottom-right", width: 10 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			// Should be on last row, ending at last column
+			const lastRow = viewport[23];
+			assert.ok(lastRow?.includes("BTM-RIGHT"), `Expected BTM-RIGHT on last row, got: ${lastRow}`);
+			assert.ok(lastRow?.trimEnd().endsWith("BTM-RIGHT"), `Expected BTM-RIGHT at end, got: ${lastRow}`);
+			tui.stop();
+		});
+
+		it("should position overlay at top-center", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["CENTERED"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { anchor: "top-center", width: 10 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			// Should be on first row, centered horizontally
+			const firstRow = viewport[0];
+			assert.ok(firstRow?.includes("CENTERED"), `Expected CENTERED on first row, got: ${firstRow}`);
+			// Check it's roughly centered (col 35 for width 10 in 80 col terminal)
+			const colIndex = firstRow?.indexOf("CENTERED") ?? -1;
+			assert.ok(colIndex >= 30 && colIndex <= 40, `Expected centered, got col ${colIndex}`);
+			tui.stop();
+		});
+	});
+
+	describe("margin", () => {
+		it("should clamp negative margins to zero", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["NEG-MARGIN"]);
+
+			tui.addChild(new EmptyContent());
+			// Negative margins should be treated as 0
+			tui.showOverlay(overlay, {
+				anchor: "top-left",
+				width: 12,
+				margin: { top: -5, left: -10, right: 0, bottom: 0 },
+			});
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			// Should be at row 0, col 0 (negative margins clamped to 0)
+			assert.ok(viewport[0]?.startsWith("NEG-MARGIN"), `Expected NEG-MARGIN at start of row 0, got: ${viewport[0]}`);
+			tui.stop();
+		});
+
+		it("should respect margin as number", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["MARGIN"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { anchor: "top-left", width: 10, margin: 5 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			// Should be on row 5 (not 0) due to margin
+			assert.ok(!viewport[0]?.includes("MARGIN"), "Should not be on row 0");
+			assert.ok(!viewport[4]?.includes("MARGIN"), "Should not be on row 4");
+			assert.ok(viewport[5]?.includes("MARGIN"), `Expected MARGIN on row 5, got: ${viewport[5]}`);
+			// Should start at col 5 (not 0)
+			const colIndex = viewport[5]?.indexOf("MARGIN") ?? -1;
+			assert.strictEqual(colIndex, 5, `Expected col 5, got ${colIndex}`);
+			tui.stop();
+		});
+
+		it("should respect margin object", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["MARGIN"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, {
+				anchor: "top-left",
+				width: 10,
+				margin: { top: 2, left: 3, right: 0, bottom: 0 },
+			});
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			assert.ok(viewport[2]?.includes("MARGIN"), `Expected MARGIN on row 2, got: ${viewport[2]}`);
+			const colIndex = viewport[2]?.indexOf("MARGIN") ?? -1;
+			assert.strictEqual(colIndex, 3, `Expected col 3, got ${colIndex}`);
+			tui.stop();
+		});
+	});
+
+	describe("offset", () => {
+		it("should apply offsetX and offsetY from anchor position", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["OFFSET"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { anchor: "top-left", width: 10, offsetX: 10, offsetY: 5 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			assert.ok(viewport[5]?.includes("OFFSET"), `Expected OFFSET on row 5, got: ${viewport[5]}`);
+			const colIndex = viewport[5]?.indexOf("OFFSET") ?? -1;
+			assert.strictEqual(colIndex, 10, `Expected col 10, got ${colIndex}`);
+			tui.stop();
+		});
+	});
+
+	describe("percentage positioning", () => {
+		it("should position with rowPercent and colPercent", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["PCT"]);
+
+			tui.addChild(new EmptyContent());
+			// 50% should center both ways
+			tui.showOverlay(overlay, { width: 10, rowPercent: 50, colPercent: 50 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			// Find the row with PCT
+			let foundRow = -1;
+			for (let i = 0; i < viewport.length; i++) {
+				if (viewport[i]?.includes("PCT")) {
+					foundRow = i;
+					break;
+				}
+			}
+			// Should be roughly centered vertically (row ~11-12 for 24 row terminal)
+			assert.ok(foundRow >= 10 && foundRow <= 13, `Expected centered row, got ${foundRow}`);
+			tui.stop();
+		});
+
+		it("rowPercent 0 should position at top", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["TOP"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { width: 10, rowPercent: 0 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			assert.ok(viewport[0]?.includes("TOP"), `Expected TOP on row 0, got: ${viewport[0]}`);
+			tui.stop();
+		});
+
+		it("rowPercent 100 should position at bottom", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["BOTTOM"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { width: 10, rowPercent: 100 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			assert.ok(viewport[23]?.includes("BOTTOM"), `Expected BOTTOM on last row, got: ${viewport[23]}`);
+			tui.stop();
+		});
+	});
+
+	describe("maxHeight", () => {
+		it("should truncate overlay to maxHeight", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["Line 1", "Line 2", "Line 3", "Line 4", "Line 5"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { maxHeight: 3 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			const content = viewport.join("\n");
+			assert.ok(content.includes("Line 1"), "Should include Line 1");
+			assert.ok(content.includes("Line 2"), "Should include Line 2");
+			assert.ok(content.includes("Line 3"), "Should include Line 3");
+			assert.ok(!content.includes("Line 4"), "Should NOT include Line 4");
+			assert.ok(!content.includes("Line 5"), "Should NOT include Line 5");
+			tui.stop();
+		});
+
+		it("should truncate overlay to maxHeightPercent", async () => {
+			const terminal = new VirtualTerminal(80, 10);
+			const tui = new TUI(terminal);
+			// 10 lines in a 10 row terminal with 50% maxHeight should show 5 lines
+			const overlay = new StaticOverlay(["L1", "L2", "L3", "L4", "L5", "L6", "L7", "L8", "L9", "L10"]);
+
+			tui.addChild(new EmptyContent());
+			tui.showOverlay(overlay, { maxHeightPercent: 50 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			const content = viewport.join("\n");
+			assert.ok(content.includes("L1"), "Should include L1");
+			assert.ok(content.includes("L5"), "Should include L5");
+			assert.ok(!content.includes("L6"), "Should NOT include L6");
+			tui.stop();
+		});
+	});
+
+	describe("absolute positioning", () => {
+		it("row and col should override anchor", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+			const overlay = new StaticOverlay(["ABSOLUTE"]);
+
+			tui.addChild(new EmptyContent());
+			// Even with bottom-right anchor, row/col should win
+			tui.showOverlay(overlay, { anchor: "bottom-right", row: 3, col: 5, width: 10 });
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			assert.ok(viewport[3]?.includes("ABSOLUTE"), `Expected ABSOLUTE on row 3, got: ${viewport[3]}`);
+			const colIndex = viewport[3]?.indexOf("ABSOLUTE") ?? -1;
+			assert.strictEqual(colIndex, 5, `Expected col 5, got ${colIndex}`);
+			tui.stop();
+		});
+	});
+
+	describe("stacked overlays", () => {
+		it("should render multiple overlays with later ones on top", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+
+			tui.addChild(new EmptyContent());
+
+			// First overlay at top-left
+			const overlay1 = new StaticOverlay(["FIRST-OVERLAY"]);
+			tui.showOverlay(overlay1, { anchor: "top-left", width: 20 });
+
+			// Second overlay at top-left (should cover part of first)
+			const overlay2 = new StaticOverlay(["SECOND"]);
+			tui.showOverlay(overlay2, { anchor: "top-left", width: 10 });
+
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			// Second overlay should be visible (on top)
+			assert.ok(viewport[0]?.includes("SECOND"), `Expected SECOND on row 0, got: ${viewport[0]}`);
+			// Part of first overlay might still be visible after SECOND
+			// FIRST-OVERLAY is 13 chars, SECOND is 6 chars, so "OVERLAY" part might show
+			tui.stop();
+		});
+
+		it("should handle overlays at different positions without interference", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+
+			tui.addChild(new EmptyContent());
+
+			// Overlay at top-left
+			const overlay1 = new StaticOverlay(["TOP-LEFT"]);
+			tui.showOverlay(overlay1, { anchor: "top-left", width: 15 });
+
+			// Overlay at bottom-right
+			const overlay2 = new StaticOverlay(["BTM-RIGHT"]);
+			tui.showOverlay(overlay2, { anchor: "bottom-right", width: 15 });
+
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			const viewport = terminal.getViewport();
+			// Both should be visible
+			assert.ok(viewport[0]?.includes("TOP-LEFT"), `Expected TOP-LEFT on row 0, got: ${viewport[0]}`);
+			assert.ok(viewport[23]?.includes("BTM-RIGHT"), `Expected BTM-RIGHT on row 23, got: ${viewport[23]}`);
+			tui.stop();
+		});
+
+		it("should properly hide overlays in stack order", async () => {
+			const terminal = new VirtualTerminal(80, 24);
+			const tui = new TUI(terminal);
+
+			tui.addChild(new EmptyContent());
+
+			// Show two overlays
+			const overlay1 = new StaticOverlay(["FIRST"]);
+			tui.showOverlay(overlay1, { anchor: "top-left", width: 10 });
+
+			const overlay2 = new StaticOverlay(["SECOND"]);
+			tui.showOverlay(overlay2, { anchor: "top-left", width: 10 });
+
+			tui.start();
+			await renderAndFlush(tui, terminal);
+
+			// Second should be visible
+			let viewport = terminal.getViewport();
+			assert.ok(viewport[0]?.includes("SECOND"), "SECOND should be visible initially");
+
+			// Hide top overlay
+			tui.hideOverlay();
+			await renderAndFlush(tui, terminal);
+
+			// First should now be visible
+			viewport = terminal.getViewport();
+			assert.ok(viewport[0]?.includes("FIRST"), "FIRST should be visible after hiding SECOND");
+
+			tui.stop();
+		});
+	});
+});
diff --git a/packages/tui/test/overlay-short-content.test.ts b/packages/tui/test/overlay-short-content.test.ts
new file mode 100644
index 00000000..13c07fe3
--- /dev/null
+++ b/packages/tui/test/overlay-short-content.test.ts
@@ -0,0 +1,57 @@
+import assert from "node:assert";
+import { describe, it } from "node:test";
+import { type Component, TUI } from "../src/tui.js";
+import { VirtualTerminal } from "./virtual-terminal.js";
+
+class SimpleContent implements Component {
+	constructor(private lines: string[]) {}
+	render(): string[] {
+		return this.lines;
+	}
+	invalidate() {}
+}
+
+class SimpleOverlay implements Component {
+	render(): string[] {
+		return ["OVERLAY_TOP", "OVERLAY_MID", "OVERLAY_BOT"];
+	}
+	invalidate() {}
+}
+
+describe("TUI overlay with short content", () => {
+	it("should render overlay when content is shorter than terminal height", async () => {
+		// Terminal has 24 rows, but content only has 3 lines
+		const terminal = new VirtualTerminal(80, 24);
+		const tui = new TUI(terminal);
+
+		// Only 3 lines of content
+		tui.addChild(new SimpleContent(["Line 1", "Line 2", "Line 3"]));
+
+		// Show overlay centered - should be around row 10 in a 24-row terminal
+		const overlay = new SimpleOverlay();
+		tui.showOverlay(overlay);
+
+		// Trigger render
+		tui.start();
+		await new Promise((r) => process.nextTick(r));
+		await terminal.flush();
+
+		const viewport = terminal.getViewport();
+		const hasOverlay = viewport.some((line) => line.includes("OVERLAY"));
+
+		console.log("Terminal rows:", terminal.rows);
+		console.log("Content lines: 3");
+		console.log("Overlay visible:", hasOverlay);
+
+		if (!hasOverlay) {
+			console.log("\nViewport contents:");
+			for (let i = 0; i < viewport.length; i++) {
+				console.log(`  [${i}]: "${viewport[i]}"`);
+			}
+		}
+
+		assert.ok(hasOverlay, "Overlay should be visible when content is shorter than terminal");
+
+		tui.stop();
+	});
+});
diff --git a/packages/tui/test/tui-render.test.ts b/packages/tui/test/tui-render.test.ts
index 75469904..e22a349e 100644
--- a/packages/tui/test/tui-render.test.ts
+++ b/packages/tui/test/tui-render.test.ts
@@ -165,4 +165,35 @@ describe("TUI differential rendering", () => {
 
 		tui.stop();
 	});
+
+	it("handles transition from content to empty and back to content", async () => {
+		const terminal = new VirtualTerminal(40, 10);
+		const tui = new TUI(terminal);
+		const component = new TestComponent();
+		tui.addChild(component);
+
+		// Start with content
+		component.lines = ["Line 0", "Line 1", "Line 2"];
+		tui.start();
+		await terminal.flush();
+
+		let viewport = terminal.getViewport();
+		assert.ok(viewport[0]?.includes("Line 0"), "Initial content rendered");
+
+		// Clear to empty
+		component.lines = [];
+		tui.requestRender();
+		await terminal.flush();
+
+		// Add content back - this should work correctly even after empty state
+		component.lines = ["New Line 0", "New Line 1"];
+		tui.requestRender();
+		await terminal.flush();
+
+		viewport = terminal.getViewport();
+		assert.ok(viewport[0]?.includes("New Line 0"), `New content rendered: ${viewport[0]}`);
+		assert.ok(viewport[1]?.includes("New Line 1"), `New content line 1: ${viewport[1]}`);
+
+		tui.stop();
+	});
 });