diff --git a/packages/coding-agent/CHANGELOG.md b/packages/coding-agent/CHANGELOG.md
index c5633b68..918be50d 100644
--- a/packages/coding-agent/CHANGELOG.md
+++ b/packages/coding-agent/CHANGELOG.md
@@ -9,6 +9,8 @@
 ### Added
 
 - Session naming: `/name <name>` command sets a display name shown in the session selector instead of the first message. Useful for distinguishing forked sessions. Extensions can use `pi.setSessionName()` and `pi.getSessionName()`. ([#650](https://github.com/badlogic/pi-mono/pull/650) by [@scutifer](https://github.com/scutifer))
+- `ctx.ui.custom()` now accepts `overlayOptions` for overlay positioning and sizing (anchor, margins, offsets, percentages, absolute positioning)
+- Extension example: `overlay-qa-tests.ts` for testing all overlay positioning scenarios
 - Extension example: `notify.ts` for desktop notifications via OSC 777 escape sequence ([#658](https://github.com/badlogic/pi-mono/pull/658) by [@ferologics](https://github.com/ferologics))
 - Inline hint for queued messages showing the `Alt+Up` restore shortcut ([#657](https://github.com/badlogic/pi-mono/pull/657) by [@tmustier](https://github.com/tmustier))
 - Page-up/down navigation in `/resume` session selector to jump by 5 items ([#662](https://github.com/badlogic/pi-mono/pull/662) by [@aliou](https://github.com/aliou))
diff --git a/packages/coding-agent/examples/extensions/README.md b/packages/coding-agent/examples/extensions/README.md
index 4a6931f3..9d61071e 100644
--- a/packages/coding-agent/examples/extensions/README.md
+++ b/packages/coding-agent/examples/extensions/README.md
@@ -49,6 +49,8 @@ cp permission-gate.ts ~/.pi/agent/extensions/
 | `timed-confirm.ts` | Demonstrates AbortSignal for auto-dismissing `ctx.ui.confirm()` and `ctx.ui.select()` dialogs |
 | `modal-editor.ts` | Custom vim-like modal editor via `ctx.ui.setEditorComponent()` |
 | `notify.ts` | Desktop notifications via OSC 777 when agent finishes (Ghostty, iTerm2, WezTerm) |
+| `overlay-test.ts` | Test overlay compositing with inline text inputs and edge cases |
+| `overlay-qa-tests.ts` | Comprehensive overlay QA tests: anchors, margins, stacking, overflow protection |
 
 ### Git Integration
 
diff --git a/packages/coding-agent/examples/extensions/overlay-qa-tests.ts b/packages/coding-agent/examples/extensions/overlay-qa-tests.ts
new file mode 100644
index 00000000..2771926a
--- /dev/null
+++ b/packages/coding-agent/examples/extensions/overlay-qa-tests.ts
@@ -0,0 +1,591 @@
+/**
+ * Overlay QA Tests - comprehensive overlay positioning and edge case tests
+ *
+ * Usage: pi --extension ./examples/extensions/overlay-qa-tests.ts
+ *
+ * Commands:
+ *   /overlay-anchors    - Cycle through all 9 anchor positions
+ *   /overlay-margins    - Test margin and offset options
+ *   /overlay-stack      - Test stacked overlays
+ *   /overlay-overflow   - Test width overflow with streaming process output
+ *   /overlay-edge       - Test overlay positioned at terminal edge
+ *   /overlay-percent    - Test percentage-based positioning
+ *   /overlay-maxheight  - Test maxHeight truncation
+ */
+
+import type { ExtensionAPI, ExtensionCommandContext, Theme } from "@mariozechner/pi-coding-agent";
+import type { OverlayAnchor, OverlayOptions, TUI } from "@mariozechner/pi-tui";
+import { matchesKey, truncateToWidth, visibleWidth } from "@mariozechner/pi-tui";
+import { spawn } from "child_process";
+
+export default function (pi: ExtensionAPI) {
+	// Test all 9 anchor positions
+	pi.registerCommand("overlay-anchors", {
+		description: "Cycle through all anchor positions",
+		handler: async (_args: string, ctx: ExtensionCommandContext) => {
+			const anchors: OverlayAnchor[] = [
+				"top-left",
+				"top-center",
+				"top-right",
+				"left-center",
+				"center",
+				"right-center",
+				"bottom-left",
+				"bottom-center",
+				"bottom-right",
+			];
+
+			let index = 0;
+			while (true) {
+				const result = await ctx.ui.custom<"next" | "confirm" | "cancel">(
+					(_tui, theme, _kb, done) => new AnchorTestComponent(theme, anchors[index]!, done),
+					{
+						overlay: true,
+						overlayOptions: { anchor: anchors[index], width: 40 },
+					},
+				);
+
+				if (result === "next") {
+					index = (index + 1) % anchors.length;
+					continue;
+				}
+				if (result === "confirm") {
+					ctx.ui.notify(`Selected: ${anchors[index]}`, "info");
+				}
+				break;
+			}
+		},
+	});
+
+	// Test margins and offsets
+	pi.registerCommand("overlay-margins", {
+		description: "Test margin and offset options",
+		handler: async (_args: string, ctx: ExtensionCommandContext) => {
+			const configs: { name: string; options: OverlayOptions }[] = [
+				{ name: "No margin (top-left)", options: { anchor: "top-left", width: 35 } },
+				{ name: "Margin: 3 all sides", options: { anchor: "top-left", width: 35, margin: 3 } },
+				{
+					name: "Margin: top=5, left=10",
+					options: { anchor: "top-left", width: 35, margin: { top: 5, left: 10 } },
+				},
+				{ name: "Center + offset (10, -3)", options: { anchor: "center", width: 35, offsetX: 10, offsetY: -3 } },
+				{ name: "Bottom-right, margin: 2", options: { anchor: "bottom-right", width: 35, margin: 2 } },
+			];
+
+			let index = 0;
+			while (true) {
+				const result = await ctx.ui.custom<"next" | "close">(
+					(_tui, theme, _kb, done) => new MarginTestComponent(theme, configs[index]!, done),
+					{
+						overlay: true,
+						overlayOptions: configs[index]!.options,
+					},
+				);
+
+				if (result === "next") {
+					index = (index + 1) % configs.length;
+					continue;
+				}
+				break;
+			}
+		},
+	});
+
+	// Test stacked overlays
+	pi.registerCommand("overlay-stack", {
+		description: "Test stacked overlays",
+		handler: async (_args: string, ctx: ExtensionCommandContext) => {
+			// Three large overlays that overlap in the center area
+			// Each offset slightly so you can see the stacking
+
+			ctx.ui.notify("Showing overlay 1 (back)...", "info");
+			const p1 = ctx.ui.custom<string>(
+				(_tui, theme, _kb, done) => new StackOverlayComponent(theme, 1, "back (red border)", done),
+				{
+					overlay: true,
+					overlayOptions: { anchor: "center", width: 50, offsetX: -8, offsetY: -4, maxHeight: 15 },
+				},
+			);
+
+			await sleep(400);
+
+			ctx.ui.notify("Showing overlay 2 (middle)...", "info");
+			const p2 = ctx.ui.custom<string>(
+				(_tui, theme, _kb, done) => new StackOverlayComponent(theme, 2, "middle (green border)", done),
+				{
+					overlay: true,
+					overlayOptions: { anchor: "center", width: 50, offsetX: 0, offsetY: 0, maxHeight: 15 },
+				},
+			);
+
+			await sleep(400);
+
+			ctx.ui.notify("Showing overlay 3 (front)...", "info");
+			const p3 = ctx.ui.custom<string>(
+				(_tui, theme, _kb, done) => new StackOverlayComponent(theme, 3, "front (blue border)", done),
+				{
+					overlay: true,
+					overlayOptions: { anchor: "center", width: 50, offsetX: 8, offsetY: 4, maxHeight: 15 },
+				},
+			);
+
+			// Wait for all to close
+			const results = await Promise.all([p1, p2, p3]);
+			ctx.ui.notify(`Closed in order: ${results.join(", ")}`, "info");
+		},
+	});
+
+	// Test width overflow scenarios (original crash case) - streams real process output
+	pi.registerCommand("overlay-overflow", {
+		description: "Test width overflow with streaming process output",
+		handler: async (_args: string, ctx: ExtensionCommandContext) => {
+			await ctx.ui.custom<void>((tui, theme, _kb, done) => new StreamingOverflowComponent(tui, theme, done), {
+				overlay: true,
+				overlayOptions: { anchor: "center", width: 90, maxHeight: 20 },
+			});
+		},
+	});
+
+	// Test overlay at terminal edge
+	pi.registerCommand("overlay-edge", {
+		description: "Test overlay positioned at terminal edge",
+		handler: async (_args: string, ctx: ExtensionCommandContext) => {
+			await ctx.ui.custom<void>((_tui, theme, _kb, done) => new EdgeTestComponent(theme, done), {
+				overlay: true,
+				overlayOptions: { anchor: "right-center", width: 40, margin: { right: 0 } },
+			});
+		},
+	});
+
+	// Test percentage-based positioning
+	pi.registerCommand("overlay-percent", {
+		description: "Test percentage-based positioning",
+		handler: async (_args: string, ctx: ExtensionCommandContext) => {
+			const configs = [
+				{ name: "rowPercent: 0 (top)", row: 0, col: 50 },
+				{ name: "rowPercent: 50 (middle)", row: 50, col: 50 },
+				{ name: "rowPercent: 100 (bottom)", row: 100, col: 50 },
+				{ name: "colPercent: 0 (left)", row: 50, col: 0 },
+				{ name: "colPercent: 100 (right)", row: 50, col: 100 },
+			];
+
+			let index = 0;
+			while (true) {
+				const config = configs[index]!;
+				const result = await ctx.ui.custom<"next" | "close">(
+					(_tui, theme, _kb, done) => new PercentTestComponent(theme, config, done),
+					{
+						overlay: true,
+						overlayOptions: {
+							width: 30,
+							rowPercent: config.row,
+							colPercent: config.col,
+						},
+					},
+				);
+
+				if (result === "next") {
+					index = (index + 1) % configs.length;
+					continue;
+				}
+				break;
+			}
+		},
+	});
+
+	// Test maxHeight
+	pi.registerCommand("overlay-maxheight", {
+		description: "Test maxHeight truncation",
+		handler: async (_args: string, ctx: ExtensionCommandContext) => {
+			await ctx.ui.custom<void>((_tui, theme, _kb, done) => new MaxHeightTestComponent(theme, done), {
+				overlay: true,
+				overlayOptions: { anchor: "center", width: 50, maxHeight: 10 },
+			});
+		},
+	});
+}
+
+function sleep(ms: number): Promise<void> {
+	return new Promise((resolve) => setTimeout(resolve, ms));
+}
+
+// Base overlay component with common rendering
+abstract class BaseOverlay {
+	constructor(protected theme: Theme) {}
+
+	protected box(lines: string[], width: number, title?: string): string[] {
+		const th = this.theme;
+		const innerW = width - 2;
+		const result: string[] = [];
+
+		const titleStr = title ? truncateToWidth(` ${title} `, innerW) : "";
+		const titleW = visibleWidth(titleStr);
+		const topLine = "─".repeat(Math.floor((innerW - titleW) / 2));
+		const topLine2 = "─".repeat(Math.max(0, innerW - titleW - topLine.length));
+		result.push(th.fg("border", `╭${topLine}`) + th.fg("accent", titleStr) + th.fg("border", `${topLine2}╮`));
+
+		for (const line of lines) {
+			result.push(th.fg("border", "│") + truncateToWidth(line, innerW, "...", true) + th.fg("border", "│"));
+		}
+
+		result.push(th.fg("border", `╰${"─".repeat(innerW)}╯`));
+		return result;
+	}
+
+	invalidate(): void {}
+	dispose(): void {}
+}
+
+// Anchor position test
+class AnchorTestComponent extends BaseOverlay {
+	constructor(
+		theme: Theme,
+		private anchor: OverlayAnchor,
+		private done: (result: "next" | "confirm" | "cancel") => void,
+	) {
+		super(theme);
+	}
+
+	handleInput(data: string): void {
+		if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c")) {
+			this.done("cancel");
+		} else if (matchesKey(data, "return")) {
+			this.done("confirm");
+		} else if (matchesKey(data, "space") || matchesKey(data, "right")) {
+			this.done("next");
+		}
+	}
+
+	render(width: number): string[] {
+		const th = this.theme;
+		return this.box(
+			[
+				"",
+				` Current: ${th.fg("accent", this.anchor)}`,
+				"",
+				` ${th.fg("dim", "Space/→ = next anchor")}`,
+				` ${th.fg("dim", "Enter = confirm")}`,
+				` ${th.fg("dim", "Esc = cancel")}`,
+				"",
+			],
+			width,
+			"Anchor Test",
+		);
+	}
+}
+
+// Margin/offset test
+class MarginTestComponent extends BaseOverlay {
+	constructor(
+		theme: Theme,
+		private config: { name: string; options: OverlayOptions },
+		private done: (result: "next" | "close") => void,
+	) {
+		super(theme);
+	}
+
+	handleInput(data: string): void {
+		if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c")) {
+			this.done("close");
+		} else if (matchesKey(data, "space") || matchesKey(data, "right")) {
+			this.done("next");
+		}
+	}
+
+	render(width: number): string[] {
+		const th = this.theme;
+		return this.box(
+			[
+				"",
+				` ${th.fg("accent", this.config.name)}`,
+				"",
+				` ${th.fg("dim", "Space/→ = next config")}`,
+				` ${th.fg("dim", "Esc = close")}`,
+				"",
+			],
+			width,
+			"Margin Test",
+		);
+	}
+}
+
+// Stacked overlay test
+class StackOverlayComponent extends BaseOverlay {
+	constructor(
+		theme: Theme,
+		private num: number,
+		private position: string,
+		private done: (result: string) => void,
+	) {
+		super(theme);
+	}
+
+	handleInput(data: string): void {
+		if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c") || matchesKey(data, "return")) {
+			this.done(`Overlay ${this.num}`);
+		}
+	}
+
+	render(width: number): string[] {
+		const th = this.theme;
+		// Use different colors for each overlay to show stacking
+		const colors = ["error", "success", "accent"] as const;
+		const color = colors[(this.num - 1) % colors.length]!;
+		const innerW = width - 2;
+		const border = (char: string) => th.fg(color, char);
+		const padLine = (s: string) => truncateToWidth(s, innerW, "...", true);
+		const lines: string[] = [];
+
+		lines.push(border(`╭${"─".repeat(innerW)}╮`));
+		lines.push(border("│") + padLine(` Overlay ${th.fg("accent", `#${this.num}`)}`) + border("│"));
+		lines.push(border("│") + padLine(` Layer: ${th.fg(color, this.position)}`) + border("│"));
+		lines.push(border("│") + padLine("") + border("│"));
+		// Add extra lines to make it taller
+		for (let i = 0; i < 5; i++) {
+			lines.push(border("│") + padLine(` ${"░".repeat(innerW - 2)} `) + border("│"));
+		}
+		lines.push(border("│") + padLine("") + border("│"));
+		lines.push(border("│") + padLine(th.fg("dim", " Press Enter/Esc to close")) + border("│"));
+		lines.push(border(`╰${"─".repeat(innerW)}╯`));
+
+		return lines;
+	}
+}
+
+// Streaming overflow test - spawns real process with colored output (original crash scenario)
+class StreamingOverflowComponent extends BaseOverlay {
+	private lines: string[] = [];
+	private proc: ReturnType<typeof spawn> | null = null;
+	private scrollOffset = 0;
+	private maxVisibleLines = 15;
+	private finished = false;
+	private disposed = false;
+
+	constructor(
+		private tui: TUI,
+		theme: Theme,
+		private done: () => void,
+	) {
+		super(theme);
+		this.startProcess();
+	}
+
+	private startProcess(): void {
+		// Run a command that produces many lines with ANSI colors
+		// Using find with -ls produces file listings, or use ls --color
+		this.proc = spawn("bash", [
+			"-c",
+			`
+			echo "Starting streaming overflow test (30+ seconds)..."
+			echo "This simulates subagent output with colors, hyperlinks, and long paths"
+			echo ""
+			for i in $(seq 1 100); do
+				# Simulate long file paths with OSC 8 hyperlinks (clickable) - tests width overflow
+				DIR="/Users/nicobailon/Documents/development/pi-mono/packages/coding-agent/src/modes/interactive"
+				FILE="\${DIR}/components/very-long-component-name-that-exceeds-width-\${i}.ts"
+				echo -e "\\033]8;;file://\${FILE}\\007▶ read: \${FILE}\\033]8;;\\007"
+				
+				# Add some colored status messages with long text
+				if [ $((i % 5)) -eq 0 ]; then
+					echo -e "  \\033[32m✓ Successfully processed \${i} files in /Users/nicobailon/Documents/development/pi-mono\\033[0m"
+				fi
+				if [ $((i % 7)) -eq 0 ]; then
+					echo -e "  \\033[33m⚠ Warning: potential issue detected at line \${i} in very-long-component-name-that-exceeds-width.ts\\033[0m"
+				fi
+				if [ $((i % 11)) -eq 0 ]; then
+					echo -e "  \\033[31m✗ Error: file not found /some/really/long/path/that/definitely/exceeds/the/overlay/width/limit/file-\${i}.ts\\033[0m"
+				fi
+				sleep 0.3
+			done
+			echo ""
+			echo -e "\\033[32m✓ Complete - 100 files processed in 30 seconds\\033[0m"
+			echo "Press Esc to close"
+			`,
+		]);
+
+		this.proc.stdout?.on("data", (data: Buffer) => {
+			if (this.disposed) return; // Guard against callbacks after dispose
+			const text = data.toString();
+			const newLines = text.split("\n");
+			for (const line of newLines) {
+				if (line) this.lines.push(line);
+			}
+			// Auto-scroll to bottom
+			this.scrollOffset = Math.max(0, this.lines.length - this.maxVisibleLines);
+			this.tui.requestRender();
+		});
+
+		this.proc.stderr?.on("data", (data: Buffer) => {
+			if (this.disposed) return; // Guard against callbacks after dispose
+			this.lines.push(this.theme.fg("error", data.toString().trim()));
+			this.tui.requestRender();
+		});
+
+		this.proc.on("close", () => {
+			if (this.disposed) return; // Guard against callbacks after dispose
+			this.finished = true;
+			this.tui.requestRender();
+		});
+	}
+
+	handleInput(data: string): void {
+		if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c")) {
+			this.proc?.kill();
+			this.done();
+		} else if (matchesKey(data, "up")) {
+			this.scrollOffset = Math.max(0, this.scrollOffset - 1);
+			this.tui.requestRender(); // Trigger re-render after scroll
+		} else if (matchesKey(data, "down")) {
+			this.scrollOffset = Math.min(Math.max(0, this.lines.length - this.maxVisibleLines), this.scrollOffset + 1);
+			this.tui.requestRender(); // Trigger re-render after scroll
+		}
+	}
+
+	render(width: number): string[] {
+		const th = this.theme;
+		const innerW = width - 2;
+		const padLine = (s: string) => truncateToWidth(s, innerW, "...", true);
+		const border = (c: string) => th.fg("border", c);
+
+		const result: string[] = [];
+		const title = truncateToWidth(` Streaming Output (${this.lines.length} lines) `, innerW);
+		const titlePad = Math.max(0, innerW - visibleWidth(title));
+		result.push(border("╭") + th.fg("accent", title) + border("─".repeat(titlePad) + "╮"));
+
+		// Scroll indicators
+		const canScrollUp = this.scrollOffset > 0;
+		const canScrollDown = this.scrollOffset < this.lines.length - this.maxVisibleLines;
+		const scrollInfo = `↑${this.scrollOffset} | ↓${Math.max(0, this.lines.length - this.maxVisibleLines - this.scrollOffset)}`;
+
+		result.push(
+			border("│") + padLine(canScrollUp || canScrollDown ? th.fg("dim", ` ${scrollInfo}`) : "") + border("│"),
+		);
+
+		// Visible lines - truncate long lines to fit within border
+		const visibleLines = this.lines.slice(this.scrollOffset, this.scrollOffset + this.maxVisibleLines);
+		for (const line of visibleLines) {
+			result.push(border("│") + padLine(` ${line}`) + border("│"));
+		}
+
+		// Pad to maxVisibleLines
+		for (let i = visibleLines.length; i < this.maxVisibleLines; i++) {
+			result.push(border("│") + padLine("") + border("│"));
+		}
+
+		const status = this.finished ? th.fg("success", "✓ Done") : th.fg("warning", "● Running");
+		result.push(border("│") + padLine(` ${status} ${th.fg("dim", "| ↑↓ scroll | Esc close")}`) + border("│"));
+		result.push(border(`╰${"─".repeat(innerW)}╯`));
+
+		return result;
+	}
+
+	dispose(): void {
+		this.disposed = true;
+		this.proc?.kill();
+	}
+}
+
+// Edge position test
+class EdgeTestComponent extends BaseOverlay {
+	constructor(
+		theme: Theme,
+		private done: () => void,
+	) {
+		super(theme);
+	}
+
+	handleInput(data: string): void {
+		if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c")) {
+			this.done();
+		}
+	}
+
+	render(width: number): string[] {
+		const th = this.theme;
+		return this.box(
+			[
+				"",
+				" This overlay is at the",
+				" right edge of terminal.",
+				"",
+				` ${th.fg("dim", "Verify right border")}`,
+				` ${th.fg("dim", "aligns with edge.")}`,
+				"",
+				` ${th.fg("dim", "Press Esc to close")}`,
+				"",
+			],
+			width,
+			"Edge Test",
+		);
+	}
+}
+
+// Percentage positioning test
+class PercentTestComponent extends BaseOverlay {
+	constructor(
+		theme: Theme,
+		private config: { name: string; row: number; col: number },
+		private done: (result: "next" | "close") => void,
+	) {
+		super(theme);
+	}
+
+	handleInput(data: string): void {
+		if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c")) {
+			this.done("close");
+		} else if (matchesKey(data, "space") || matchesKey(data, "right")) {
+			this.done("next");
+		}
+	}
+
+	render(width: number): string[] {
+		const th = this.theme;
+		return this.box(
+			[
+				"",
+				` ${th.fg("accent", this.config.name)}`,
+				"",
+				` ${th.fg("dim", "Space/→ = next")}`,
+				` ${th.fg("dim", "Esc = close")}`,
+				"",
+			],
+			width,
+			"Percent Test",
+		);
+	}
+}
+
+// MaxHeight test - renders 20 lines, truncated to 10 by maxHeight
+class MaxHeightTestComponent extends BaseOverlay {
+	constructor(
+		theme: Theme,
+		private done: () => void,
+	) {
+		super(theme);
+	}
+
+	handleInput(data: string): void {
+		if (matchesKey(data, "escape") || matchesKey(data, "ctrl+c")) {
+			this.done();
+		}
+	}
+
+	render(width: number): string[] {
+		const th = this.theme;
+		// Intentionally render 21 lines - maxHeight: 10 will truncate to first 10
+		// You should see header + lines 1-6, with bottom border cut off
+		const contentLines: string[] = [
+			th.fg("warning", " ⚠ Rendering 21 lines, maxHeight: 10"),
+			th.fg("dim", " Lines 11-21 truncated (no bottom border)"),
+			"",
+		];
+
+		for (let i = 1; i <= 14; i++) {
+			contentLines.push(` Line ${i} of 14`);
+		}
+
+		contentLines.push("", th.fg("dim", " Press Esc to close"));
+
+		return this.box(contentLines, width, "MaxHeight Test");
+	}
+}
diff --git a/packages/coding-agent/src/core/extensions/types.ts b/packages/coding-agent/src/core/extensions/types.ts
index a17e4699..517544ce 100644
--- a/packages/coding-agent/src/core/extensions/types.ts
+++ b/packages/coding-agent/src/core/extensions/types.ts
@@ -15,7 +15,7 @@ import type {
 	ThinkingLevel,
 } from "@mariozechner/pi-agent-core";
 import type { ImageContent, Model, TextContent, ToolResultMessage } from "@mariozechner/pi-ai";
-import type { Component, EditorComponent, EditorTheme, KeyId, TUI } from "@mariozechner/pi-tui";
+import type { Component, EditorComponent, EditorTheme, KeyId, OverlayOptions, TUI } from "@mariozechner/pi-tui";
 import type { Static, TSchema } from "@sinclair/typebox";
 import type { Theme } from "../../modes/interactive/theme/theme.js";
 import type { BashResult } from "../bash-executor.js";
@@ -112,7 +112,11 @@ export interface ExtensionUIContext {
 			keybindings: KeybindingsManager,
 			done: (result: T) => void,
 		) => (Component & { dispose?(): void }) | Promise<Component & { dispose?(): void }>,
-		options?: { overlay?: boolean },
+		options?: {
+			overlay?: boolean;
+			/** Overlay positioning/sizing options. Can be static or a function for dynamic updates. */
+			overlayOptions?: OverlayOptions | (() => OverlayOptions);
+		},
 	): Promise<T>;
 
 	/** Set the text in the core input editor. */
diff --git a/packages/coding-agent/src/modes/interactive/interactive-mode.ts b/packages/coding-agent/src/modes/interactive/interactive-mode.ts
index 5f84555b..11f5740d 100644
--- a/packages/coding-agent/src/modes/interactive/interactive-mode.ts
+++ b/packages/coding-agent/src/modes/interactive/interactive-mode.ts
@@ -16,7 +16,14 @@ import {
 	type Model,
 	type OAuthProvider,
 } from "@mariozechner/pi-ai";
-import type { AutocompleteItem, EditorComponent, EditorTheme, KeyId, SlashCommand } from "@mariozechner/pi-tui";
+import type {
+	AutocompleteItem,
+	EditorComponent,
+	EditorTheme,
+	KeyId,
+	OverlayOptions,
+	SlashCommand,
+} from "@mariozechner/pi-tui";
 import {
 	CombinedAutocompleteProvider,
 	type Component,
@@ -1253,7 +1260,7 @@ export class InteractiveMode {
 			keybindings: KeybindingsManager,
 			done: (result: T) => void,
 		) => (Component & { dispose?(): void }) | Promise<Component & { dispose?(): void }>,
-		options?: { overlay?: boolean },
+		options?: { overlay?: boolean; overlayOptions?: OverlayOptions | (() => OverlayOptions) },
 	): Promise<T> {
 		const savedText = this.editor.getText();
 		const isOverlay = options?.overlay ?? false;
@@ -1289,8 +1296,20 @@ export class InteractiveMode {
 					if (closed) return;
 					component = c;
 					if (isOverlay) {
-						const w = (component as { width?: number }).width;
-						this.ui.showOverlay(component, w ? { width: w } : undefined);
+						// Resolve overlay options - can be static or dynamic function
+						const resolveOptions = (): OverlayOptions | undefined => {
+							if (options?.overlayOptions) {
+								const opts =
+									typeof options.overlayOptions === "function"
+										? options.overlayOptions()
+										: options.overlayOptions;
+								return opts;
+							}
+							// Fallback: use component's width property if available
+							const w = (component as { width?: number }).width;
+							return w ? { width: w } : undefined;
+						};
+						this.ui.showOverlay(component, resolveOptions());
 					} else {
 						this.editorContainer.clear();
 						this.editorContainer.addChild(component);
diff --git a/packages/tui/CHANGELOG.md b/packages/tui/CHANGELOG.md
index 157864ef..44173e63 100644
--- a/packages/tui/CHANGELOG.md
+++ b/packages/tui/CHANGELOG.md
@@ -8,6 +8,7 @@
 - `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`
+- `truncateToWidth()` now accepts optional `pad` parameter to pad result with spaces to exactly `maxWidth`
 
 ### Fixed
 
diff --git a/packages/tui/src/utils.ts b/packages/tui/src/utils.ts
index 163a4074..16e372a6 100644
--- a/packages/tui/src/utils.ts
+++ b/packages/tui/src/utils.ts
@@ -650,18 +650,25 @@ export function applyBackgroundToLine(line: string, width: number, bgFn: (text:
 
 /**
  * Truncate text to fit within a maximum visible width, adding ellipsis if needed.
+ * Optionally pad with spaces to reach exactly maxWidth.
  * Properly handles ANSI escape codes (they don't count toward width).
  *
  * @param text - Text to truncate (may contain ANSI codes)
  * @param maxWidth - Maximum visible width
  * @param ellipsis - Ellipsis string to append when truncating (default: "...")
- * @returns Truncated text with ellipsis if it exceeded maxWidth
+ * @param pad - If true, pad result with spaces to exactly maxWidth (default: false)
+ * @returns Truncated text, optionally padded to exactly maxWidth
  */
-export function truncateToWidth(text: string, maxWidth: number, ellipsis: string = "..."): string {
+export function truncateToWidth(
+	text: string,
+	maxWidth: number,
+	ellipsis: string = "...",
+	pad: boolean = false,
+): string {
 	const textVisibleWidth = visibleWidth(text);
 
 	if (textVisibleWidth <= maxWidth) {
-		return text;
+		return pad ? text + " ".repeat(maxWidth - textVisibleWidth) : text;
 	}
 
 	const ellipsisWidth = visibleWidth(ellipsis);
@@ -722,7 +729,12 @@ export function truncateToWidth(text: string, maxWidth: number, ellipsis: string
 	}
 
 	// Add reset code before ellipsis to prevent styling leaking into it
-	return `${result}\x1b[0m${ellipsis}`;
+	const truncated = `${result}\x1b[0m${ellipsis}`;
+	if (pad) {
+		const truncatedWidth = visibleWidth(truncated);
+		return truncated + " ".repeat(Math.max(0, maxWidth - truncatedWidth));
+	}
+	return truncated;
 }
 
 /**