diff --git a/packages/main/cypress/specs/MultiComboBox.cy.tsx b/packages/main/cypress/specs/MultiComboBox.cy.tsx
index ae9197edbed4..57bb41f3f7c9 100644
--- a/packages/main/cypress/specs/MultiComboBox.cy.tsx
+++ b/packages/main/cypress/specs/MultiComboBox.cy.tsx
@@ -704,6 +704,140 @@ describe("General", () => {
 			}));
 	});
 
+	it("Select All checkbox state with grouped items", () => {
+		cy.mount(
+			<MultiComboBox noValidation={true} showSelectAll={true} onSelectionChange={cy.stub().as("selectionChangeEvent")}>
+				<MultiComboBoxItemGroup headerText="Group 1">
+					<MultiComboBoxItem text="Item 1"></MultiComboBoxItem>
+					<MultiComboBoxItem text="Item 2"></MultiComboBoxItem>
+				</MultiComboBoxItemGroup>
+				<MultiComboBoxItemGroup headerText="Group 2">
+					<MultiComboBoxItem text="Item 3"></MultiComboBoxItem>
+					<MultiComboBoxItem text="Item 4"></MultiComboBoxItem>
+				</MultiComboBoxItemGroup>
+			</MultiComboBox>
+		);
+
+		cy.get("[ui5-multi-combobox]")
+			.as("mcb")
+			.realClick();
+
+		cy.get("@mcb")
+			.shadow()
+			.find(".inputIcon")
+			.realClick();
+
+		cy.get("@mcb")
+			.shadow()
+			.find<ResponsivePopover>("ui5-responsive-popover")
+			.as("popover")
+			.ui5ResponsivePopoverOpened();
+
+		// Verify checkbox is initially unchecked
+		cy.get("@popover")
+			.find(".ui5-mcb-select-all-checkbox")
+			.as("checkbox")
+			.should("not.have.attr", "checked");
+
+		// Click Select All
+		cy.get("@checkbox")
+			.realClick();
+
+		// Verify checkbox is now checked
+		cy.get("@checkbox")
+			.should("have.attr", "checked");
+
+		// Verify all 4 items are selected (not 2 groups)
+		cy.get("@selectionChangeEvent")
+			.should("have.been.calledWithMatch", Cypress.sinon.match(event => {
+				return event.detail.items.length === 4;
+			}));
+
+		// Click Select All again to deselect
+		cy.get("@checkbox")
+			.realClick();
+
+		// Verify checkbox is unchecked
+		cy.get("@checkbox")
+			.should("not.have.attr", "checked");
+
+		// Verify all items are deselected
+		cy.get("@selectionChangeEvent")
+			.should("have.been.calledWithMatch", Cypress.sinon.match(event => {
+				return event.detail.items.length === 0;
+			}));
+	});
+
+	it("Select All checkbox with partial selection in groups", () => {
+		cy.mount(
+			<MultiComboBox noValidation={true} showSelectAll={true}>
+				<MultiComboBoxItemGroup headerText="Group 1">
+					<MultiComboBoxItem text="Item 1" selected={true}></MultiComboBoxItem>
+					<MultiComboBoxItem text="Item 2"></MultiComboBoxItem>
+				</MultiComboBoxItemGroup>
+				<MultiComboBoxItemGroup headerText="Group 2">
+					<MultiComboBoxItem text="Item 3"></MultiComboBoxItem>
+					<MultiComboBoxItem text="Item 4"></MultiComboBoxItem>
+				</MultiComboBoxItemGroup>
+			</MultiComboBox>
+		);
+
+		cy.get("[ui5-multi-combobox]")
+			.as("mcb")
+			.realClick();
+
+		cy.get("@mcb")
+			.shadow()
+			.find(".inputIcon")
+			.realClick();
+
+		cy.get("@mcb")
+			.shadow()
+			.find<ResponsivePopover>("ui5-responsive-popover")
+			.as("popover")
+			.ui5ResponsivePopoverOpened();
+
+		// Verify checkbox is unchecked (1 out of 4 items selected)
+		cy.get("@popover")
+			.find(".ui5-mcb-select-all-checkbox")
+			.should("not.have.attr", "checked");
+	});
+
+	it("Select All checkbox checked when all grouped items selected initially", () => {
+		cy.mount(
+			<MultiComboBox noValidation={true} showSelectAll={true}>
+				<MultiComboBoxItemGroup headerText="Group 1">
+					<MultiComboBoxItem text="Item 1" selected={true}></MultiComboBoxItem>
+					<MultiComboBoxItem text="Item 2" selected={true}></MultiComboBoxItem>
+				</MultiComboBoxItemGroup>
+				<MultiComboBoxItemGroup headerText="Group 2">
+					<MultiComboBoxItem text="Item 3" selected={true}></MultiComboBoxItem>
+					<MultiComboBoxItem text="Item 4" selected={true}></MultiComboBoxItem>
+				</MultiComboBoxItemGroup>
+			</MultiComboBox>
+		);
+
+		cy.get("[ui5-multi-combobox]")
+			.as("mcb")
+			.realClick();
+
+		cy.get("@mcb")
+			.shadow()
+			.find(".inputIcon")
+			.realClick();
+
+		cy.get("@mcb")
+			.shadow()
+			.find<ResponsivePopover>("ui5-responsive-popover")
+			.as("popover")
+			.ui5ResponsivePopoverOpened();
+
+		// Verify checkbox is checked (all 4 items selected)
+		cy.get("@popover")
+			.find(".ui5-mcb-select-all-checkbox")
+			.should("have.attr", "checked");
+	});
+
 	it("Tokenizer expansion on dynamically added tokens", () => {
 		const addTokens = () => {
 			const mcb = document.getElementById("mcb");
diff --git a/packages/main/src/MultiComboBox.ts b/packages/main/src/MultiComboBox.ts
index 534eeb34c311..841cf48cfd38 100644
--- a/packages/main/src/MultiComboBox.ts
+++ b/packages/main/src/MultiComboBox.ts
@@ -733,14 +733,20 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 		this._showMorePressed = true;
 		this._tokenizer._scrollToEndOnExpand = true;
 
+		this._applySelectedItemsFilter();
+
 		this._toggleTokenizerPopover();
 	}
 
 	filterSelectedItems(e: UI5CustomEvent<ToggleButton, "click">) {
 		this.filterSelected = (e.target as ToggleButton).pressed;
-		const selectedItems = this._filteredItems.filter(item => item.selected);
 
-		this.selectedItems = this._getItems().filter((item, idx, allItems) => MultiComboBox._groupItemFilter(item, ++idx, allItems, selectedItems) || selectedItems.indexOf(item) !== -1);
+		if (this.filterSelected) {
+			this._applySelectedItemsFilter();
+		} else {
+			// Reset to show all items
+			this._updateItemsVisibility();
+		}
 	}
 
 	get _showAllItemsButtonPressed(): boolean {
@@ -1199,7 +1205,8 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 			this.filterSelected = false;
 		} else {
 			this._previouslySelectedItems = this._getSelectedItems();
-			this.selectedItems?.filter(item => !item.isGroupItem).forEach(item => {
+			// In n-more mode, use _filteredItems instead of selectedItems
+			this._filteredItems?.filter(item => !item.isGroupItem).forEach(item => {
 				item.selected = (e.target as CheckBox).checked;
 			});
 
@@ -1212,6 +1219,11 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 			if (changePrevented) {
 				this._revertSelection();
 			}
+
+			// In n-more mode, update Select All checkbox state after selection changes
+			if (this.filterSelected) {
+				this._updateGroupsVisibility();
+			}
 		}
 	}
 
@@ -1630,6 +1642,71 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 			.filter((v): v is string => !!v);
 	}
 
+	/**
+	 * Filters items to show only selected items and their group headers,
+	 * and updates the _isVisible property accordingly.
+	 * Used in n-more mode.
+	 * @private
+	 */
+	_applySelectedItemsFilter() {
+		const allItems = this._getItems();
+
+		// Set _isVisible for all items based on selection
+		allItems.forEach(item => {
+			if (isInstanceOfMultiComboBoxItem(item)) {
+				item._isVisible = item.selected;
+			}
+		});
+
+		// Hide unselected items and empty groups using CSS
+		allItems.forEach(item => {
+			const shouldBeVisible = item.isGroupItem ? item._isVisible : item.selected;
+			(item as HTMLElement).style.display = shouldBeVisible ? "" : "none";
+		});
+
+		// Filter to only include selected items and non-empty groups
+		const filtered = allItems.filter(item => {
+			if (item.isGroupItem) {
+				return item._isVisible; // Group's _isVisible getter checks if any children are visible
+			}
+			return item.selected;
+		});
+
+		this._filteredItems = [...filtered];
+	}
+
+	/**
+	 * Updates the _isVisible property for all items.
+	 * If visibleItems is provided, only those items will be visible.
+	 * If not provided, all items will be visible.
+	 * @private
+	 */
+	_updateItemsVisibility(visibleItems?: IMultiComboBoxItem[]) {
+		this._getItems().forEach(item => {
+			if (isInstanceOfMultiComboBoxItem(item)) {
+				item._isVisible = visibleItems ? visibleItems.includes(item) : true;
+			}
+			// Reset display style
+			(item as HTMLElement).style.display = "";
+		});
+	}
+
+	/**
+	 * Updates Select All checkbox state in n-more mode.
+	 * Items and groups stay visible - they're only filtered on reopen.
+	 * Used when selections change while the n-more popup is open.
+	 * @private
+	 */
+	_updateGroupsVisibility() {
+		// In n-more mode, when selections change, we only update the Select All checkbox state
+		// We DON'T hide items or groups - they stay visible until popup closes and reopens
+
+		// Recalculate Select All checkbox state based on currently visible items
+		const visibleSelectableItems = this._filteredItems.filter(item => !item.isGroupItem);
+		const selectedVisibleItems = visibleSelectableItems.filter(item => item.selected);
+		this._allSelected = selectedVisibleItems.length > 0 && selectedVisibleItems.length === visibleSelectableItems.length;
+	}
+
 	_listSelectionChange(e: CustomEvent<ListSelectionChangeEventDetail>) {
 		let changePrevented;
 
@@ -1649,6 +1726,11 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 			this.selectedValues = this._getSelectedValues();
 		}
 
+		// In n-more mode, update Select All checkbox state when selections change
+		if (this.filterSelected) {
+			this._updateGroupsVisibility();
+		}
+
 		// don't call selection change right after selection as user can cancel it on phone
 		if (!isPhone()) {
 			changePrevented = this.fireSelectionChange();
@@ -1740,6 +1822,9 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 		this._iconPressed = false;
 		this._preventTokenizerToggle = false;
 		this.filterSelected = false;
+
+		// Reset _isVisible for all items when closing
+		this._updateItemsVisibility();
 	}
 
 	_beforeOpen() {
@@ -1758,8 +1843,7 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 		this._innerInput.value = this.value;
 
 		if (this.filterSelected) {
-			const selectedItems = this._filteredItems.filter(item => item.selected);
-			this.selectedItems = this._getItems().filter((item, idx, allItems) => MultiComboBox._groupItemFilter(item, ++idx, allItems, selectedItems) || selectedItems.indexOf(item) !== -1);
+			this._applySelectedItemsFilter();
 		}
 	}
 
@@ -1861,16 +1945,28 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 		const value = input && input.value;
 
 		if (this.open) {
-			const list = this._getList();
-			const selectedListItemsCount = this.items.filter(item => item.selected).length;
-			this._allSelected = selectedListItemsCount > 0 && ((selectedListItemsCount === this.items.length) || (list?.getSlottedNodes("items").length === selectedListItemsCount));
+			// When in n-more mode, Select All is checked only if ALL visible items are selected
+			// In normal mode, Select All is checked only if ALL selectable items are selected
+			if (this.filterSelected) {
+				const visibleSelectableItems = this._filteredItems.filter(item => !item.isGroupItem);
+				const selectedVisibleItems = visibleSelectableItems.filter(item => item.selected);
+				this._allSelected = selectedVisibleItems.length > 0 && selectedVisibleItems.length === visibleSelectableItems.length;
+			} else {
+				// Normal mode: Select All is checked only if ALL selectable items are selected
+				const selectableItems = this._getItems().filter(item => !item.isGroupItem && item._isVisible);
+				const selectedCount = selectableItems.filter(item => item.selected).length;
+				this._allSelected = selectedCount > 0 && selectedCount === selectableItems.length;
+			}
 		}
 
 		this._effectiveShowClearIcon = (this.showClearIcon && !!this.value && !this.readonly && !this.disabled);
 
 		if (input && !input.value) {
 			this.valueBeforeAutoComplete = "";
-			this._filteredItems = this._getItems();
+			// Don't reset _filteredItems in n-more mode - it's controlled by _applySelectedItemsFilter
+			if (!this.filterSelected) {
+				this._filteredItems = this._getItems();
+			}
 		}
 
 		if (this.selectedValues) {
@@ -1881,9 +1977,13 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 		this.style.setProperty("--_ui5-input-icons-count", `${this.iconsCount}`);
 
 		if (!input || !value) {
+			// Don't reset visibility in n-more mode - it's controlled by _beforeOpen and _showFilteredItems
+			if (!this.filterSelected) {
+				this._updateItemsVisibility();
+			}
+			// Update readonly state for all items
 			this._getItems().forEach(item => {
 				if (isInstanceOfMultiComboBoxItem(item)) {
-					item._isVisible = true;
 					item._readonly = this.readonly;
 				}
 			});
@@ -1902,10 +2002,13 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 			}
 		}
 
-		if (this._shouldFilterItems) {
-			this._filteredItems = this._filterItems(autoCompletedChars ? this.valueBeforeAutoComplete : value);
-		} else {
-			this._filteredItems = this._getItems();
+		// Don't reset _filteredItems in n-more mode - it's controlled by _applySelectedItemsFilter
+		if (!this.filterSelected) {
+			if (this._shouldFilterItems) {
+				this._filteredItems = this._filterItems(autoCompletedChars ? this.valueBeforeAutoComplete : value);
+			} else {
+				this._filteredItems = this._getItems();
+			}
 		}
 	}
 
@@ -2341,7 +2444,16 @@ class MultiComboBox extends UI5Element implements IFormInputElement {
 	}
 
 	get selectAllCheckboxLabel() {
-		const items = this._getItems().filter(item => !item.isGroupItem);
+		// In n-more mode, show count of selected vs. total visible items
+		// In normal mode, show selected vs. total count
+		if (this.filterSelected) {
+			const visibleItems = this._filteredItems.filter(item => !item.isGroupItem);
+			const selectedCount = visibleItems.filter(item => item.selected).length;
+			return MultiComboBox.i18nBundle.getText(MCB_SELECTED_ITEMS, selectedCount, visibleItems.length);
+		}
+
+		// Normal mode: count only visible items
+		const items = this._getItems().filter(item => !item.isGroupItem && item._isVisible);
 		const selected = items.filter(item => item.selected);
 
 		return MultiComboBox.i18nBundle.getText(MCB_SELECTED_ITEMS, selected.length, items.length);
diff --git a/packages/main/src/MultiComboBoxPopoverTemplate.tsx b/packages/main/src/MultiComboBoxPopoverTemplate.tsx
index 0393b075a1f3..3d5a51a7c931 100644
--- a/packages/main/src/MultiComboBoxPopoverTemplate.tsx
+++ b/packages/main/src/MultiComboBoxPopoverTemplate.tsx
@@ -95,7 +95,7 @@ export default function MultiComboBoxPopoverTemplate(this: MultiComboBox) {
 
 			{!this.loading && this.filterSelected ?
 				<List separators="None" selectionMode="Multiple" class="ui5-multi-combobox-all-items-list" accessibleRole="ListBox">
-					{this.selectedItems.map(item => <slot name={item._individualSlot}></slot>)}
+					{this._filteredItems.map(item => <slot name={item._individualSlot}></slot>)}
 				</List>
 				: !this.loading &&
 				<List separators="None" selectionMode="Multiple" class="ui5-multi-combobox-all-items-list" accessibleRole="ListBox" onKeyDown={this._onItemKeydown}>
diff --git a/packages/main/src/themes/MultiComboBoxPopover.css b/packages/main/src/themes/MultiComboBoxPopover.css
index 21115cc5c4a9..9ce322eeaf3b 100644
--- a/packages/main/src/themes/MultiComboBoxPopover.css
+++ b/packages/main/src/themes/MultiComboBoxPopover.css
@@ -16,13 +16,14 @@
 	font-family: var(--sapFontBoldFamily);
 }
 
+.ui5-mcb-select-all-checkbox::part(root) {
+	width: 100%;
+}
+
 .ui5-mcb-select-all-checkbox::part(root):focus::before {
 	border: var(--sapContent_FocusWidth) var(--sapContent_FocusStyle) var(--sapContent_FocusColor);
 	border-radius: 0;
-	right: 2px;
-	left: 2px;
-	bottom: 0;
-	top: 0;
+	inset: 0 2px;
 }
 
 .ui5-mcb-select-all-checkbox::part(label) {