diff --git a/packages/base-styles/_z-index.scss b/packages/base-styles/_z-index.scss
index affe9489684cdd..d995ccb31bbf5f 100644
--- a/packages/base-styles/_z-index.scss
+++ b/packages/base-styles/_z-index.scss
@@ -4,7 +4,7 @@
 
 $z-layers: (
 	".block-editor-block-list__block::before": 0,
-	".block-editor-block-list__block.is-selected": 1,
+	".block-editor-block-list__block.is-selected": 20,
 	".block-editor-block-switcher__arrow": 1,
 	".block-editor-block-list__block {core/image aligned wide or fullwide}": 20,
 	".block-library-classic__toolbar": 31, // When scrolled to top this toolbar needs to sit over block-editor-block-toolbar
diff --git a/packages/block-editor/src/components/block-list/content.scss b/packages/block-editor/src/components/block-list/content.scss
index 51c53fd580e7b5..a7c6f02ca6d416 100644
--- a/packages/block-editor/src/components/block-list/content.scss
+++ b/packages/block-editor/src/components/block-list/content.scss
@@ -183,10 +183,12 @@ _::-webkit-full-page-media, _:future, :root .has-multi-selection .block-editor-b
 		user-select: none;
 	}
 
-	&.is-selected,
-	&.has-child-selected {
-		// Bring the selected block forward so we can see it.
-		z-index: z-index(".block-editor-block-list__block.is-selected");
+	&.has-negative-margin {
+		&.is-selected,
+		&.has-child-selected {
+			// Bring the selected block forward so we can see it.
+			z-index: z-index(".block-editor-block-list__block.is-selected");
+		}
 	}
 
 	.reusable-block-edit-panel * {
diff --git a/packages/block-editor/src/components/block-list/use-block-props/index.js b/packages/block-editor/src/components/block-list/use-block-props/index.js
index af98f24b98785e..b91b9d32f52acc 100644
--- a/packages/block-editor/src/components/block-list/use-block-props/index.js
+++ b/packages/block-editor/src/components/block-list/use-block-props/index.js
@@ -144,6 +144,16 @@ export function useBlockProps( props = {}, { __unstableIsHtml } = {} ) {
 		);
 	}
 
+	let hasNegativeMargin = false;
+	if (
+		wrapperProps?.style?.marginTop?.charAt( 0 ) === '-' ||
+		wrapperProps?.style?.marginBottom?.charAt( 0 ) === '-' ||
+		wrapperProps?.style?.marginLeft?.charAt( 0 ) === '-' ||
+		wrapperProps?.style?.marginRight?.charAt( 0 ) === '-'
+	) {
+		hasNegativeMargin = true;
+	}
+
 	return {
 		tabIndex: blockEditingMode === 'disabled' ? -1 : 0,
 		...wrapperProps,
@@ -174,6 +184,7 @@ export function useBlockProps( props = {}, { __unstableIsHtml } = {} ) {
 				'can-insert-moving-block': canInsertMovingBlock,
 				'is-editing-disabled': isEditingDisabled,
 				'has-editable-outline': hasEditableOutline,
+				'has-negative-margin': hasNegativeMargin,
 				'is-content-locked-temporarily-editing-as-blocks':
 					isTemporarilyEditingAsBlocks,
 			},