diff --git a/Modules/Background/ScreenCorners.qml b/Modules/Background/ScreenCorners.qml
index 0d2e8e0..a2c8913 100644
--- a/Modules/Background/ScreenCorners.qml
+++ b/Modules/Background/ScreenCorners.qml
@@ -44,11 +44,11 @@ Loader {
 
       margins {
         top: ((modelData && Settings.data.bar.monitors.includes(modelData.name))
-              || (Settings.data.bar.monitors.length === 0))
-             && Settings.data.bar.position === "top" ? Math.floor(Style.barHeight * scaling) : 0
+              || (Settings.data.bar.monitors.length === 0)) && Settings.data.bar.position === "top"
+             && Settings.data.bar.backgroundOpacity > 0 ? Math.floor(Style.barHeight * scaling) : 0
         bottom: ((modelData && Settings.data.bar.monitors.includes(modelData.name))
-                 || (Settings.data.bar.monitors.length === 0))
-                && Settings.data.bar.position === "bottom" ? Math.floor(Style.barHeight * scaling) : 0
+                 || (Settings.data.bar.monitors.length === 0)) && Settings.data.bar.position === "bottom"
+                && Settings.data.bar.backgroundOpacity > 0 ? Math.floor(Style.barHeight * scaling) : 0
       }
 
       // Source we want to show only as a ring
diff --git a/Widgets/NPanel.qml b/Widgets/NPanel.qml
index 2bfc771..309d07c 100644
--- a/Widgets/NPanel.qml
+++ b/Widgets/NPanel.qml
@@ -41,6 +41,21 @@ Loader {
   readonly property real barHeight: Style.barHeight * scaling
   readonly property bool barAtBottom: Settings.data.bar.position === "bottom"
 
+  // Helper function to check if bar is enabled on this screen
+  function isBarEnabled(screen) {
+    if (!screen || !screen.name)
+      return false
+    return Settings.data.bar.monitors.includes(screen.name) || (Settings.data.bar.monitors.length === 0)
+  }
+
+  // Helper function to get effective bar height (accounting for opacity)
+  function getEffectiveBarHeight(screen) {
+    if (!isBarEnabled(screen))
+      return 0
+    // If bar opacity is 0, treat it as if bar is not there for dimming purposes
+    return Settings.data.bar.backgroundOpacity > 0 ? barHeight : 0
+  }
+
   signal opened
   signal closed
 
@@ -132,27 +147,19 @@ Loader {
 
       visible: true
 
-      // Dim desktop if required
-      color: (root.active && !root.isClosing && Settings.data.general.dimDesktop) ? Color.applyOpacity(
-                                                                                      Color.mShadow,
-                                                                                      "BB") : Color.transparent
+      // Dim desktop if required - but exclude corners if screen corners are enabled
+      color: Color.transparent
 
       WlrLayershell.exclusionMode: ExclusionMode.Ignore
       WlrLayershell.namespace: "noctalia-panel"
       WlrLayershell.keyboardFocus: WlrKeyboardFocus.OnDemand
 
-      Behavior on color {
-        ColorAnimation {
-          duration: Style.animationNormal
-        }
-      }
-
       anchors.top: true
       anchors.left: true
       anchors.right: true
       anchors.bottom: true
-      margins.top: !barAtBottom ? barHeight : 0
-      margins.bottom: barAtBottom ? barHeight : 0
+      margins.top: !barAtBottom ? getEffectiveBarHeight(screen) : 0
+      margins.bottom: barAtBottom ? getEffectiveBarHeight(screen) : 0
 
       // Close any panel with Esc without requiring focus
       Shortcut {
@@ -168,6 +175,59 @@ Loader {
         onClicked: root.close()
       }
 
+      // Dim overlay that excludes corners when screen corners are enabled
+      Item {
+        id: dimOverlay
+        anchors.fill: parent
+        visible: root.active && !root.isClosing && Settings.data.general.dimDesktop
+        opacity: visible ? 1.0 : 0.0
+
+        // Helper function to check if screen corners are enabled
+        function isScreenCornersEnabled() {
+          return Settings.data.general.showScreenCorners
+        }
+
+        // Helper function to get corner radius
+        function getCornerRadius() {
+          return 20 // Same as ScreenCorners innerRadius
+        }
+
+        // Helper function to get border width
+        function getBorderWidth() {
+          return Style.borderM
+        }
+
+        // Full screen dim when screen corners are disabled
+        Rectangle {
+          id: fullScreenDim
+          visible: dimOverlay.visible && !dimOverlay.isScreenCornersEnabled()
+          anchors.fill: parent
+          color: Color.applyOpacity(Color.mShadow, "BB")
+        }
+
+        // Masked dim when screen corners are enabled
+        Item {
+          id: maskedDim
+          visible: dimOverlay.visible && dimOverlay.isScreenCornersEnabled()
+          anchors.fill: parent
+
+          // Only dim the center area, leaving the entire border undimmed
+          Rectangle {
+            id: centerDim
+            anchors.margins: dimOverlay.getCornerRadius() + dimOverlay.getBorderWidth()
+            anchors.fill: parent
+            color: Color.applyOpacity(Color.mShadow, "BB")
+          }
+        }
+
+        // Behavior for dim overlay visibility
+        Behavior on opacity {
+          NumberAnimation {
+            duration: Style.animationNormal
+          }
+        }
+      }
+
       Rectangle {
         id: panelBackground
         color: panelBackgroundColor