diff --git a/docs/resources/changelog.md b/docs/resources/changelog.md
index de503019..72d48f21 100644
--- a/docs/resources/changelog.md
+++ b/docs/resources/changelog.md
@@ -13,9 +13,13 @@ _During the beta period, these restrictions may be relaxed in the event of a mis
 - Added `--header-spacing`, `--body-spacing`, and `--footer-spacing` custom properties to `sl-drawer` and `sl-dialog` [#409](https://github.com/shoelace-style/shoelace/issues/409)
 - Fixed a bug where `sl-menu-item` prefix and suffix slots wouldn't always receive the correct spacing
 - Fixed a bug where `sl-badge` used `--sl-color-white` instead of the correct design tokens [#407](https://github.com/shoelace-style/shoelace/issues/407)
+- Fixed a bug in `sl-dialog` and `sl-drawer` where the escape key would cause parent components to close
 - Fixed a race condition bug in `sl-icon` [#410](https://github.com/shoelace-style/shoelace/issues/410)
+- Improved focus trap behavior in `sl-dialog` and `sl-drawer`
+- Improved a11y in `sl-dialog` and `sl-drawer` by restoring focus to trigger on close
 - Improved a11y in `sl-radio` with Windows high contrast mode [#215](https://github.com/shoelace-style/shoelace/issues/215)
 - Improved a11y in `sl-select` by preventing the chevron icon from being announced
+- Internal: removed the `options` argument from the modal utility as focus trapping is now handled internally
 
 ## 2.0.0-beta.37
 
diff --git a/src/components/dialog/dialog.ts b/src/components/dialog/dialog.ts
index fda99915..56621c8a 100644
--- a/src/components/dialog/dialog.ts
+++ b/src/components/dialog/dialog.ts
@@ -3,11 +3,11 @@ import { customElement, property, query, state } from 'lit/decorators';
 import { classMap } from 'lit-html/directives/class-map';
 import { ifDefined } from 'lit-html/directives/if-defined';
 import { event, EventEmitter, watch } from '../../internal/decorators';
-import styles from 'sass:./dialog.scss';
 import { lockBodyScrolling, unlockBodyScrolling } from '../../internal/scroll';
 import { hasSlot } from '../../internal/slot';
 import { isPreventScrollSupported } from '../../internal/support';
 import Modal from '../../internal/modal';
+import styles from 'sass:./dialog.scss';
 
 const hasPreventScroll = isPreventScrollSupported();
 
@@ -41,6 +41,7 @@ export default class SlDialog extends LitElement {
 
   private componentId = `dialog-${++id}`;
   private modal: Modal;
+  private originalTrigger: HTMLElement | null;
   private willShow = false;
   private willHide = false;
 
@@ -86,10 +87,7 @@ export default class SlDialog extends LitElement {
   connectedCallback() {
     super.connectedCallback();
 
-    this.modal = new Modal(this, {
-      onfocusOut: () => this.panel.focus()
-    });
-
+    this.modal = new Modal(this);
     this.handleSlotChange();
 
     // Show on init if open
@@ -115,6 +113,7 @@ export default class SlDialog extends LitElement {
       return;
     }
 
+    this.originalTrigger = document.activeElement as HTMLElement;
     this.willShow = true;
     this.isVisible = true;
     this.open = true;
@@ -169,6 +168,12 @@ export default class SlDialog extends LitElement {
     this.open = false;
     this.modal.deactivate();
 
+    // Restore focus to the original trigger
+    const trigger = this.originalTrigger;
+    if (trigger && typeof trigger.focus === 'function') {
+      setTimeout(() => trigger.focus());
+    }
+
     unlockBodyScrolling(this);
   }
 
@@ -178,6 +183,7 @@ export default class SlDialog extends LitElement {
 
   handleKeyDown(event: KeyboardEvent) {
     if (event.key === 'Escape') {
+      event.stopPropagation();
       this.hide();
     }
   }
diff --git a/src/components/drawer/drawer.ts b/src/components/drawer/drawer.ts
index 43cf34b4..9049c072 100644
--- a/src/components/drawer/drawer.ts
+++ b/src/components/drawer/drawer.ts
@@ -3,11 +3,11 @@ import { customElement, property, query, state } from 'lit/decorators';
 import { classMap } from 'lit-html/directives/class-map';
 import { ifDefined } from 'lit-html/directives/if-defined';
 import { event, EventEmitter, watch } from '../../internal/decorators';
-import styles from 'sass:./drawer.scss';
 import { lockBodyScrolling, unlockBodyScrolling } from '../../internal/scroll';
 import { hasSlot } from '../../internal/slot';
 import { isPreventScrollSupported } from '../../internal/support';
 import Modal from '../../internal/modal';
+import styles from 'sass:./drawer.scss';
 
 const hasPreventScroll = isPreventScrollSupported();
 
@@ -41,6 +41,7 @@ export default class SlDrawer extends LitElement {
 
   private componentId = `drawer-${++id}`;
   private modal: Modal;
+  private originalTrigger: HTMLElement | null;
   private willShow = false;
   private willHide = false;
 
@@ -92,10 +93,7 @@ export default class SlDrawer extends LitElement {
   connectedCallback() {
     super.connectedCallback();
 
-    this.modal = new Modal(this, {
-      onfocusOut: () => (this.contained ? null : this.panel.focus())
-    });
-
+    this.modal = new Modal(this);
     this.handleSlotChange();
 
     // Show on init if open
@@ -121,6 +119,7 @@ export default class SlDrawer extends LitElement {
       return;
     }
 
+    this.originalTrigger = document.activeElement as HTMLElement;
     this.willShow = true;
     this.isVisible = true;
     this.open = true;
@@ -178,6 +177,12 @@ export default class SlDrawer extends LitElement {
     this.open = false;
     this.modal.deactivate();
 
+    // Restore focus to the original trigger
+    const trigger = this.originalTrigger;
+    if (trigger && typeof trigger.focus === 'function') {
+      setTimeout(() => trigger.focus());
+    }
+
     unlockBodyScrolling(this);
   }
 
@@ -187,6 +192,7 @@ export default class SlDrawer extends LitElement {
 
   handleKeyDown(event: KeyboardEvent) {
     if (event.key === 'Escape') {
+      event.stopPropagation();
       this.hide();
     }
   }
diff --git a/src/internal/modal.ts b/src/internal/modal.ts
index 48f0cd00..11cf6c81 100644
--- a/src/internal/modal.ts
+++ b/src/internal/modal.ts
@@ -1,27 +1,27 @@
-interface ModalOptions {
-  onfocusOut?: (event: Event) => any;
-}
+import { getTabbableElements } from '../utilities/tabbable';
 
 let activeModals: HTMLElement[] = [];
 
 export default class Modal {
   element: HTMLElement;
-  options: ModalOptions | undefined;
+  tabDirection: 'forward' | 'backward' = 'forward';
 
-  constructor(element: HTMLElement, options?: ModalOptions) {
+  constructor(element: HTMLElement) {
     this.element = element;
-    this.options = options;
     this.handleFocusIn = this.handleFocusIn.bind(this);
+    this.handleKeyDown = this.handleKeyDown.bind(this);
   }
 
   activate() {
     activeModals.push(this.element);
     document.addEventListener('focusin', this.handleFocusIn);
+    document.addEventListener('keydown', this.handleKeyDown);
   }
 
   deactivate() {
     activeModals = activeModals.filter(modal => modal !== this.element);
     document.removeEventListener('focusin', this.handleFocusIn);
+    document.removeEventListener('keydown', this.handleKeyDown);
   }
 
   isActive() {
@@ -30,12 +30,21 @@ export default class Modal {
   }
 
   handleFocusIn(event: Event) {
-    const target = event.target as HTMLElement;
-    const tagName = this.element.tagName.toLowerCase();
+    const path = event.composedPath();
 
-    // If focus is lost while the modal is active, run the onfocusOut callback
-    if (this.isActive() && target.closest(tagName) !== this.element && typeof this.options?.onfocusOut === 'function') {
-      this.options?.onfocusOut(event);
+    // Trap focus so it doesn't go out of the modal's boundary
+    if (this.isActive() && !path.includes(this.element)) {
+      const tabbableElements = getTabbableElements(this.element);
+      const index = this.tabDirection === 'backward' ? tabbableElements.length - 1 : 0;
+      tabbableElements[index].focus({ preventScroll: true });
+    }
+  }
+
+  handleKeyDown(event: KeyboardEvent) {
+    // Quick hack to determine tab direction
+    if (event.key === 'Tab' && event.shiftKey) {
+      this.tabDirection = 'backward';
+      setTimeout(() => (this.tabDirection = 'forward'));
     }
   }
 }
diff --git a/src/utilities/tabbable.ts b/src/utilities/tabbable.ts
new file mode 100644
index 00000000..d6c956d7
--- /dev/null
+++ b/src/utilities/tabbable.ts
@@ -0,0 +1,84 @@
+// Determines if the specified element is tabbable using heuristics inspired by https://github.com/focus-trap/tabbable
+function isTabbable(el: HTMLElement) {
+  const tag = el.tagName.toLowerCase();
+
+  // Elements with a -1 tab index are not tabbable
+  if (el.getAttribute('tabindex') === '-1') {
+    return false;
+  }
+
+  // Elements with a disabled attribute are not tabbable
+  if (el.hasAttribute('disabled')) {
+    return false;
+  }
+
+  // Elements with aria-disabled are not tabbable
+  if (el.hasAttribute('aria-disabled') && el.getAttribute('aria-disabled') !== 'false') {
+    return false;
+  }
+
+  // Elements with a tabindex other than -1 are tabbable
+  if (el.hasAttribute('tabindex')) {
+    return true;
+  }
+
+  // Elements with a contenteditable attribute are tabbable
+  if (el.hasAttribute('contenteditable') && el.getAttribute('contenteditable') !== 'false') {
+    return true;
+  }
+
+  // Audio and video elements with the controls attribute are tabbable
+  if ((tag === 'audio' || tag === 'video') && el.hasAttribute('controls')) {
+    return true;
+  }
+
+  // Radios without a checked attribute are not tabbable
+  if (tag === 'input' && el.getAttribute('type') === 'radio' && !el.hasAttribute('checked')) {
+    return false;
+  }
+
+  // Elements that are hidden have no offsetParent and are not tabbable
+  if (!el.offsetParent) {
+    return false;
+  }
+
+  // Elements without visibility are not tabbable (calculated last due to performance)
+  if (window.getComputedStyle(el).visibility === 'hidden') {
+    return false;
+  }
+
+  // At this point, the following elements are considered tabbable
+  return ['button', 'input', 'select', 'textarea', 'a', 'audio', 'video', 'summary'].includes(tag);
+}
+
+// Locates all tabbable elements within an element. If the target element is tabbable, it will be included in the
+// resulting array. This function will also look in open shadow roots.
+export function getTabbableElements(root: HTMLElement | ShadowRoot) {
+  const tabbableElements: HTMLElement[] = [];
+
+  if (root instanceof HTMLElement) {
+    // Is the root element tabbable?
+    if (isTabbable(root)) {
+      tabbableElements.push(root);
+    }
+
+    // Look for tabbable elements in the shadow root
+    if (root.shadowRoot && root.shadowRoot.mode === 'open') {
+      getTabbableElements(root.shadowRoot).map(el => tabbableElements.push(el));
+    }
+
+    // Look at slotted elements
+    if (root instanceof HTMLSlotElement) {
+      root.assignedElements().map((slottedEl: HTMLElement) => {
+        getTabbableElements(slottedEl).map(el => tabbableElements.push(el));
+      });
+    }
+  }
+
+  // Look for tabbable elements in children
+  [...root.querySelectorAll('*')].map((el: HTMLElement) => {
+    getTabbableElements(el).map(el => tabbableElements.push(el));
+  });
+
+  return tabbableElements;
+}