diff --git a/apps/web/src/api/types.ts b/apps/web/src/api/types.ts
index adbc2d9..7745527 100644
--- a/apps/web/src/api/types.ts
+++ b/apps/web/src/api/types.ts
@@ -233,7 +233,7 @@ export interface GitMeta {
 
 // v1.9: 'settings' is an ephemeral pane kind — never persisted, always
 // singleton per workspace. The pane hook filters it out before writing to
-// localStorage and dedupes on insertion via openOrFocusSettingsPane().
+// localStorage and dedupes on insertion via toggleSettingsPane().
 export type WorkspacePaneKind = 'chat' | 'terminal' | 'agent' | 'empty' | 'settings';
 
 export interface WorkspacePane {
diff --git a/apps/web/src/components/Workspace.tsx b/apps/web/src/components/Workspace.tsx
index 52068e1..34fceb8 100644
--- a/apps/web/src/components/Workspace.tsx
+++ b/apps/web/src/components/Workspace.tsx
@@ -81,14 +81,27 @@ export function Workspace({
   const [maximized, setMaximized] = useState(false);
   const settingsIdx = panes.findIndex((p) => p.kind === 'settings');
 
+  // Esc semantics: maximized → restore; otherwise → close settings pane (only
+  // when it's the active pane). Bail when the user is typing in a field or
+  // inside an open dialog so we don't eat their cancel keystroke.
   useEffect(() => {
-    if (!maximized) return;
+    if (settingsIdx < 0) return;
     function onKey(e: KeyboardEvent) {
-      if (e.key === 'Escape') setMaximized(false);
+      if (e.key !== 'Escape') return;
+      const t = e.target;
+      if (t instanceof HTMLElement) {
+        if (t.tagName === 'INPUT' || t.tagName === 'TEXTAREA' || t.isContentEditable) return;
+        if (t.closest('[role="dialog"]')) return;
+      }
+      if (maximized) {
+        setMaximized(false);
+      } else if (activePaneIdx === settingsIdx) {
+        removePane(settingsIdx);
+      }
     }
     window.addEventListener('keydown', onKey);
     return () => window.removeEventListener('keydown', onKey);
-  }, [maximized]);
+  }, [maximized, settingsIdx, activePaneIdx, removePane]);
 
   // If the settings pane was closed (no longer in panes) while maximized,
   // clear the maximize state so the grid renders normally.
@@ -210,6 +223,7 @@ export function Workspace({
                   project={project}
                   maximized={maximized}
                   onToggleMaximize={() => setMaximized((v) => !v)}
+                  onClose={() => removePane(idx)}
                   isMobile={isMobile}
                 />
               ) : pane.kind === 'chat' && pane.chatId ? (
diff --git a/apps/web/src/components/panes/SettingsPane.tsx b/apps/web/src/components/panes/SettingsPane.tsx
index ab1c2e9..1fcda97 100644
--- a/apps/web/src/components/panes/SettingsPane.tsx
+++ b/apps/web/src/components/panes/SettingsPane.tsx
@@ -1,5 +1,5 @@
 import { useEffect, useState } from 'react';
-import { Archive, Maximize2, Minimize2 } from 'lucide-react';
+import { Archive, Maximize2, Minimize2, X } from 'lucide-react';
 import { toast } from 'sonner';
 import { api } from '@/api/client';
 import type { Project, Session } from '@/api/types';
@@ -24,6 +24,7 @@ interface Props {
   project: Project;
   maximized: boolean;
   onToggleMaximize: () => void;
+  onClose: () => void;
   isMobile: boolean;
 }
 
@@ -65,7 +66,7 @@ function Switch({
   );
 }
 
-export function SettingsPane({ session, project, maximized, onToggleMaximize, isMobile }: Props) {
+export function SettingsPane({ session, project, maximized, onToggleMaximize, onClose, isMobile }: Props) {
   const [activeSection, setActiveSection] = useState<Section>('session');
 
   return (
@@ -99,6 +100,15 @@ export function SettingsPane({ session, project, maximized, onToggleMaximize, is
             {maximized ? <Minimize2 size={14} /> : <Maximize2 size={14} />}
           </button>
         )}
+        <button
+          type="button"
+          onClick={onClose}
+          className="inline-flex items-center justify-center p-1 rounded text-muted-foreground hover:bg-muted hover:text-foreground max-md:min-h-[44px] max-md:min-w-[44px]"
+          aria-label="Close settings"
+          title="Close (Esc)"
+        >
+          <X size={14} />
+        </button>
       </div>
 
       <div className="flex-1 overflow-y-auto">
diff --git a/apps/web/src/hooks/sessionEvents.ts b/apps/web/src/hooks/sessionEvents.ts
index 243fac5..7b43482 100644
--- a/apps/web/src/hooks/sessionEvents.ts
+++ b/apps/web/src/hooks/sessionEvents.ts
@@ -62,10 +62,10 @@ export interface OpenChatInActivePaneEvent {
   chat_id: string;
 }
 
-// v1.9: client-side event fired by the sidebar Settings button when a
-// session is currently mounted. Session.tsx subscribes and calls
-// panesHook.openOrFocusSettingsPane(). Sidebar handles the no-session case
-// by navigating to /settings (themes page) directly.
+// Client-side event fired by the sidebar Settings button when a session is
+// currently mounted. Session.tsx subscribes and calls
+// panesHook.toggleSettingsPane() (open on first click, close on second).
+// Sidebar handles the no-session case by navigating to /settings directly.
 export interface OpenSettingsPaneEvent {
   type: 'open_settings_pane';
 }
diff --git a/apps/web/src/hooks/useSidebar.ts b/apps/web/src/hooks/useSidebar.ts
index 27dbc0c..9e7a016 100644
--- a/apps/web/src/hooks/useSidebar.ts
+++ b/apps/web/src/hooks/useSidebar.ts
@@ -152,8 +152,8 @@ function applyEvent(prev: SidebarResponse, event: import('./sessionEvents').Sess
       // Consumed by Workspace; sidebar has no business with pane state.
       return prev;
     case 'open_settings_pane':
-      // v1.9: consumed by Session.tsx (calls openOrFocusSettingsPane on its
-      // panesHook). Sidebar data is untouched.
+      // Consumed by Session.tsx (calls toggleSettingsPane on its panesHook).
+      // Sidebar data is untouched.
       return prev;
     case 'session_archived': {
       let changed = false;
diff --git a/apps/web/src/hooks/useWorkspacePanes.ts b/apps/web/src/hooks/useWorkspacePanes.ts
index 5d03c8d..4bea4ac 100644
--- a/apps/web/src/hooks/useWorkspacePanes.ts
+++ b/apps/web/src/hooks/useWorkspacePanes.ts
@@ -73,10 +73,10 @@ export interface UseWorkspacePanesResult {
   closeAllTabs: (paneIdx: number) => void;
   showLandingPage: (paneIdx: number) => void;
   addSplitPane: (kind: 'chat' | 'terminal' | 'agent') => void;
-  // v1.9: idempotent open-or-focus for the settings pane singleton. Appends
-  // a new settings pane if none exists, otherwise just focuses the existing
-  // one. Always succeeds — settings panes don't count toward MAX_PANES.
-  openOrFocusSettingsPane: () => void;
+  // Open-on-first-click, close-on-second-click. Singleton — settings panes
+  // don't count toward MAX_PANES. Closing the only remaining pane (edge case)
+  // falls back to an empty pane to preserve the "always one pane" invariant.
+  toggleSettingsPane: () => void;
   removePane: (idx: number) => void;
   removeChatFromPanes: (chatId: string) => void;
   initializeFirstChatIfEmpty: (chatId: string) => void;
@@ -254,22 +254,35 @@ export function useWorkspacePanes(sessionId: string): UseWorkspacePanesResult {
     });
   }, []);
 
-  const openOrFocusSettingsPane = useCallback(() => {
+  const toggleSettingsPane = useCallback(() => {
     setPanes((prev) => {
       const existingIdx = prev.findIndex((p) => p.kind === 'settings');
-      if (existingIdx >= 0) {
-        setActivePaneIdx(existingIdx);
-        return prev;
+      if (existingIdx < 0) {
+        const next = [...prev, settingsPane()];
+        setActivePaneIdx(next.length - 1);
+        return next;
       }
-      const next = [...prev, settingsPane()];
-      setActivePaneIdx(next.length - 1);
+      if (prev.length <= 1) {
+        setActivePaneIdx(0);
+        return [emptyPane()];
+      }
+      const next = prev.filter((_, i) => i !== existingIdx);
+      setActivePaneIdx((ai) => Math.min(ai, next.length - 1));
       return next;
     });
   }, []);
 
   const removePane = useCallback((idx: number) => {
     setPanes((prev) => {
-      if (prev.length <= 1) return prev;
+      if (prev.length <= 1) {
+        // Settings is the only kind that can be the last pane and still need
+        // closing (X / Esc / sidebar toggle). Fall back to empty.
+        if (prev[idx]?.kind === 'settings') {
+          setActivePaneIdx(0);
+          return [emptyPane()];
+        }
+        return prev;
+      }
       const next = prev.filter((_, i) => i !== idx);
       setActivePaneIdx((ai) => Math.min(ai, next.length - 1));
       return next;
@@ -359,7 +372,6 @@ export function useWorkspacePanes(sessionId: string): UseWorkspacePanesResult {
     setActivePaneIdx,
     activePaneIdxRef,
     openChatInPane,
-    openOrFocusSettingsPane,
     switchTab,
     removeTab,
     closeOtherTabs,
@@ -367,6 +379,7 @@ export function useWorkspacePanes(sessionId: string): UseWorkspacePanesResult {
     closeAllTabs,
     showLandingPage,
     addSplitPane,
+    toggleSettingsPane,
     removePane,
     removeChatFromPanes,
     initializeFirstChatIfEmpty,
diff --git a/apps/web/src/pages/Session.tsx b/apps/web/src/pages/Session.tsx
index 19c3aba..8eb58e6 100644
--- a/apps/web/src/pages/Session.tsx
+++ b/apps/web/src/pages/Session.tsx
@@ -134,11 +134,10 @@ function SessionInner({ sessionId }: { sessionId: string }) {
         void api.projects.get(project.id).then(setProject).catch(() => {});
         return;
       }
-      // v1.9: sidebar Settings button broadcasts this when a session is
-      // mounted; we own the workspace pane state, so we open/focus the
-      // singleton settings pane here.
+      // Sidebar Settings button broadcasts this when a session is mounted;
+      // toggleSettingsPane opens on first click, closes on second.
       if (event.type === 'open_settings_pane') {
-        panesHook.openOrFocusSettingsPane();
+        panesHook.toggleSettingsPane();
       }
     });
   }, [sessionId, editingName, navigate, project, panesHook]);