diff --git a/src/browser/services/SelectionService.ts b/src/browser/services/SelectionService.ts
index 39d666de..6abd5fb9 100644
--- a/src/browser/services/SelectionService.ts
+++ b/src/browser/services/SelectionService.ts
@@ -532,6 +532,9 @@ export class SelectionService extends Disposable implements ISelectionService {
    * @param event The mouse event.
    */
   private _handleSingleClick(event: MouseEvent): void {
+    // Track if there was a selection before clearing
+    const hadSelection = this.hasSelection;
+
     this._model.selectionStartLength = 0;
     this._model.isSelectAllActive = false;
     this._activeSelectionMode = this.shouldColumnSelect(event) ? SelectionMode.COLUMN : SelectionMode.NORMAL;
@@ -543,6 +546,11 @@ export class SelectionService extends Disposable implements ISelectionService {
     }
     this._model.selectionEnd = undefined;
 
+    // Fire selection change event if a selection was cleared
+    if (hadSelection) {
+      this._fireOnSelectionChange(this._model.finalSelectionStart, this._model.finalSelectionEnd, false);
+    }
+
     // Ensure the line exists
     const line = this._bufferService.buffer.lines.get(this._model.selectionStart[1]);
     if (!line) {
diff --git a/test/playwright/Terminal.test.ts b/test/playwright/Terminal.test.ts
index acd89f73..6dee11da 100644
--- a/test/playwright/Terminal.test.ts
+++ b/test/playwright/Terminal.test.ts
@@ -361,17 +361,72 @@ test.describe('API Integration Tests', () => {
       await pollFor(ctx.page, `window.calls`, [1, 2]);
     });
 
-    test('onSelectionChange', async () => {
-      await openTerminal(ctx);
-      await ctx.page.evaluate(`
-        window.callCount = 0;
-        window.term.onSelectionChange(() => window.callCount++);
-      `);
-      await pollFor(ctx.page, `window.callCount`, 0);
-      await ctx.page.evaluate(`window.term.selectAll()`);
-      await pollFor(ctx.page, `window.callCount`, 1);
-      await ctx.page.evaluate(`window.term.clearSelection()`);
-      await pollFor(ctx.page, `window.callCount`, 2);
+    test.describe('onSelectionChange', () => {
+      let callCount: number;
+
+      test.beforeEach(async () => {
+        await openTerminal(ctx);
+        callCount = 0;
+        ctx.proxy.onSelectionChange(() => callCount++);
+      });
+
+      test('should fire for programmatic selection changes', async () => {
+        strictEqual(callCount, 0);
+        await ctx.proxy.selectAll();
+        strictEqual(callCount, 1);
+        await ctx.proxy.clearSelection();
+        strictEqual(callCount, 2);
+      });
+
+      test('should fire on mousedown when clearing selection', async () => {
+        await ctx.proxy.write('foo bar baz');
+        await ctx.proxy.selectAll();
+        strictEqual(callCount, 1);
+
+        const dims = (await ctx.proxy.dimensions)!;
+        const termRect: any = await ctx.page.evaluate(`window.term.element.getBoundingClientRect()`);
+        const x = termRect.left + dims.css.cell.width * 5;
+        const y = termRect.top + dims.css.cell.height * 0.5;
+        await ctx.page.mouse.click(x, y);
+
+        await pollFor(ctx.page, () => callCount, 2);
+      });
+
+      test('should not fire on mousedown when no prior selection', async () => {
+        await ctx.proxy.write('foo bar baz');
+        strictEqual(callCount, 0);
+
+        const dims = (await ctx.proxy.dimensions)!;
+        const termRect: any = await ctx.page.evaluate(`window.term.element.getBoundingClientRect()`);
+        const x = termRect.left + dims.css.cell.width * 5;
+        const y = termRect.top + dims.css.cell.height * 0.5;
+        await ctx.page.mouse.click(x, y);
+        await timeout(20);
+
+        strictEqual(callCount, 0);
+      });
+
+      test('should fire once on mousedown to clear, and again on mouseup after drag', async () => {
+        await ctx.proxy.write('foo bar baz');
+        await ctx.proxy.selectAll();
+        strictEqual(callCount, 1);
+
+        const dims = (await ctx.proxy.dimensions)!;
+        const termRect: any = await ctx.page.evaluate(`window.term.element.getBoundingClientRect()`);
+        const startX = termRect.left + dims.css.cell.width * 0.5;
+        const endX = termRect.left + dims.css.cell.width * 5;
+        const y = termRect.top + dims.css.cell.height * 0.5;
+
+        await ctx.page.mouse.move(startX, y);
+        await ctx.page.mouse.down();
+        await pollFor(ctx.page, () => callCount, 2);
+
+        await ctx.page.mouse.move(endX, y);
+        strictEqual(callCount, 2);
+
+        await ctx.page.mouse.up();
+        await pollFor(ctx.page, () => callCount, 3);
+      });
     });
 
     test('onRender', async () => {