diff --git a/app/client/cypress/fixtures/CanvasResizeDsl.json b/app/client/cypress/fixtures/CanvasResizeDsl.json
new file mode 100644
index 0000000000..0ade4a1ac2
--- /dev/null
+++ b/app/client/cypress/fixtures/CanvasResizeDsl.json
@@ -0,0 +1,57 @@
+{
+    "dsl": {
+        "widgetName": "MainContainer",
+        "backgroundColor": "none",
+        "rightColumn": 1224,
+        "snapColumns": 16,
+        "detachFromLayout": true,
+        "widgetId": "0",
+        "topRow": 0,
+        "bottomRow": 2960,
+        "containerStyle": "none",
+        "snapRows": 33,
+        "parentRowSpace": 1,
+        "type": "CANVAS_WIDGET",
+        "canExtend": true,
+        "version": 7,
+        "minHeight": 1292,
+        "parentColumnSpace": 1,
+        "dynamicBindingPathList": [],
+        "leftColumn": 0,
+        "children": [
+          {
+            "widgetName": "Text2",
+            "rightColumn": 8,
+            "textAlign": "LEFT",
+            "widgetId": "i4eeob8e7t",
+            "topRow": 71,
+            "bottomRow": 72,
+            "parentRowSpace": 40,
+            "isVisible": true,
+            "type": "TEXT_WIDGET",
+            "parentId": "0",
+            "isLoading": false,
+            "parentColumnSpace": 74,
+            "leftColumn": 4,
+            "text": "Label",
+            "textStyle": "LABEL"
+          },
+          {
+            "widgetName": "Checkbox1",
+            "rightColumn": 4,
+            "widgetId": "vyl7d3u54d",
+            "topRow": 5,
+            "bottomRow": 6,
+            "parentRowSpace": 40,
+            "isVisible": true,
+            "label": "Label",
+            "type": "CHECKBOX_WIDGET",
+            "parentId": "0",
+            "isLoading": false,
+            "parentColumnSpace": 74,
+            "leftColumn": 1,
+            "defaultCheckedState": true
+          }
+        ]
+      }
+}
\ No newline at end of file
diff --git a/app/client/cypress/integration/Smoke_TestSuite/Canvas/Resize_spec.js b/app/client/cypress/integration/Smoke_TestSuite/Canvas/Resize_spec.js
new file mode 100644
index 0000000000..d31feed86d
--- /dev/null
+++ b/app/client/cypress/integration/Smoke_TestSuite/Canvas/Resize_spec.js
@@ -0,0 +1,16 @@
+const commonlocators = require("../../../locators/commonlocators.json");
+const dsl = require("../../../fixtures/CanvasResizeDsl.json");
+
+describe("Canvas Resize", function() {
+  before(() => {
+    cy.addDsl(dsl);
+  });
+  it("Deleting bottom widget should resize canvas", function() {
+    const InitHeight = "2960px";
+    const FinalHeight = "1292px";
+    cy.get(commonlocators.dropTarget).should("have.css", "height", InitHeight);
+    cy.openPropertyPane("textwidget");
+    cy.get(commonlocators.deleteWidget).click();
+    cy.get(commonlocators.dropTarget).should("have.css", "height", FinalHeight);
+  });
+});
diff --git a/app/client/cypress/integration/Smoke_TestSuite/ExplorerTests/Entity_Explorer_DragAndDropWidget_spec.js b/app/client/cypress/integration/Smoke_TestSuite/ExplorerTests/Entity_Explorer_DragAndDropWidget_spec.js
index b9fc71360c..8af5138486 100644
--- a/app/client/cypress/integration/Smoke_TestSuite/ExplorerTests/Entity_Explorer_DragAndDropWidget_spec.js
+++ b/app/client/cypress/integration/Smoke_TestSuite/ExplorerTests/Entity_Explorer_DragAndDropWidget_spec.js
@@ -15,7 +15,7 @@ describe("Entity explorer Drag and Drop widgets testcases", function() {
     cy.get(commonlocators.entityExplorersearch)
       .clear()
       .type("form");
-    cy.dragAndDropToCanvas("formwidget");
+    cy.dragAndDropToCanvas("formwidget", { x: 300, y: -300 });
     /**
      * @param{Text} Random Text
      * @param{FormWidget}Mouseover
diff --git a/app/client/cypress/integration/Smoke_TestSuite/LayoutWidgets/Tab_spec.js b/app/client/cypress/integration/Smoke_TestSuite/LayoutWidgets/Tab_spec.js
index 38e9147674..e358cada5e 100644
--- a/app/client/cypress/integration/Smoke_TestSuite/LayoutWidgets/Tab_spec.js
+++ b/app/client/cypress/integration/Smoke_TestSuite/LayoutWidgets/Tab_spec.js
@@ -32,6 +32,7 @@ describe("Tab widget test", function() {
       .click({ force: true })
       .should("be.visible");
     cy.get(Layoutpage.tabButton).click({ force: true });
+    cy.wait(200);
     cy.tabVerify(2, "Day");
     cy.get(Layoutpage.tabDelete)
       .eq(2)
diff --git a/app/client/cypress/locators/commonlocators.json b/app/client/cypress/locators/commonlocators.json
index b6e49bef45..e8fdd2183a 100644
--- a/app/client/cypress/locators/commonlocators.json
+++ b/app/client/cypress/locators/commonlocators.json
@@ -70,6 +70,7 @@
   "toastmsg": ".Toastify__toast-body span",
   "copyWidget": ".t--copy-widget",
   "deleteWidget": ".t--delete-widget",
+  "dropTarget":".t--drop-target",
   "toastAction": ".t--toast-action",
   "toastBody": ".Toastify__toast-body",
   "videoInner": ".t--draggable-videowidget span.t--widget-name",
diff --git a/app/client/cypress/support/commands.js b/app/client/cypress/support/commands.js
index 93823443c7..d5e3516184 100644
--- a/app/client/cypress/support/commands.js
+++ b/app/client/cypress/support/commands.js
@@ -1526,11 +1526,11 @@ Cypress.Commands.add("runAndDeleteQuery", () => {
   );
 });
 
-Cypress.Commands.add("dragAndDropToCanvas", widgetType => {
+Cypress.Commands.add("dragAndDropToCanvas", (widgetType, { x, y }) => {
   const selector = `.t--widget-card-draggable-${widgetType}`;
   cy.get(selector)
     .trigger("mousedown", { button: 0 }, { force: true })
-    .trigger("mousemove", 300, -300, { force: true });
+    .trigger("mousemove", x, y, { force: true });
   cy.get(explorer.dropHere)
     .click()
     .trigger("mouseup", { force: true });
diff --git a/app/client/src/components/editorComponents/DropTargetComponent.tsx b/app/client/src/components/editorComponents/DropTargetComponent.tsx
index 1042715989..8fb3d91473 100644
--- a/app/client/src/components/editorComponents/DropTargetComponent.tsx
+++ b/app/client/src/components/editorComponents/DropTargetComponent.tsx
@@ -276,6 +276,7 @@ export const DropTargetComponent = memo((props: DropTargetComponentProps) => {
           height,
           border,
         }}
+        className={"t--drop-target"}
       >
         {props.children}
         {!(childWidgets && childWidgets.length) &&
diff --git a/app/client/src/sagas/WidgetOperationSagas.tsx b/app/client/src/sagas/WidgetOperationSagas.tsx
index 31a8614b3f..c8f42b751c 100644
--- a/app/client/src/sagas/WidgetOperationSagas.tsx
+++ b/app/client/src/sagas/WidgetOperationSagas.tsx
@@ -329,6 +329,36 @@ const getAllWidgetsInTree = (
   return widgetList;
 };
 
+/**
+ * Note: Mutates finalWidgets[parentId].bottomRow for CANVAS_WIDGET
+ * @param finalWidgets
+ * @param parentId
+ */
+const resizeCanvasToLowestWidget = (
+  finalWidgets: CanvasWidgetsReduxState,
+  parentId: string,
+) => {
+  if (
+    !finalWidgets[parentId] ||
+    finalWidgets[parentId].type !== WidgetTypes.CANVAS_WIDGET
+  ) {
+    return;
+  }
+
+  let lowestBottomRow = 0;
+  const childIds = finalWidgets[parentId].children || [];
+  // find lowest row
+  childIds.forEach(cId => {
+    const child = finalWidgets[cId];
+    if (child.bottomRow > lowestBottomRow) {
+      lowestBottomRow = child.bottomRow;
+    }
+  });
+  finalWidgets[parentId].bottomRow =
+    (lowestBottomRow + GridDefaults.CANVAS_EXTENSION_OFFSET) *
+    GridDefaults.DEFAULT_GRID_ROW_HEIGHT;
+};
+
 export function* deleteSaga(deleteAction: ReduxAction<WidgetDelete>) {
   try {
     let { widgetId, parentId } = deleteAction.payload;
@@ -402,11 +432,14 @@ export function* deleteSaga(deleteAction: ReduxAction<WidgetDelete>) {
 
       yield call(clearEvalPropertyCacheOfWidget, widgetName);
 
-      const finalWidgets = _.omit(
+      const finalWidgets: CanvasWidgetsReduxState = _.omit(
         widgets,
         otherWidgetsToDelete.map(widgets => widgets.widgetId),
       );
 
+      // Note: mutates finalWidgets
+      resizeCanvasToLowestWidget(finalWidgets, parentId);
+
       yield put(updateAndSaveLayout(finalWidgets));
     }
   } catch (error) {