diff --git a/app/client/packages/design-system/headless/src/components/Menu/src/MenuItem.tsx b/app/client/packages/design-system/headless/src/components/Menu/src/MenuItem.tsx
index 9687e89ab5..5de624f154 100644
--- a/app/client/packages/design-system/headless/src/components/Menu/src/MenuItem.tsx
+++ b/app/client/packages/design-system/headless/src/components/Menu/src/MenuItem.tsx
@@ -17,6 +17,7 @@ export const MenuItem = <T extends object>(props: MenuItemProps<T>) => {
       data-focused={isFocused ? "" : undefined}
       data-hovered={isFocused ? "" : undefined}
       data-selected={isSelected ? "" : undefined}
+      data-separator={Boolean(item.props.isSeparator) ? "" : undefined}
       ref={ref}
     >
       <div data-text>{item.rendered}</div>
diff --git a/app/client/packages/design-system/widgets/src/components/ActionGroup/src/ActionGroup.tsx b/app/client/packages/design-system/widgets/src/components/ActionGroup/src/ActionGroup.tsx
index e329d6a113..6484b5fa61 100644
--- a/app/client/packages/design-system/widgets/src/components/ActionGroup/src/ActionGroup.tsx
+++ b/app/client/packages/design-system/widgets/src/components/ActionGroup/src/ActionGroup.tsx
@@ -73,14 +73,29 @@ const _ActionGroup = <T extends object>(
           );
         })}
         {menuChildren?.length > 0 && (
-          <Menu onAction={onAction}>
+          <Menu
+            disabledKeys={[
+              ...state.disabledKeys,
+              ...menuChildren
+                // filtering out separators so that they can't be clicked or navigated
+                .filter((item) => item.props.isSeparator)
+                .map((item) => item.key),
+            ]}
+            onAction={onAction}
+          >
             <IconButton color={color} icon="dots" variant={variant} />
             <MenuList>
-              {menuChildren.map((item) => (
-                <Item isSeparator={item.props.isSeparator} key={item.key}>
-                  {item.rendered}
-                </Item>
-              ))}
+              {menuChildren.map((item) => {
+                return (
+                  <Item
+                    icon={item.props.icon}
+                    isSeparator={item.props.isSeparator}
+                    key={item.key}
+                  >
+                    {item.rendered}
+                  </Item>
+                );
+              })}
             </MenuList>
           </Menu>
         )}
diff --git a/app/client/packages/design-system/widgets/src/components/ActionGroup/stories/ActionGroup.stories.mdx b/app/client/packages/design-system/widgets/src/components/ActionGroup/stories/ActionGroup.stories.mdx
index d3cc75e0c6..6ed4b13d32 100644
--- a/app/client/packages/design-system/widgets/src/components/ActionGroup/stories/ActionGroup.stories.mdx
+++ b/app/client/packages/design-system/widgets/src/components/ActionGroup/stories/ActionGroup.stories.mdx
@@ -113,9 +113,11 @@ The `ActionGroup` can be `collapse`. By default it is not collapsed. When collpa
 <Story name="OverflowMode">
   <div style={{ maxWidth: 150 }}>
     <ActionGroup overflowMode="collapse" variant="outlined">
-      <Item key="option-1">Option 1</Item>
-      <Item isSeparator />
+      <Item key="option-1" icon="file">
+        Option 1
+      </Item>
       <Item key="option-2">Option 2</Item>
+      <Item isSeparator />
       <Item key="option-3" icon="file">
         {"Option 3"}
       </Item>
diff --git a/app/client/packages/design-system/widgets/src/components/Menu/src/styles.module.css b/app/client/packages/design-system/widgets/src/components/Menu/src/styles.module.css
index 2220e01eca..4a8f1e143b 100644
--- a/app/client/packages/design-system/widgets/src/components/Menu/src/styles.module.css
+++ b/app/client/packages/design-system/widgets/src/components/Menu/src/styles.module.css
@@ -75,3 +75,13 @@
     0 0 0 2px var(--color-bg),
     0 0 0 4px var(--color-bd-focus);
 }
+
+.menuList li[data-separator] {
+  border-top: var(--border-width-1) solid var(--color-bd);
+  padding: 0;
+}
+
+/* making sure the first and last child are not displayed when they have the data-separator attribute */
+.menuList li:is(:first-child, :last-child):is([data-separator]) {
+  display: none;
+}
diff --git a/app/client/src/widgets/wds/WDSInlineButtonsWidget/thumbnail.svg b/app/client/src/widgets/wds/WDSInlineButtonsWidget/thumbnail.svg
index c1c5702620..8aaff72647 100644
--- a/app/client/src/widgets/wds/WDSInlineButtonsWidget/thumbnail.svg
+++ b/app/client/src/widgets/wds/WDSInlineButtonsWidget/thumbnail.svg
@@ -1 +1 @@
-<svg xmlns="http://www.w3.org/2000/svg" width="72" height="76" fill="none"><rect width="19" height="16" x="5.5" y="30.5" fill="#FFEEE5" rx="2.5"/><rect width="19" height="16" x="5.5" y="30.5" stroke="#CC3D00" rx="2.5"/><path fill="#CC3D00" d="M19.5 43.5v.5h.5v-.5h-.5Zm-9 0H10v.5h.5v-.5Zm4.5-10 .332-.374a.5.5 0 0 0-.664 0L15 33.5Zm-1.5 10v.5h.5v-.5h-.5Zm0-4V39H13v.5h.5Zm3 0h.5V39h-.5v.5Zm0 4H16v.5h.5v-.5Zm2.664-6.298.332-.374-.332.373Zm-8.328 0-.332-.374.332.373ZM11 43.5v-5.551h-1v5.55h1Zm8-5.551V43.499h1V37.948h-1Zm-7.832-.374 4.164-3.701-.664-.748-4.164 3.702.664.747Zm3.5-3.701 4.164 3.701.665-.747-4.165-3.702-.664.748ZM13.5 43h-3v1h3v-1Zm.5.5v-4h-1v4h1Zm-.5-3.5H16.5v-1H13.5v1Zm6 3h-3v1h3v-1ZM16 39.5v4h1v-4h-1Zm4-1.551a1.5 1.5 0 0 0-.503-1.121l-.665.747a.5.5 0 0 1 .168.374h1Zm-9 0a.5.5 0 0 1 .168-.374l-.664-.747a1.5 1.5 0 0 0-.504 1.12h1Z"/><rect width="18" height="16" x="27.5" y="30.5" fill="#E3E8EF" rx="2.5"/><rect width="18" height="16" x="27.5" y="30.5" stroke="#6A7585" rx="2.5"/><circle cx="36.5" cy="38.5" r="5" stroke="#6A7585"/><path stroke="#6A7585" stroke-linecap="round" d="M34.5 38.5h4M36.5 40.5v-4"/><rect width="19" height="16" x="48.5" y="30.5" fill="#E3E8EF" rx="2.5"/><rect width="19" height="16" x="48.5" y="30.5" stroke="#6A7585" rx="2.5"/><circle cx="58" cy="38" r=".5" stroke="#6A7585" stroke-linejoin="round"/><circle cx="62" cy="38" r=".5" stroke="#6A7585" stroke-linejoin="round"/><circle cx="54" cy="38" r=".5" stroke="#6A7585" stroke-linejoin="round"/></svg>
\ No newline at end of file
+<svg xmlns="http://www.w3.org/2000/svg" width="72" height="76" fill="none"><rect width="59" height="23" x="6.5" y="26.5" fill="#fff" rx="4.5"/><rect width="59" height="23" x="6.5" y="26.5" stroke="#CDD5DF" rx="4.5"/><rect width="24" height="15" x="10.5" y="30.5" fill="#FFEEE5" rx="2.5"/><rect width="24" height="15" x="10.5" y="30.5" stroke="#CC3D00" rx="2.5"/><path stroke="#CC3D00" stroke-linecap="round" stroke-linejoin="round" d="m18.5 37.5 3 3 5-5"/><rect width="24" height="15" x="37.5" y="30.5" fill="#FFEEE5" rx="2.5"/><rect width="24" height="15" x="37.5" y="30.5" stroke="#CC3D00" rx="2.5"/><path stroke="#CC3D00" stroke-linecap="round" d="m46.5 35 6 6m0-6-6 6"/></svg>
\ No newline at end of file
diff --git a/app/client/src/widgets/wds/WDSToolbarButtonsWidget/thumbnail.svg b/app/client/src/widgets/wds/WDSToolbarButtonsWidget/thumbnail.svg
index 8aaff72647..c1c5702620 100644
--- a/app/client/src/widgets/wds/WDSToolbarButtonsWidget/thumbnail.svg
+++ b/app/client/src/widgets/wds/WDSToolbarButtonsWidget/thumbnail.svg
@@ -1 +1 @@
-<svg xmlns="http://www.w3.org/2000/svg" width="72" height="76" fill="none"><rect width="59" height="23" x="6.5" y="26.5" fill="#fff" rx="4.5"/><rect width="59" height="23" x="6.5" y="26.5" stroke="#CDD5DF" rx="4.5"/><rect width="24" height="15" x="10.5" y="30.5" fill="#FFEEE5" rx="2.5"/><rect width="24" height="15" x="10.5" y="30.5" stroke="#CC3D00" rx="2.5"/><path stroke="#CC3D00" stroke-linecap="round" stroke-linejoin="round" d="m18.5 37.5 3 3 5-5"/><rect width="24" height="15" x="37.5" y="30.5" fill="#FFEEE5" rx="2.5"/><rect width="24" height="15" x="37.5" y="30.5" stroke="#CC3D00" rx="2.5"/><path stroke="#CC3D00" stroke-linecap="round" d="m46.5 35 6 6m0-6-6 6"/></svg>
\ No newline at end of file
+<svg xmlns="http://www.w3.org/2000/svg" width="72" height="76" fill="none"><rect width="19" height="16" x="5.5" y="30.5" fill="#FFEEE5" rx="2.5"/><rect width="19" height="16" x="5.5" y="30.5" stroke="#CC3D00" rx="2.5"/><path fill="#CC3D00" d="M19.5 43.5v.5h.5v-.5h-.5Zm-9 0H10v.5h.5v-.5Zm4.5-10 .332-.374a.5.5 0 0 0-.664 0L15 33.5Zm-1.5 10v.5h.5v-.5h-.5Zm0-4V39H13v.5h.5Zm3 0h.5V39h-.5v.5Zm0 4H16v.5h.5v-.5Zm2.664-6.298.332-.374-.332.373Zm-8.328 0-.332-.374.332.373ZM11 43.5v-5.551h-1v5.55h1Zm8-5.551V43.499h1V37.948h-1Zm-7.832-.374 4.164-3.701-.664-.748-4.164 3.702.664.747Zm3.5-3.701 4.164 3.701.665-.747-4.165-3.702-.664.748ZM13.5 43h-3v1h3v-1Zm.5.5v-4h-1v4h1Zm-.5-3.5H16.5v-1H13.5v1Zm6 3h-3v1h3v-1ZM16 39.5v4h1v-4h-1Zm4-1.551a1.5 1.5 0 0 0-.503-1.121l-.665.747a.5.5 0 0 1 .168.374h1Zm-9 0a.5.5 0 0 1 .168-.374l-.664-.747a1.5 1.5 0 0 0-.504 1.12h1Z"/><rect width="18" height="16" x="27.5" y="30.5" fill="#E3E8EF" rx="2.5"/><rect width="18" height="16" x="27.5" y="30.5" stroke="#6A7585" rx="2.5"/><circle cx="36.5" cy="38.5" r="5" stroke="#6A7585"/><path stroke="#6A7585" stroke-linecap="round" d="M34.5 38.5h4M36.5 40.5v-4"/><rect width="19" height="16" x="48.5" y="30.5" fill="#E3E8EF" rx="2.5"/><rect width="19" height="16" x="48.5" y="30.5" stroke="#6A7585" rx="2.5"/><circle cx="58" cy="38" r=".5" stroke="#6A7585" stroke-linejoin="round"/><circle cx="62" cy="38" r=".5" stroke="#6A7585" stroke-linejoin="round"/><circle cx="54" cy="38" r=".5" stroke="#6A7585" stroke-linejoin="round"/></svg>
\ No newline at end of file