diff --git a/frontend/src/container/PanelWrapper/UplotPanelWrapper.tsx b/frontend/src/container/PanelWrapper/UplotPanelWrapper.tsx
index 77b29c779854..4e48296ed514 100644
--- a/frontend/src/container/PanelWrapper/UplotPanelWrapper.tsx
+++ b/frontend/src/container/PanelWrapper/UplotPanelWrapper.tsx
@@ -138,6 +138,7 @@ function UplotPanelWrapper({
 				timezone: timezone.value,
 				customSeries,
 				isLogScale: widget?.isLogScale,
+				enhancedLegend: true, // Enable enhanced legend
 			}),
 		[
 			widget?.id,
diff --git a/frontend/src/container/PanelWrapper/enhancedLegend.ts b/frontend/src/container/PanelWrapper/enhancedLegend.ts
new file mode 100644
index 000000000000..c33a376719c4
--- /dev/null
+++ b/frontend/src/container/PanelWrapper/enhancedLegend.ts
@@ -0,0 +1,123 @@
+import { Dimensions } from 'hooks/useDimensions';
+
+export interface EnhancedLegendConfig {
+	minHeight: number;
+	maxHeight: number;
+	calculatedHeight: number;
+	showScrollbar: boolean;
+	requiredRows: number;
+}
+
+/**
+ * Calculate legend configuration based on panel dimensions and series count
+ * Prioritizes chart space while ensuring legend usability
+ */
+export function calculateEnhancedLegendConfig(
+	dimensions: Dimensions,
+	seriesCount: number,
+	seriesLabels?: string[],
+): EnhancedLegendConfig {
+	const lineHeight = 34;
+	const padding = 12;
+	const maxRowsToShow = 2; // Reduced from 3 to 2 for better chart/legend ratio
+
+	// Legend should not take more than 15% of panel height, with absolute max of 80px
+	const maxLegendRatio = 0.15;
+	const absoluteMaxHeight = Math.min(80, dimensions.height * maxLegendRatio);
+
+	const baseItemWidth = 44;
+	const avgCharWidth = 8;
+
+	let avgTextLength = 15;
+	if (seriesLabels && seriesLabels.length > 0) {
+		const totalLength = seriesLabels.reduce(
+			(sum, label) => sum + Math.min(label.length, 30),
+			0,
+		);
+		avgTextLength = Math.max(8, Math.min(25, totalLength / seriesLabels.length));
+	}
+
+	// Estimate item width based on actual or estimated text length
+	let estimatedItemWidth = baseItemWidth + avgCharWidth * avgTextLength;
+
+	// For very wide panels, allow longer text
+	if (dimensions.width > 800) {
+		estimatedItemWidth = Math.max(
+			estimatedItemWidth,
+			baseItemWidth + avgCharWidth * 22,
+		);
+	} else if (dimensions.width < 400) {
+		estimatedItemWidth = Math.min(
+			estimatedItemWidth,
+			baseItemWidth + avgCharWidth * 14,
+		);
+	}
+
+	// Calculate items per row based on available width
+	const availableWidth = dimensions.width - padding * 2;
+	const itemsPerRow = Math.max(
+		1,
+		Math.floor(availableWidth / estimatedItemWidth),
+	);
+	const requiredRows = Math.ceil(seriesCount / itemsPerRow);
+
+	// Calculate heights
+	const idealHeight = requiredRows * lineHeight + padding;
+
+	// For single row, use minimal height
+	let minHeight;
+	if (requiredRows <= 1) {
+		minHeight = lineHeight + padding; // Single row
+	} else {
+		// Multiple rows: show 2 rows max, then scroll
+		minHeight = Math.min(2 * lineHeight + padding, idealHeight);
+	}
+
+	// Maximum height constraint - prioritize chart space
+	const maxHeight = Math.min(
+		maxRowsToShow * lineHeight + padding,
+		absoluteMaxHeight,
+	);
+
+	const calculatedHeight = Math.max(minHeight, Math.min(idealHeight, maxHeight));
+	const showScrollbar = idealHeight > calculatedHeight;
+
+	return {
+		minHeight,
+		maxHeight,
+		calculatedHeight,
+		showScrollbar,
+		requiredRows,
+	};
+}
+
+/**
+ * Apply enhanced legend styling to a legend element
+ */
+export function applyEnhancedLegendStyling(
+	legend: HTMLElement,
+	config: EnhancedLegendConfig,
+	requiredRows: number,
+): void {
+	const legendElement = legend;
+	legendElement.classList.add('u-legend-enhanced');
+	legendElement.style.height = `${config.calculatedHeight}px`;
+	legendElement.style.minHeight = `${config.minHeight}px`;
+	legendElement.style.maxHeight = `${config.maxHeight}px`;
+
+	// Apply alignment based on number of rows
+	if (requiredRows === 1) {
+		legendElement.classList.add('u-legend-single-line');
+		legendElement.classList.remove('u-legend-multi-line');
+	} else {
+		legendElement.classList.add('u-legend-multi-line');
+		legendElement.classList.remove('u-legend-single-line');
+	}
+
+	// Add scrollbar indicator if needed
+	if (config.showScrollbar) {
+		legendElement.classList.add('u-legend-scrollable');
+	} else {
+		legendElement.classList.remove('u-legend-scrollable');
+	}
+}
diff --git a/frontend/src/lib/uPlotLib/getUplotChartOptions.ts b/frontend/src/lib/uPlotLib/getUplotChartOptions.ts
index 9c29e29d5bca..9c4ed06d932b 100644
--- a/frontend/src/lib/uPlotLib/getUplotChartOptions.ts
+++ b/frontend/src/lib/uPlotLib/getUplotChartOptions.ts
@@ -8,8 +8,13 @@ import { PANEL_TYPES } from 'constants/queryBuilder';
 import { FullViewProps } from 'container/GridCardLayout/GridCard/FullView/types';
 import { saveLegendEntriesToLocalStorage } from 'container/GridCardLayout/GridCard/FullView/utils';
 import { ThresholdProps } from 'container/NewWidget/RightContainer/Threshold/types';
+import {
+	applyEnhancedLegendStyling,
+	calculateEnhancedLegendConfig,
+} from 'container/PanelWrapper/enhancedLegend';
 import { Dimensions } from 'hooks/useDimensions';
 import { convertValue } from 'lib/getConvertedValue';
+import getLabelName from 'lib/getLabelName';
 import { cloneDeep, isUndefined } from 'lodash-es';
 import _noop from 'lodash-es/noop';
 import { MetricRangePayloadProps } from 'types/api/metrics/getQueryRange';
@@ -60,6 +65,7 @@ export interface GetUPlotChartOptions {
 	customSeries?: (data: QueryData[]) => uPlot.Series[];
 	isLogScale?: boolean;
 	colorMapping?: Record<string, string>;
+	enhancedLegend?: boolean;
 }
 
 /** the function converts series A , series B , series C to
@@ -168,6 +174,7 @@ export const getUPlotChartOptions = ({
 	customSeries,
 	isLogScale,
 	colorMapping,
+	enhancedLegend = true,
 }: GetUPlotChartOptions): uPlot.Options => {
 	const timeScaleProps = getXAxisScale(minTimeScale, maxTimeScale);
 
@@ -180,10 +187,27 @@ export const getUPlotChartOptions = ({
 
 	const bands = stackBarChart ? getBands(series) : null;
 
+	// Calculate dynamic legend height based on panel dimensions and series count
+	const seriesCount = (apiResponse?.data?.result || []).length;
+	const seriesLabels = enhancedLegend
+		? (apiResponse?.data?.result || []).map((item) =>
+				getLabelName(item.metric || {}, item.queryName || '', item.legend || ''),
+		  )
+		: [];
+	const legendConfig = enhancedLegend
+		? calculateEnhancedLegendConfig(dimensions, seriesCount, seriesLabels)
+		: {
+				calculatedHeight: 30,
+				minHeight: 30,
+				maxHeight: 30,
+				itemsPerRow: 3,
+				showScrollbar: false,
+		  };
+
 	return {
 		id,
 		width: dimensions.width,
-		height: dimensions.height - 30,
+		height: dimensions.height - legendConfig.calculatedHeight - 10, // Adjust chart height for enhanced legend
 		legend: {
 			show: true,
 			live: false,
@@ -335,6 +359,15 @@ export const getUPlotChartOptions = ({
 				(self): void => {
 					const legend = self.root.querySelector('.u-legend');
 					if (legend) {
+						// Apply enhanced legend styling
+						if (enhancedLegend) {
+							applyEnhancedLegendStyling(
+								legend as HTMLElement,
+								legendConfig,
+								legendConfig.requiredRows,
+							);
+						}
+
 						const seriesEls = legend.querySelectorAll('.u-series');
 						const seriesArray = Array.from(seriesEls);
 						seriesArray.forEach((seriesEl, index) => {
diff --git a/frontend/src/styles.scss b/frontend/src/styles.scss
index 0f574942cfaf..43db326af29b 100644
--- a/frontend/src/styles.scss
+++ b/frontend/src/styles.scss
@@ -17,12 +17,12 @@ body {
 }
 
 .u-legend {
-	max-height: 30px; // slicing the height of the widget Header height ;
+	max-height: 30px; // Default height for backward compatibility
 	overflow-y: auto;
 	overflow-x: hidden;
 
 	&::-webkit-scrollbar {
-		width: 0.3rem;
+		width: 0.5rem;
 	}
 	&::-webkit-scrollbar-corner {
 		background: transparent;
@@ -53,6 +53,99 @@ body {
 			text-decoration-thickness: 3px;
 		}
 	}
+
+	// Enhanced legend styles
+	&.u-legend-enhanced {
+		max-height: none; // Remove default max-height restriction
+		padding: 6px 4px; // Back to original padding
+
+		// Thin and neat scrollbar for enhanced legend
+		&::-webkit-scrollbar {
+			width: 0.25rem;
+			height: 0.25rem;
+		}
+		&::-webkit-scrollbar-thumb {
+			background: rgba(136, 136, 136, 0.4);
+			border-radius: 0.125rem;
+
+			&:hover {
+				background: rgba(136, 136, 136, 0.7);
+			}
+		}
+		&::-webkit-scrollbar-track {
+			background: transparent;
+		}
+
+		// Enhanced table layout for better responsiveness
+		table {
+			width: 100%;
+			table-layout: fixed;
+		}
+
+		tbody {
+			display: flex;
+			flex-wrap: wrap;
+			gap: 2px 2px;
+			align-items: center;
+			justify-content: flex-start;
+			width: 100%;
+		}
+
+		// Center alignment for single-line legends
+		&.u-legend-single-line tbody {
+			justify-content: center;
+		}
+
+		tr.u-series {
+			display: flex;
+			flex: 0 0 auto;
+			min-width: fit-content;
+
+			th {
+				display: flex;
+				align-items: center;
+				gap: 6px;
+				font-size: 13px;
+				font-weight: 400;
+				padding: 6px 10px;
+				cursor: pointer;
+				white-space: nowrap;
+				-webkit-font-smoothing: antialiased;
+				border-radius: 2px;
+
+				&:hover {
+					background: rgba(255, 255, 255, 0.05);
+				}
+
+				.u-marker {
+					border-radius: 50%;
+					min-width: 10px;
+					min-height: 10px;
+					width: 10px;
+					height: 10px;
+					flex-shrink: 0;
+				}
+			}
+
+			&.u-off {
+				opacity: 0.5;
+				text-decoration: line-through;
+				text-decoration-thickness: 1px;
+
+				th {
+					&:hover {
+						opacity: 0.7;
+					}
+				}
+			}
+
+			// Focus styles for keyboard navigation
+			&:focus {
+				outline: 1px solid rgba(66, 165, 245, 0.8);
+				outline-offset: 1px;
+			}
+		}
+	}
 }
 
 /* Style the selected background */
@@ -250,6 +343,39 @@ body {
 			}
 		}
 	}
+
+	// Enhanced legend light mode styles
+	.u-legend-enhanced {
+		// Light mode scrollbar styling
+		&::-webkit-scrollbar-thumb {
+			background: rgba(0, 0, 0, 0.2);
+
+			&:hover {
+				background: rgba(0, 0, 0, 0.4);
+			}
+		}
+
+		tr.u-series {
+			th {
+				&:hover {
+					background: rgba(0, 0, 0, 0.05);
+				}
+			}
+
+			&.u-off {
+				th {
+					&:hover {
+						background: rgba(0, 0, 0, 0.08);
+					}
+				}
+			}
+
+			// Light mode focus styles
+			&:focus {
+				outline: 1px solid rgba(25, 118, 210, 0.8);
+			}
+		}
+	}
 }
 
 .ant-notification-notice-message {