diff --git a/frontend/src/Editor/Components/DropdownV2/CustomMenuList.jsx b/frontend/src/Editor/Components/DropdownV2/CustomMenuList.jsx
index 949efa0ca8..6be9d65bc7 100644
--- a/frontend/src/Editor/Components/DropdownV2/CustomMenuList.jsx
+++ b/frontend/src/Editor/Components/DropdownV2/CustomMenuList.jsx
@@ -3,7 +3,6 @@ import { components } from 'react-select';
 import SolidIcon from '@/_ui/Icon/SolidIcons';
 import Loader from '@/ToolJetUI/Loader/Loader';
 import './dropdownV2.scss';
-import { FormCheck } from 'react-bootstrap';
 // eslint-disable-next-line import/no-unresolved
 import { useVirtualizer } from '@tanstack/react-virtual';
 import cx from 'classnames';
@@ -12,20 +11,8 @@ const { MenuList } = components;
 
 // This Menulist also used in MultiselectV2
 const CustomMenuList = ({ selectProps, ...props }) => {
-  const {
-    onInputChange,
-    onMenuInputFocus,
-    showAllOption,
-    isSelectAllSelected,
-    optionsLoadingState,
-    darkMode,
-    setSelected,
-    setIsSelectAllSelected,
-    fireEvent,
-    inputValue,
-    menuId,
-    showSearchInput,
-  } = selectProps;
+  const { onInputChange, onMenuInputFocus, optionsLoadingState, darkMode, inputValue, menuId, showSearchInput } =
+    selectProps;
 
   const parentRef = useRef(null);
   const virtualizer = useVirtualizer({
@@ -35,16 +22,6 @@ const CustomMenuList = ({ selectProps, ...props }) => {
     overscan: 15,
   });
 
-  const handleSelectAll = (e) => {
-    e.target.checked && fireEvent();
-    if (e.target.checked) {
-      setSelected(props.options);
-    } else {
-      setSelected([]);
-    }
-    setIsSelectAllSelected(e.target.checked);
-  };
-
   useEffect(() => {
     const searchInput = document.querySelector('.dropdown-multiselect-widget-search-box');
     if (searchInput) {
@@ -89,17 +66,6 @@ const CustomMenuList = ({ selectProps, ...props }) => {
           />
         </div>
       )}
-      {showAllOption && !optionsLoadingState && (
-        <label htmlFor="select-all-checkbox" className="multiselect-custom-menulist-select-all">
-          <FormCheck
-            id="select-all-checkbox"
-            checked={isSelectAllSelected}
-            onChange={handleSelectAll}
-            onTouchEnd={handleSelectAll}
-          />
-          <span style={{ marginLeft: '4px' }}>Select all</span>
-        </label>
-      )}
       {!optionsLoadingState && (
         <div
           ref={parentRef}
@@ -112,19 +78,22 @@ const CustomMenuList = ({ selectProps, ...props }) => {
             style={{
               height: `${virtualizer.getTotalSize() || 38}px`,
               position: 'relative',
+              marginTop: '5px',
             }}
           >
             {!virtualizer.getTotalSize() && props.children}
             {virtualizer.getVirtualItems().map((virtualItem) => {
               const option = props.options[virtualItem.index];
               const child = props.children[virtualItem.index];
+              const isSelectAll = option?.value === 'multiselect-custom-menulist-select-all';
               return (
                 <div
                   key={option.value}
                   style={{
-                    position: 'absolute',
+                    position: isSelectAll ? 'sticky' : 'absolute',
                     width: '100%',
                     top: 0,
+                    zIndex: isSelectAll && 10,
                     transform: `translateY(${virtualItem.start}px)`,
                   }}
                   data-index={virtualItem.index}
diff --git a/frontend/src/Editor/Components/DropdownV2/dropdownV2.scss b/frontend/src/Editor/Components/DropdownV2/dropdownV2.scss
index 763f03cc86..779f2c2420 100644
--- a/frontend/src/Editor/Components/DropdownV2/dropdownV2.scss
+++ b/frontend/src/Editor/Components/DropdownV2/dropdownV2.scss
@@ -1,7 +1,7 @@
 .dropdown-multiselect-widget-custom-menu-list-body {
     overflow-y: auto;
     position: relative;
-    padding: 5px 0;
+    padding: 0 0 5px;
     background-color: var(--surfaces-surface-01) !important;
     border-radius: 0 0 8px 8px;
 }
\ No newline at end of file
diff --git a/frontend/src/Editor/Components/MultiselectV2/CustomOption.jsx b/frontend/src/Editor/Components/MultiselectV2/CustomOption.jsx
index c95a52714d..e187cf1292 100644
--- a/frontend/src/Editor/Components/MultiselectV2/CustomOption.jsx
+++ b/frontend/src/Editor/Components/MultiselectV2/CustomOption.jsx
@@ -21,7 +21,9 @@ const CustomOption = (props) => {
       <div className="d-flex multiselct-widget-option">
         <FormCheck checked={props.isSelected} disabled={props?.isDisabled} />
         <span style={{ marginLeft: '5px' }}>
-          {highlightText(props.label?.toString(), props.selectProps.inputValue)}
+          {props.label?.includes('Select all')
+            ? 'Select all'
+            : highlightText(props.label?.toString(), props.selectProps.inputValue)}
         </span>
       </div>
     </Option>
diff --git a/frontend/src/Editor/Components/MultiselectV2/MultiselectV2.jsx b/frontend/src/Editor/Components/MultiselectV2/MultiselectV2.jsx
index df97acfdd7..ad02125839 100644
--- a/frontend/src/Editor/Components/MultiselectV2/MultiselectV2.jsx
+++ b/frontend/src/Editor/Components/MultiselectV2/MultiselectV2.jsx
@@ -74,7 +74,6 @@ export const MultiselectV2 = ({
   const [visibility, setVisibility] = useState(properties.visibility);
   const [isMultiSelectLoading, setIsMultiSelectLoading] = useState(multiSelectLoadingState);
   const [isMultiSelectDisabled, setIsMultiSelectDisabled] = useState(disabledState);
-  const [isSelectAllSelected, setIsSelectAllSelected] = useState(false);
   const [searchInputValue, setSearchInputValue] = useState('');
   const _height = padding === 'default' ? `${height}px` : `${height + 4}px`;
   const [userInteracted, setUserInteracted] = useState(false);
@@ -104,6 +103,17 @@ export const MultiselectV2 = ({
     // eslint-disable-next-line react-hooks/exhaustive-deps
   }, [advanced, JSON.stringify(schema), JSON.stringify(options), sort]);
 
+  const modifiedSelectOptions = useMemo(() => {
+    // Adding select all option dynamically to the options
+    if (showAllOption && !optionsLoadingState) {
+      return [
+        // Appended search input value so that it is always visible
+        { label: `Select all ${searchInputValue}`, value: 'multiselect-custom-menulist-select-all' },
+        ...selectOptions,
+      ];
+    } else return selectOptions;
+  }, [showAllOption, JSON.stringify(selectOptions), optionsLoadingState, searchInputValue]);
+
   function findDefaultItem(value, isAdvanced, isDefault) {
     if (isAdvanced) {
       const foundItem = Array.isArray(schema) ? schema.filter((item) => item?.visible && item?.default) : [];
@@ -128,8 +138,28 @@ export const MultiselectV2 = ({
     }
     return false;
   }
+
   const onChangeHandler = (items, action) => {
-    setInputValue(items);
+    const SELECT_ALL = 'multiselect-custom-menulist-select-all';
+
+    if (action.option?.value === SELECT_ALL) {
+      // Case 1 - If select all is selected
+      if (action.action === 'select-option') {
+        setInputValue(modifiedSelectOptions);
+      } else {
+        setInputValue([]);
+      }
+    } else if (items?.some((item) => item.value === SELECT_ALL)) {
+      // Case 2 - If select all is not selected but selected options include select all
+      setInputValue(items.filter((item) => item.value !== SELECT_ALL));
+    } else if (selectOptions?.length === items?.length) {
+      // Case 3 - If all options are selected except select all
+      setInputValue(modifiedSelectOptions);
+    } else {
+      // Case 4 - Normal selection
+      setInputValue(items);
+    }
+
     fireEvent('onSelect');
     setUserInteracted(true);
   };
@@ -315,15 +345,6 @@ export const MultiselectV2 = ({
     };
   }, [isMultiselectOpen, componentName]);
 
-  // Handle Select all logic
-  useEffect(() => {
-    if (selectOptions?.length === selected?.length) {
-      setIsSelectAllSelected(true);
-    } else {
-      setIsSelectAllSelected(false);
-    }
-  }, [selectOptions, selected]);
-
   const customStyles = {
     container: (base) => ({
       ...base,
@@ -481,7 +502,7 @@ export const MultiselectV2 = ({
             isDisabled={isMultiSelectDisabled}
             value={selected}
             onChange={onChangeHandler}
-            options={selectOptions}
+            options={modifiedSelectOptions}
             styles={customStyles}
             // Only show loading when dynamic options are enabled
             isLoading={isMultiSelectLoading}
@@ -521,19 +542,9 @@ export const MultiselectV2 = ({
             icon={icon}
             doShowIcon={iconVisibility}
             containerRef={valueContainerRef}
-            showAllOption={showAllOption}
-            isSelectAllSelected={isSelectAllSelected}
-            setIsSelectAllSelected={(value) => {
-              setIsSelectAllSelected(value);
-              if (!value) {
-                fireEvent('onSelect');
-              }
-            }}
-            setSelected={setInputValue}
             iconColor={iconColor}
             optionsLoadingState={optionsLoadingState && advanced}
             darkMode={darkMode}
-            fireEvent={() => fireEvent('onSelect')}
             menuPlacement="auto"
             menuPortalTarget={document.body}
           />