diff --git a/src/platform/plugins/private/presentation_panel/public/panel_actions/customize_panel_action/customize_panel_editor.test.tsx b/src/platform/plugins/private/presentation_panel/public/panel_actions/customize_panel_action/customize_panel_editor.test.tsx
index 91be0c249be5..21633f28e821 100644
--- a/src/platform/plugins/private/presentation_panel/public/panel_actions/customize_panel_action/customize_panel_editor.test.tsx
+++ b/src/platform/plugins/private/presentation_panel/public/panel_actions/customize_panel_action/customize_panel_editor.test.tsx
@@ -89,6 +89,17 @@ describe('customize panel editor', () => {
       expect(titleInput).toHaveValue('Default title');
     });
 
+    // Even if the input value matches defaultTitle on apply, we expect setTitle(undefined) to be called,  meaning the title is treated as "not customized".
+    it('should not set panel custom title if it matches default title on apply', async () => {
+      api.defaultTitle$ = new BehaviorSubject<string | undefined>('Default title');
+      renderPanelEditor();
+      const titleInput = screen.getByTestId('customEmbeddablePanelTitleInput');
+      expect(titleInput).toHaveValue('Default title');
+      await userEvent.click(screen.getByTestId('saveCustomizePanelButton'));
+      expect(setTitle).toHaveBeenCalledWith(undefined);
+      expect(api.title$?.getValue()).toBeUndefined();
+    });
+
     it('should use title even when empty string', () => {
       api.defaultTitle$ = new BehaviorSubject<string | undefined>('Default title');
       setTitle('');
diff --git a/src/platform/plugins/private/presentation_panel/public/panel_actions/customize_panel_action/customize_panel_editor.tsx b/src/platform/plugins/private/presentation_panel/public/panel_actions/customize_panel_action/customize_panel_editor.tsx
index 122fd05e5309..4d8f41c60d47 100644
--- a/src/platform/plugins/private/presentation_panel/public/panel_actions/customize_panel_action/customize_panel_editor.tsx
+++ b/src/platform/plugins/private/presentation_panel/public/panel_actions/customize_panel_action/customize_panel_editor.tsx
@@ -99,7 +99,13 @@ export const CustomizePanelEditor = ({
   const dateFormat = useMemo(() => core.uiSettings.get<string>(UI_SETTINGS.DATE_FORMAT), []);
 
   const save = () => {
-    if (panelTitle !== api.title$?.value) api.setTitle?.(panelTitle);
+    // If the panel title matches the default title, we set api.title to undefined to indicate there's no custom title.
+    // This ensures the panel stays in sync with the centrally saved object's title and reflects any updates to its title.
+    if (panelTitle === api?.defaultTitle$?.value) {
+      api.setTitle?.(undefined);
+    } else if (panelTitle !== api.title$?.value) {
+      api.setTitle?.(panelTitle);
+    }
     if (hideTitle !== api.hideTitle$?.value) api.setHideTitle?.(hideTitle);
     if (panelDescription !== api.description$?.value) api.setDescription?.(panelDescription);