diff --git a/packages/combo-box/theme/material/vaadin-combo-box-overlay-styles.js b/packages/combo-box/theme/material/vaadin-combo-box-overlay-styles.js
index e90cb8a8ff7..4ee898eb57e 100644
--- a/packages/combo-box/theme/material/vaadin-combo-box-overlay-styles.js
+++ b/packages/combo-box/theme/material/vaadin-combo-box-overlay-styles.js
@@ -6,11 +6,16 @@ import { css, registerStyles } from '@vaadin/vaadin-themable-mixin/vaadin-themab
 const comboBoxOverlay = css`
   [part='overlay'] {
     position: relative;
-    overflow: visible;
     border-top-left-radius: 0;
     border-top-right-radius: 0;
   }
 
+  /* Overflow needs to be auto by default to make overlay sizing logic work */
+  /* When loading, overflow needs to be visible to make loading indicator visible */
+  :host([loading]) [part='overlay'] {
+    overflow: visible;
+  }
+
   [part='content'] {
     padding: 0;
   }