diff --git a/docs/resources/changelog.md b/docs/resources/changelog.md
index 982d5e275..cf710c7a6 100644
--- a/docs/resources/changelog.md
+++ b/docs/resources/changelog.md
@@ -20,6 +20,7 @@ New versions of Shoelace are released as-needed and generally occur when a criti
 - Fixed a bug in `<sl-menu-item>` that caused the focus color to show when selecting menu items with a mouse or touch device
 - Fixed a bug in `<sl-select>` that caused `sl-change` and `sl-input` to be emitted too early [#1201](https://github.com/shoelace-style/shoelace/issues/1201)
 - Fixed a positioning edge case that caused `<sl-popup>` to positioned nested popups incorrectly [#1135](https://github.com/shoelace-style/shoelace/issues/1135)
+- Fixed a bug in `<sl-tree>` that caused the tree item to collapse when clicking a child item, dragging the mouse, and releasing it on the parent node [#1082](https://github.com/shoelace-style/shoelace/issues/1082)
 - Updated `@shoelace-style/localize` to 3.1.0
 - Updated `@floating-ui/dom` to 1.2.1
 
diff --git a/src/components/tree/tree.ts b/src/components/tree/tree.ts
index 608783551..22f9c3ebf 100644
--- a/src/components/tree/tree.ts
+++ b/src/components/tree/tree.ts
@@ -90,6 +90,7 @@ export default class SlTree extends ShoelaceElement {
   private lastFocusedItem: SlTreeItem;
   private readonly localize = new LocalizeController(this);
   private mutationObserver: MutationObserver;
+  private clickTarget: SlTreeItem | null = null;
 
   async connectedCallback() {
     super.connectedCallback();
@@ -292,13 +293,20 @@ export default class SlTree extends ShoelaceElement {
   }
 
   private handleClick(event: Event) {
-    const target = event.target as HTMLElement;
+    const target = event.target as SlTreeItem;
     const treeItem = target.closest('sl-tree-item')!;
     const isExpandButton = event
       .composedPath()
       .some((el: HTMLElement) => el?.classList?.contains('tree-item__expand-button'));
 
-    if (!treeItem || treeItem.disabled) {
+    //
+    // Don't Do anything if there's no tree item, if it's disabled, or if the click doesn't match the initial target
+    // from mousedown. The latter case prevents the user from starting a click on one item and ending it on another,
+    // causing the parent node to collapse.
+    //
+    // See https://github.com/shoelace-style/shoelace/issues/1082
+    //
+    if (!treeItem || treeItem.disabled || target !== this.clickTarget) {
       return;
     }
 
@@ -309,6 +317,11 @@ export default class SlTree extends ShoelaceElement {
     }
   }
 
+  handleMouseDown(event: MouseEvent) {
+    // Record the click target so we know which item the click initially targeted
+    this.clickTarget = event.target as SlTreeItem;
+  }
+
   private handleFocusOut(event: FocusEvent) {
     const relatedTarget = event.relatedTarget as HTMLElement;
 
@@ -392,7 +405,13 @@ export default class SlTree extends ShoelaceElement {
 
   render() {
     return html`
-      <div part="base" class="tree" @click=${this.handleClick} @keydown=${this.handleKeyDown}>
+      <div
+        part="base"
+        class="tree"
+        @click=${this.handleClick}
+        @keydown=${this.handleKeyDown}
+        @mousedown=${this.handleMouseDown}
+      >
         <slot @slotchange=${this.handleSlotChange}></slot>
         <slot name="expand-icon" hidden aria-hidden="true"> </slot>
         <slot name="collapse-icon" hidden aria-hidden="true"> </slot>
diff --git a/src/internal/test.ts b/src/internal/test.ts
index e4dc703c7..a1f10dad8 100644
--- a/src/internal/test.ts
+++ b/src/internal/test.ts
@@ -50,6 +50,7 @@ export async function clickOnElement(
   await sendMouse({ type: 'click', position: [clickX, clickY] });
 }
 
+/** A testing utility that moves the mouse onto an element. */
 export async function moveMouseOnElement(
   /** The element to click */
   el: Element,