diff --git a/frontend/src/components/SimulationList.tsx b/frontend/src/components/SimulationList.tsx
index a158a23..2028e9d 100644
--- a/frontend/src/components/SimulationList.tsx
+++ b/frontend/src/components/SimulationList.tsx
@@ -1,4 +1,4 @@
-import { useRef, useState } from 'react';
+import { useEffect, useRef, useState } from 'react';
 import { Link, useNavigate } from 'react-router-dom';
 import { ChevronDown, Plus } from 'lucide-react';
 import { extractApiError } from '@/api/client';
@@ -26,9 +26,27 @@ function NewSimulationDropdown({ engagementId }: { engagementId: number }): JSX.
   const { push } = useToast();
   const [open, setOpen] = useState(false);
   const [showPicker, setShowPicker] = useState(false);
-  const btnRef = useRef<HTMLDivElement>(null);
+  const ref = useRef<HTMLDivElement>(null);
   const createMutation = useCreateSimulation(engagementId);
 
+  useEffect(() => {
+    if (!open) return;
+    const onPointerDown = (e: PointerEvent) => {
+      if (ref.current && !ref.current.contains(e.target as Node)) {
+        setOpen(false);
+      }
+    };
+    const onKeyDown = (e: KeyboardEvent) => {
+      if (e.key === 'Escape') setOpen(false);
+    };
+    document.addEventListener('pointerdown', onPointerDown);
+    document.addEventListener('keydown', onKeyDown);
+    return () => {
+      document.removeEventListener('pointerdown', onPointerDown);
+      document.removeEventListener('keydown', onKeyDown);
+    };
+  }, [open]);
+
   const handleBlank = () => {
     setOpen(false);
     navigate(`/engagements/${engagementId}/simulations/new`);
@@ -51,7 +69,7 @@ function NewSimulationDropdown({ engagementId }: { engagementId: number }): JSX.
   };
 
   return (
-    <div className="relative" ref={btnRef}>
+    <div className="relative" ref={ref}>
       <div className="inline-flex">
         <button
           type="button"
@@ -137,13 +155,7 @@ export function SimulationList({ engagementId }: SimulationListProps): JSX.Eleme
         description="Create the first simulation to start tracking red team tests."
         action={
           canEditEngagements ? (
-            <Link
-              to={`/engagements/${engagementId}/simulations/new`}
-              className="btn-primary"
-              data-testid="new-simulation-btn"
-            >
-              New simulation
-            </Link>
+            <NewSimulationDropdown engagementId={engagementId} />
           ) : undefined
         }
       />
diff --git a/frontend/tests/SimulationList.test.tsx b/frontend/tests/SimulationList.test.tsx
index fbc763e..10d5965 100644
--- a/frontend/tests/SimulationList.test.tsx
+++ b/frontend/tests/SimulationList.test.tsx
@@ -142,6 +142,44 @@ describe('SimulationList — admin/redteam', () => {
     });
   });
 
+  it('closes dropdown on click outside', async () => {
+    mock.onGet('/engagements/42/simulations').reply(200, SIMULATIONS);
+    const user = userEvent.setup();
+    renderWithProviders(<SimulationList engagementId={42} />);
+    await waitFor(() => {
+      expect(screen.getByText('Lateral movement test')).toBeInTheDocument();
+    });
+    await user.click(screen.getByTestId('new-simulation-dropdown-toggle'));
+    expect(screen.getByTestId('from-template-btn')).toBeInTheDocument();
+    // Click outside the dropdown
+    await user.click(document.body);
+    expect(screen.queryByTestId('from-template-btn')).toBeNull();
+  });
+
+  it('closes dropdown on Escape key', async () => {
+    mock.onGet('/engagements/42/simulations').reply(200, SIMULATIONS);
+    const user = userEvent.setup();
+    renderWithProviders(<SimulationList engagementId={42} />);
+    await waitFor(() => {
+      expect(screen.getByText('Lateral movement test')).toBeInTheDocument();
+    });
+    await user.click(screen.getByTestId('new-simulation-dropdown-toggle'));
+    expect(screen.getByTestId('from-template-btn')).toBeInTheDocument();
+    await user.keyboard('{Escape}');
+    expect(screen.queryByTestId('from-template-btn')).toBeNull();
+  });
+
+  it('shows dropdown in empty state (not a plain link)', async () => {
+    mock.onGet('/engagements/42/simulations').reply(200, []);
+    renderWithProviders(<SimulationList engagementId={42} />);
+    await waitFor(() => {
+      expect(screen.getByTestId('empty-state')).toBeInTheDocument();
+    });
+    // Must have the split-button dropdown, not a plain link
+    expect(screen.getByTestId('new-simulation-btn')).toBeInTheDocument();
+    expect(screen.getByTestId('new-simulation-dropdown-toggle')).toBeInTheDocument();
+  });
+
   it('clicking a row uses SPA navigation and does not trigger window.location change', async () => {
     mock.onGet('/engagements/42/simulations').reply(200, SIMULATIONS);
     const originalHref = window.location.href;