diff --git a/apps/designer/app/canvas/canvas.tsx b/apps/designer/app/canvas/canvas.tsx
index 81914d2ae5..f6d551514f 100644
--- a/apps/designer/app/canvas/canvas.tsx
+++ b/apps/designer/app/canvas/canvas.tsx
@@ -14,14 +14,13 @@ import {
   useDeleteInstance,
   useInsertInstance,
   usePopulateRootInstance,
-  usePublishHoveredInstanceData,
-  usePublishHoveredInstanceRect,
   usePublishRootInstance,
   usePublishSelectedInstanceData,
   usePublishSelectedInstanceDataRect,
   usePublishTextEditingInstanceId,
   useReparentInstance,
   useSetHoveredInstance,
+  usePublishHoveredInstanceData,
   useUnselectInstance,
   useUpdateSelectedInstance,
 } from "./shared/instance";
@@ -41,7 +40,6 @@ import {
   useSubscribeScrollState,
 } from "~/shared/nano-states";
 import { registerContainers } from "./shared/immerhin";
-import { useTrackHoveredElement } from "./shared/use-track-hovered-element";
 import { usePublishScrollState } from "./shared/use-publish-scroll-state";
 import { useDragAndDrop } from "./shared/use-drag-drop";
 import { setInstanceChildrenMutable } from "~/shared/tree-utils";
@@ -90,19 +88,17 @@ const DesignMode = ({ treeId, buildId }: DesignModeProps) => {
   useUpdateStyle();
   useManageProps();
   usePublishSelectedInstanceData(treeId);
-  usePublishHoveredInstanceData();
   useHandleBreakpoints();
   useInsertInstance();
   useReparentInstance();
   useDeleteInstance();
   usePublishRootInstance();
   useTrackSelectedElement();
-  useTrackHoveredElement();
   useSetHoveredInstance();
+  usePublishHoveredInstanceData();
   useSync({ buildId, treeId });
   useUpdateSelectedInstance();
   usePublishSelectedInstanceDataRect();
-  usePublishHoveredInstanceRect();
   useUnselectInstance();
   usePublishScrollState();
   useSubscribeScrollState();
diff --git a/apps/designer/app/canvas/shared/instance.ts b/apps/designer/app/canvas/shared/instance.ts
index 5060b5e8c2..5de7f1cb8d 100644
--- a/apps/designer/app/canvas/shared/instance.ts
+++ b/apps/designer/app/canvas/shared/instance.ts
@@ -1,4 +1,4 @@
-import { useCallback, useEffect, useMemo, useRef } from "react";
+import { useCallback, useEffect, useMemo, useRef, useState } from "react";
 import ObjectId from "bson-objectid";
 import {
   type Instance,
@@ -29,7 +29,6 @@ import {
 import {
   useSelectedInstance,
   useSelectedElement,
-  useHoveredElement,
   useHoveredInstance,
 } from "./nano-states";
 import {
@@ -38,8 +37,12 @@ import {
   useTextEditingInstanceId,
 } from "~/shared/nano-states";
 import { useMeasure } from "~/shared/dom-hooks";
-import { findInstanceByElement } from "~/shared/dom-utils";
+import {
+  findInstanceByElement,
+  getInstanceElementById,
+} from "~/shared/dom-utils";
 import { publish } from "~/shared/pubsub";
+import { useTrackHoveredElement } from "./use-track-hovered-element";
 
 declare module "~/shared/pubsub" {
   export interface PubsubMap {
@@ -263,23 +266,33 @@ export const usePublishSelectedInstanceDataRect = () => {
   }, [rect]);
 };
 
-export const usePublishHoveredInstanceRect = () => {
-  const [element] = useHoveredElement();
-  const publishRect = useCallback(() => {
-    if (element === undefined) return;
-    publish({
-      type: "hoveredInstanceRect",
-      payload: element.getBoundingClientRect(),
-    });
-  }, [element]);
-  useEffect(publishRect, [publishRect]);
-};
-
 export const useSetHoveredInstance = () => {
   const [rootInstance] = useRootInstance();
-  const [hoveredElement] = useHoveredElement();
   const [, setHoveredInstance] = useHoveredInstance();
 
+  const [hoveredElement, setHoveredElement] = useState<HTMLElement | undefined>(
+    undefined
+  );
+
+  useTrackHoveredElement(setHoveredElement);
+
+  useSubscribe(
+    "navigatorHoveredInstance",
+    useCallback((instance) => {
+      setHoveredElement(
+        instance && (getInstanceElementById(instance.id) || undefined)
+      );
+    }, [])
+  );
+
+  useEffect(() => {
+    if (hoveredElement === undefined) return;
+    publish({
+      type: "hoveredInstanceRect",
+      payload: hoveredElement.getBoundingClientRect(),
+    });
+  }, [hoveredElement]);
+
   useEffect(() => {
     let instance;
     if (rootInstance !== undefined && hoveredElement) {
diff --git a/apps/designer/app/canvas/shared/nano-states.ts b/apps/designer/app/canvas/shared/nano-states.ts
index b5b3a8fbcd..542c883bcb 100644
--- a/apps/designer/app/canvas/shared/nano-states.ts
+++ b/apps/designer/app/canvas/shared/nano-states.ts
@@ -15,6 +15,3 @@ const selectedElementContainer = createValueContainer<
   HTMLElement | undefined
 >();
 export const useSelectedElement = () => useValue(selectedElementContainer);
-
-const hoveredElementContainer = createValueContainer<HTMLElement | undefined>();
-export const useHoveredElement = () => useValue(hoveredElementContainer);
diff --git a/apps/designer/app/canvas/shared/use-track-hovered-element.ts b/apps/designer/app/canvas/shared/use-track-hovered-element.ts
index 5de85a2ab6..1d9c2c785a 100644
--- a/apps/designer/app/canvas/shared/use-track-hovered-element.ts
+++ b/apps/designer/app/canvas/shared/use-track-hovered-element.ts
@@ -1,14 +1,15 @@
 import { useEffect } from "react";
-import { useSelectedElement, useHoveredElement } from "./nano-states";
+import { useSelectedElement } from "./nano-states";
 import { useRootInstance } from "~/shared/nano-states";
 
 const eventOptions = {
   passive: true,
 };
 
-export const useTrackHoveredElement = () => {
+export const useTrackHoveredElement = (
+  onChange: (element: HTMLElement | undefined) => void
+) => {
   const [rootInstance] = useRootInstance();
-  const [, setHoveredElement] = useHoveredElement();
   const [selectedElement] = useSelectedElement();
 
   useEffect(() => {
@@ -21,12 +22,12 @@ export const useTrackHoveredElement = () => {
       ) {
         return;
       }
-      setHoveredElement(element);
+      onChange(element);
     };
 
     const handleMouseOut = () => {
       if (rootInstance === undefined) return;
-      setHoveredElement(undefined);
+      onChange(undefined);
     };
 
     window.addEventListener("mouseover", handleMouseOver, eventOptions);
@@ -36,5 +37,5 @@ export const useTrackHoveredElement = () => {
       window.removeEventListener("mouseover", handleMouseOver);
       window.removeEventListener("mouseout", handleMouseOut);
     };
-  }, [rootInstance, selectedElement, setHoveredElement]);
+  }, [rootInstance, selectedElement, onChange]);
 };
diff --git a/apps/designer/app/designer/features/sidebar-left/lib/navigator/navigator.tsx b/apps/designer/app/designer/features/sidebar-left/lib/navigator/navigator.tsx
index c4431c40e9..b5fd3977c7 100644
--- a/apps/designer/app/designer/features/sidebar-left/lib/navigator/navigator.tsx
+++ b/apps/designer/app/designer/features/sidebar-left/lib/navigator/navigator.tsx
@@ -1,5 +1,5 @@
 import { Flex } from "@webstudio-is/design-system";
-import type { Instance } from "@webstudio-is/react-sdk";
+import { type Instance } from "@webstudio-is/react-sdk";
 import { type Publish } from "~/shared/pubsub";
 import { useCallback } from "react";
 import { useSelectedInstanceData } from "~/designer/shared/nano-states";
@@ -15,6 +15,7 @@ declare module "~/shared/pubsub" {
       dropTarget: { instanceId: Instance["id"]; position: number | "end" };
     };
     deleteInstance: { id: Instance["id"] };
+    navigatorHoveredInstance: { id: Instance["id"] } | undefined;
   }
 }
 
@@ -67,6 +68,16 @@ export const Navigator = ({ publish, isClosable, onClose }: NavigatorProps) => {
     [publish]
   );
 
+  const handleHover = useCallback(
+    (instance: Instance | undefined) => {
+      publish({
+        type: "navigatorHoveredInstance",
+        payload: instance && { id: instance.id },
+      });
+    },
+    [publish]
+  );
+
   if (rootInstance === undefined) return null;
   return (
     <Flex css={{ height: "100%", flexDirection: "column" }}>
@@ -76,6 +87,7 @@ export const Navigator = ({ publish, isClosable, onClose }: NavigatorProps) => {
           root={rootInstance}
           selectedItemId={selectedInstanceData?.id}
           onSelect={handleSelect}
+          onHover={handleHover}
           onDragEnd={handleDragEnd}
           onDelete={handleDelete}
         />
diff --git a/packages/design-system/src/components/tree/tree-node.tsx b/packages/design-system/src/components/tree/tree-node.tsx
index 298b8dd204..8c24045244 100644
--- a/packages/design-system/src/components/tree/tree-node.tsx
+++ b/packages/design-system/src/components/tree/tree-node.tsx
@@ -143,6 +143,8 @@ export type TreeNodeProps<Data extends { id: string }> = {
   selectedItemId?: string;
   parentIsSelected?: boolean;
   onSelect?: (itemId: string) => void;
+  onMouseEnter?: (item: Data) => void;
+  onMouseLeave?: (item: Data) => void;
 
   level?: number;
   animate?: boolean;
@@ -161,6 +163,8 @@ export const TreeNode = <Data extends { id: string }>({
     setIsExpanded,
     selectedItemId,
     onSelect,
+    onMouseEnter,
+    onMouseLeave,
     onExpandTransitionEnd,
     forceHoverStateAtItem,
     renderItem,
@@ -213,6 +217,8 @@ export const TreeNode = <Data extends { id: string }>({
       data-drop-target-id={itemData.id}
     >
       <ItemWrapper
+        onMouseEnter={() => onMouseEnter?.(itemData)}
+        onMouseLeave={() => onMouseLeave?.(itemData)}
         isSelected={isSelected}
         parentIsSelected={parentIsSelected}
         enableHoverState={forceHoverStateAtItem === undefined}
diff --git a/packages/design-system/src/components/tree/tree.tsx b/packages/design-system/src/components/tree/tree.tsx
index bdb6e47256..ceefee0207 100644
--- a/packages/design-system/src/components/tree/tree.tsx
+++ b/packages/design-system/src/components/tree/tree.tsx
@@ -30,6 +30,7 @@ export type TreeProps<Data extends { id: string }> = {
 
   selectedItemId?: string;
   onSelect?: (itemId: string) => void;
+  onHover?: (item: Data | undefined) => void;
   animate?: boolean;
   onDragEnd: (event: {
     itemId: string;
@@ -49,6 +50,7 @@ export const Tree = <Data extends { id: string }>({
   renderItem,
   selectedItemId,
   onSelect,
+  onHover,
   animate,
   onDragEnd,
   onDelete,
@@ -238,6 +240,13 @@ export const Tree = <Data extends { id: string }>({
     onEsc: dragHandlers.cancelCurrentDrag,
   });
 
+  const [onMouseEnter, onMouseLeave] = useMemo(() => {
+    if (onHover === undefined) {
+      return [undefined, undefined];
+    }
+    return [(item: Data) => onHover(item), () => onHover(undefined)] as const;
+  }, [onHover]);
+
   return (
     <Box
       css={{
@@ -265,6 +274,8 @@ export const Tree = <Data extends { id: string }>({
           getItemChildren={getItemChildren}
           animate={animate}
           onSelect={onSelect}
+          onMouseEnter={onMouseEnter}
+          onMouseLeave={onMouseLeave}
           selectedItemId={selectedItemId}
           itemData={root}
           level={0}