diff --git a/services/core/java/com/android/server/wm/DisplayContent.java b/services/core/java/com/android/server/wm/DisplayContent.java
index ede456949116e..6c5428c693776 100644
--- a/services/core/java/com/android/server/wm/DisplayContent.java
+++ b/services/core/java/com/android/server/wm/DisplayContent.java
@@ -659,6 +659,9 @@ class DisplayContent extends WindowContainer<DisplayContent.DisplayChildWindowCo
     // When non-null, new tasks get put into this root task.
     Task mLaunchRootTask = null;
 
+    // Used in performing layout
+    private boolean mTmpWindowsBehindIme;
+
     private final Consumer<WindowState> mUpdateWindowsForAnimator = w -> {
         WindowStateAnimator winAnimator = w.mWinAnimator;
         final ActivityRecord activity = w.mActivityRecord;
@@ -750,6 +753,12 @@ class DisplayContent extends WindowContainer<DisplayContent.DisplayChildWindowCo
                     + " parentHidden=" + w.isParentWindowHidden());
         }
 
+        // Sets mBehindIme for each window. Windows behind IME can get IME insets.
+        w.mBehindIme = mTmpWindowsBehindIme;
+        if (w == mInputMethodWindow) {
+            mTmpWindowsBehindIme = true;
+        }
+
         // If this view is GONE, then skip it -- keep the current frame, and let the caller know
         // so they can ignore it if they want.  (We do the normal layout for INVISIBLE windows,
         // since that means "perform layout as normal, just don't display").
@@ -4016,6 +4025,9 @@ class DisplayContent extends WindowContainer<DisplayContent.DisplayChildWindowCo
         mTmpWindow = null;
         mTmpInitial = initial;
 
+        // Used to indicate that we have processed the IME window.
+        mTmpWindowsBehindIme = false;
+
         // First perform layout of any root windows (not attached to another window).
         forAllWindows(mPerformLayout, true /* traverseTopToBottom */);
 
diff --git a/services/core/java/com/android/server/wm/DisplayPolicy.java b/services/core/java/com/android/server/wm/DisplayPolicy.java
index 4da4a79cfd839..f593393eecfba 100644
--- a/services/core/java/com/android/server/wm/DisplayPolicy.java
+++ b/services/core/java/com/android/server/wm/DisplayPolicy.java
@@ -29,7 +29,6 @@ import static android.view.InsetsState.ITYPE_BOTTOM_DISPLAY_CUTOUT;
 import static android.view.InsetsState.ITYPE_BOTTOM_GESTURES;
 import static android.view.InsetsState.ITYPE_BOTTOM_TAPPABLE_ELEMENT;
 import static android.view.InsetsState.ITYPE_CAPTION_BAR;
-import static android.view.InsetsState.ITYPE_IME;
 import static android.view.InsetsState.ITYPE_LEFT_DISPLAY_CUTOUT;
 import static android.view.InsetsState.ITYPE_LEFT_GESTURES;
 import static android.view.InsetsState.ITYPE_NAVIGATION_BAR;
@@ -1493,14 +1492,8 @@ public class DisplayPolicy {
      */
     public void beginLayoutLw(DisplayFrames displayFrames, int uiMode) {
         displayFrames.onBeginLayout();
-        final InsetsState insetsState =
-                mDisplayContent.getInsetsStateController().getRawInsetsState();
-
-        // Reset the frame of IME so that the layout of windows above IME won't get influenced.
-        // Once we layout the IME, frames will be set again on the source.
-        insetsState.getSource(ITYPE_IME).setFrame(0, 0, 0, 0);
-
-        updateInsetsStateForDisplayCutout(displayFrames, insetsState);
+        updateInsetsStateForDisplayCutout(displayFrames,
+                mDisplayContent.getInsetsStateController().getRawInsetsState());
         mSystemGestures.screenWidth = displayFrames.mUnrestricted.width();
         mSystemGestures.screenHeight = displayFrames.mUnrestricted.height();
 
diff --git a/services/core/java/com/android/server/wm/InsetsStateController.java b/services/core/java/com/android/server/wm/InsetsStateController.java
index a4bdfb351c1f9..04454a5b33ec9 100644
--- a/services/core/java/com/android/server/wm/InsetsStateController.java
+++ b/services/core/java/com/android/server/wm/InsetsStateController.java
@@ -88,8 +88,8 @@ class InsetsStateController {
         final InsetsSourceProvider provider = target.getControllableInsetProvider();
         final @InternalInsetsType int type = provider != null
                 ? provider.getSource().getType() : ITYPE_INVALID;
-        return getInsetsForTypeAndWindowingMode(type, target.getWindowingMode(),
-                target.isAlwaysOnTop());
+        return getInsetsForDispatchInner(type, target.getWindowingMode(), target.isAlwaysOnTop(),
+                isAboveIme(target));
     }
 
     InsetsState getInsetsForWindowMetrics(@NonNull WindowManager.LayoutParams attrs) {
@@ -97,13 +97,24 @@ class InsetsStateController {
         final WindowToken token = mDisplayContent.getWindowToken(attrs.token);
         final @WindowingMode int windowingMode = token != null
                 ? token.getWindowingMode() : WINDOWING_MODE_UNDEFINED;
-        final boolean alwaysOnTop = token != null
-                ? token.isAlwaysOnTop() : false;
-        return getInsetsForTypeAndWindowingMode(type, windowingMode, alwaysOnTop);
+        final boolean alwaysOnTop = token != null && token.isAlwaysOnTop();
+        return getInsetsForDispatchInner(type, windowingMode, alwaysOnTop, isAboveIme(token));
+    }
+
+    private boolean isAboveIme(WindowContainer target) {
+        final WindowState imeWindow = mDisplayContent.mInputMethodWindow;
+        if (target == null || imeWindow == null) {
+            return false;
+        }
+        if (target instanceof WindowState) {
+            final WindowState win = (WindowState) target;
+            return win.needsRelativeLayeringToIme() || !win.mBehindIme;
+        }
+        return false;
     }
 
     private static @InternalInsetsType int getInsetsTypeForWindowType(int type) {
-        switch(type) {
+        switch (type) {
             case TYPE_STATUS_BAR:
                 return ITYPE_STATUS_BAR;
             case TYPE_NAVIGATION_BAR:
@@ -116,8 +127,8 @@ class InsetsStateController {
     }
 
     /** @see #getInsetsForDispatch */
-    private InsetsState getInsetsForTypeAndWindowingMode(@InternalInsetsType int type,
-            @WindowingMode int windowingMode, boolean isAlwaysOnTop) {
+    private InsetsState getInsetsForDispatchInner(@InternalInsetsType int type,
+            @WindowingMode int windowingMode, boolean isAlwaysOnTop, boolean aboveIme) {
         InsetsState state = mState;
 
         if (type != ITYPE_INVALID) {
@@ -158,6 +169,11 @@ class InsetsStateController {
             state.removeSource(ITYPE_NAVIGATION_BAR);
         }
 
+        if (aboveIme) {
+            state = new InsetsState(state);
+            state.removeSource(ITYPE_IME);
+        }
+
         return state;
     }
 
diff --git a/services/core/java/com/android/server/wm/WindowState.java b/services/core/java/com/android/server/wm/WindowState.java
index 0338cc3096eaf..6481a1b03d2c0 100644
--- a/services/core/java/com/android/server/wm/WindowState.java
+++ b/services/core/java/com/android/server/wm/WindowState.java
@@ -607,6 +607,11 @@ class WindowState extends WindowContainer<WindowState> implements WindowManagerP
      */
     boolean mSeamlesslyRotated = false;
 
+    /**
+     * Indicates if this window is behind IME. Only windows behind IME can get insets from IME.
+     */
+    boolean mBehindIme = false;
+
     /**
      * Surface insets from the previous call to relayout(), used to track
      * if we are changing the Surface insets.
diff --git a/services/tests/wmtests/src/com/android/server/wm/InsetsStateControllerTest.java b/services/tests/wmtests/src/com/android/server/wm/InsetsStateControllerTest.java
index bfb126f7052ce..db7bce4c87530 100644
--- a/services/tests/wmtests/src/com/android/server/wm/InsetsStateControllerTest.java
+++ b/services/tests/wmtests/src/com/android/server/wm/InsetsStateControllerTest.java
@@ -19,10 +19,12 @@ package com.android.server.wm;
 import static android.app.WindowConfiguration.WINDOWING_MODE_FREEFORM;
 import static android.app.WindowConfiguration.WINDOWING_MODE_MULTI_WINDOW;
 import static android.app.WindowConfiguration.WINDOWING_MODE_PINNED;
+import static android.app.WindowConfiguration.WINDOWING_MODE_SPLIT_SCREEN_PRIMARY;
 import static android.view.InsetsState.ITYPE_IME;
 import static android.view.InsetsState.ITYPE_NAVIGATION_BAR;
 import static android.view.InsetsState.ITYPE_STATUS_BAR;
 import static android.view.ViewRootImpl.NEW_INSETS_MODE_FULL;
+import static android.view.WindowManager.LayoutParams.FLAG_ALT_FOCUSABLE_IM;
 import static android.view.WindowManager.LayoutParams.FLAG_NOT_FOCUSABLE;
 import static android.view.WindowManager.LayoutParams.TYPE_APPLICATION;
 
@@ -146,6 +148,61 @@ public class InsetsStateControllerTest extends WindowTestsBase {
         assertNull(getController().getInsetsForDispatch(app).peekSource(ITYPE_NAVIGATION_BAR));
     }
 
+    @Test
+    public void testStripForDispatch_belowIme() {
+        final WindowState app = createWindow(null, TYPE_APPLICATION, "app");
+        final WindowState ime = createWindow(null, TYPE_APPLICATION, "ime");
+
+        getController().getSourceProvider(ITYPE_IME).setWindow(ime, null, null);
+
+        assertNotNull(getController().getInsetsForDispatch(app).peekSource(ITYPE_IME));
+    }
+
+    @Test
+    public void testStripForDispatch_aboveIme() {
+        final WindowState ime = createWindow(null, TYPE_APPLICATION, "ime");
+        final WindowState app = createWindow(null, TYPE_APPLICATION, "app");
+
+        getController().getSourceProvider(ITYPE_IME).setWindow(ime, null, null);
+
+        assertNull(getController().getInsetsForDispatch(app).peekSource(ITYPE_IME));
+    }
+
+    @Test
+    public void testStripForDispatch_childWindow_altFocusable() {
+        final WindowState app = createWindow(null, TYPE_APPLICATION, "app");
+
+        final WindowState child = createWindow(app, TYPE_APPLICATION, "child");
+        child.mAttrs.flags |= FLAG_ALT_FOCUSABLE_IM;
+
+        final WindowState ime = createWindow(null, TYPE_APPLICATION, "ime");
+
+        // IME cannot be the IME target.
+        ime.mAttrs.flags |= FLAG_NOT_FOCUSABLE;
+
+        getController().getSourceProvider(ITYPE_IME).setWindow(ime, null, null);
+
+        assertNull(getController().getInsetsForDispatch(child).peekSource(ITYPE_IME));
+    }
+
+    @Test
+    public void testStripForDispatch_childWindow_splitScreen() {
+        final WindowState app = createWindow(null, TYPE_APPLICATION, "app");
+
+        final WindowState child = createWindow(app, TYPE_APPLICATION, "child");
+        child.mAttrs.flags |= FLAG_NOT_FOCUSABLE;
+        child.setWindowingMode(WINDOWING_MODE_SPLIT_SCREEN_PRIMARY);
+
+        final WindowState ime = createWindow(null, TYPE_APPLICATION, "ime");
+
+        // IME cannot be the IME target.
+        ime.mAttrs.flags |= FLAG_NOT_FOCUSABLE;
+
+        getController().getSourceProvider(ITYPE_IME).setWindow(ime, null, null);
+
+        assertNull(getController().getInsetsForDispatch(child).peekSource(ITYPE_IME));
+    }
+
     @Test
     public void testImeForDispatch() {
         final WindowState statusBar = createWindow(null, TYPE_APPLICATION, "statusBar");