diff --git a/src/plugins/embeddable/public/lib/panel/_embeddable_panel.scss b/src/plugins/embeddable/public/lib/panel/_embeddable_panel.scss
index 9305927a041737e..3044a3896fa352c 100644
--- a/src/plugins/embeddable/public/lib/panel/_embeddable_panel.scss
+++ b/src/plugins/embeddable/public/lib/panel/_embeddable_panel.scss
@@ -29,6 +29,13 @@
   .embPanel__content--fullWidth {
     width: 100%;
   }
+
+  .embPanel__content--error {
+    &:hover {
+      box-shadow: none;
+      transform: none;
+    }
+  }
 }
 
 // HEADER
diff --git a/src/plugins/embeddable/public/lib/panel/embeddable_panel.test.tsx b/src/plugins/embeddable/public/lib/panel/embeddable_panel.test.tsx
index dfbd5f80999d6d1..a79f19cb4225c19 100644
--- a/src/plugins/embeddable/public/lib/panel/embeddable_panel.test.tsx
+++ b/src/plugins/embeddable/public/lib/panel/embeddable_panel.test.tsx
@@ -218,6 +218,7 @@ describe('HelloWorldContainer in error state', () => {
   test('renders a custom fatal error', () => {
     embeddable.triggerError(new Error('something'), true);
     component.update();
+    component.mount();
 
     const embeddableError = findTestSubject(component, 'embeddableError');
 
diff --git a/src/plugins/embeddable/public/lib/panel/embeddable_panel.tsx b/src/plugins/embeddable/public/lib/panel/embeddable_panel.tsx
index 29bb4281bec01f4..52b70f3b53406f2 100644
--- a/src/plugins/embeddable/public/lib/panel/embeddable_panel.tsx
+++ b/src/plugins/embeddable/public/lib/panel/embeddable_panel.tsx
@@ -32,6 +32,7 @@ import {
 } from '../embeddables/i_embeddable';
 import { ViewMode } from '../types';
 
+import { EmbeddablePanelError } from './embeddable_panel_error';
 import { RemovePanelAction } from './panel_header/panel_actions';
 import { AddPanelAction } from './panel_header/panel_actions/add_panel/add_panel_action';
 import { CustomizePanelTitleAction } from './panel_header/panel_actions/customize_title/customize_panel_action';
@@ -40,7 +41,7 @@ import { InspectPanelAction } from './panel_header/panel_actions/inspect_panel_a
 import { EditPanelAction } from '../actions';
 import { CustomizePanelModal } from './panel_header/panel_actions/customize_title/customize_panel_modal';
 import { EmbeddableStart } from '../../plugin';
-import { EmbeddableStateTransfer, ErrorEmbeddable, isSelfStyledEmbeddable } from '..';
+import { EmbeddableStateTransfer, isSelfStyledEmbeddable } from '..';
 
 const sortByOrderField = (
   { order: orderA }: { order?: number },
@@ -118,18 +119,10 @@ interface BasePanelActions {
   editPanel: EditPanelAction;
 }
 
-const emptyObject = {};
-type EmptyObject = typeof emptyObject;
-
-type PanelUniversalActions =
-  | BasePanelActions
-  | InspectorPanelAction
-  | (BasePanelActions & InspectorPanelAction)
-  | EmptyObject;
+interface PanelUniversalActions extends Partial<InspectorPanelAction>, Partial<BasePanelActions> {}
 
 export class EmbeddablePanel extends React.Component<Props, State> {
   private embeddableRoot = React.createRef<HTMLDivElement>();
-  private errorRoot = React.createRef<HTMLDivElement>();
   private parentSubscription?: Subscription;
   private subscription: Subscription = new Subscription();
   private mounted: boolean = false;
@@ -154,13 +147,6 @@ export class EmbeddablePanel extends React.Component<Props, State> {
     };
   }
 
-  componentDidUpdate(prevProps: Props, prevState: State) {
-    if (this.state.error !== prevState.error) {
-      prevState.destroyError?.();
-      this.setState({ destroyError: this.renderError() });
-    }
-  }
-
   private async refreshBadges() {
     if (!this.mounted) {
       return;
@@ -264,24 +250,6 @@ export class EmbeddablePanel extends React.Component<Props, State> {
     }
   };
 
-  private renderError() {
-    if (!this.state.error || !this.errorRoot.current) {
-      return;
-    }
-
-    if (this.props.embeddable.renderError) {
-      return this.props.embeddable.renderError(this.errorRoot.current, this.state.error);
-    }
-
-    const errorEmbeddable = new ErrorEmbeddable(this.state.error, {
-      id: this.props.embeddable.id,
-    });
-
-    errorEmbeddable.render(this.errorRoot.current);
-
-    return () => errorEmbeddable.destroy();
-  }
-
   public render() {
     const viewOnlyMode = [ViewMode.VIEW, ViewMode.PRINT].includes(this.state.viewMode);
     const classes = classNames('embPanel', {
@@ -330,10 +298,10 @@ export class EmbeddablePanel extends React.Component<Props, State> {
           />
         )}
         {this.state.error && (
-          <div
-            className="embPanel__content"
-            data-test-subj="embeddableError"
-            ref={this.errorRoot}
+          <EmbeddablePanelError
+            editPanelAction={this.state.universalActions.editPanel}
+            embeddable={this.props.embeddable}
+            error={this.state.error}
           />
         )}
         <div className="embPanel__content" ref={this.embeddableRoot} {...contentAttrs} />
diff --git a/src/plugins/embeddable/public/lib/panel/embeddable_panel_error.tsx b/src/plugins/embeddable/public/lib/panel/embeddable_panel_error.tsx
new file mode 100644
index 000000000000000..46e26fd1448bb1c
--- /dev/null
+++ b/src/plugins/embeddable/public/lib/panel/embeddable_panel_error.tsx
@@ -0,0 +1,89 @@
+/*
+ * Copyright Elasticsearch B.V. and/or licensed to Elasticsearch B.V. under one
+ * or more contributor license agreements. Licensed under the Elastic License
+ * 2.0 and the Server Side Public License, v 1; you may not use this file except
+ * in compliance with, at your election, the Elastic License 2.0 or the Server
+ * Side Public License, v 1.
+ */
+
+import React, { useEffect, useMemo, useRef, useState } from 'react';
+import { EuiPanel } from '@elastic/eui';
+import { i18n } from '@kbn/i18n';
+import { ErrorLike } from '@kbn/expressions-plugin/common';
+import { distinctUntilChanged, merge, of, switchMap } from 'rxjs';
+import { EditPanelAction } from '../actions';
+import { ErrorEmbeddable, IEmbeddable } from '../embeddables';
+
+interface EmbeddablePanelErrorProps {
+  editPanelAction?: EditPanelAction;
+  embeddable: IEmbeddable;
+  error: ErrorLike;
+}
+
+export function EmbeddablePanelError({
+  editPanelAction,
+  embeddable,
+  error,
+}: EmbeddablePanelErrorProps) {
+  const [isEditable, setEditable] = useState(false);
+  const ref = useRef<HTMLDivElement>(null);
+  const handleErrorClick = useMemo(
+    () => (isEditable ? () => editPanelAction?.execute({ embeddable }) : undefined),
+    [editPanelAction, embeddable, isEditable]
+  );
+
+  const title = embeddable.getTitle();
+  const actionDisplayName = useMemo(
+    () => editPanelAction?.getDisplayName({ embeddable }),
+    [editPanelAction, embeddable]
+  );
+  const ariaLabel = useMemo(
+    () =>
+      !title
+        ? actionDisplayName
+        : i18n.translate('embeddableApi.panel.editPanel.displayName', {
+            defaultMessage: 'Edit {value}',
+            values: { value: title },
+          }),
+    [title, actionDisplayName]
+  );
+
+  useEffect(() => {
+    const subscription = merge(embeddable.getInput$(), embeddable.getOutput$())
+      .pipe(
+        switchMap(() => editPanelAction?.isCompatible({ embeddable }) ?? of(false)),
+        distinctUntilChanged()
+      )
+      .subscribe(setEditable);
+
+    return () => subscription.unsubscribe();
+  }, [editPanelAction, embeddable]);
+  useEffect(() => {
+    if (!ref.current) {
+      return;
+    }
+
+    if (embeddable.renderError) {
+      return embeddable.renderError(ref.current, error);
+    }
+
+    const errorEmbeddable = new ErrorEmbeddable(error, { id: embeddable.id });
+    errorEmbeddable.render(ref.current);
+
+    return () => errorEmbeddable.destroy();
+  }, [embeddable, error]);
+
+  return (
+    <EuiPanel
+      element="div"
+      className="embPanel__content embPanel__content--error"
+      color="transparent"
+      paddingSize="none"
+      data-test-subj="embeddableError"
+      panelRef={ref}
+      role={isEditable ? 'button' : undefined}
+      aria-label={isEditable ? ariaLabel : undefined}
+      onClick={handleErrorClick}
+    />
+  );
+}