diff --git a/docs/components/content/examples/SelectMenuExampleClearable.vue b/docs/components/content/examples/SelectMenuExampleClearable.vue
new file mode 100644
index 00000000..ba019e27
--- /dev/null
+++ b/docs/components/content/examples/SelectMenuExampleClearable.vue
@@ -0,0 +1,102 @@
+<script setup lang="ts">
+const options = ref([
+  { id: 1, name: 'bug', color: 'd73a4a' },
+  { id: 2, name: 'documentation', color: '0075ca' },
+  { id: 3, name: 'duplicate', color: 'cfd3d7' },
+  { id: 4, name: 'enhancement', color: 'a2eeef' },
+  { id: 5, name: 'good first issue', color: '7057ff' },
+  { id: 6, name: 'help wanted', color: '008672' },
+  { id: 7, name: 'invalid', color: 'e4e669' },
+  { id: 8, name: 'question', color: 'd876e3' },
+  { id: 9, name: 'wontfix', color: 'ffffff' }
+])
+
+const selected = ref([])
+
+const labels = computed({
+  get: () => selected.value,
+  set: async (labels) => {
+    const promises = labels.map(async (label) => {
+      if (label.id) {
+        return label
+      }
+
+      // In a real app, you would make an API call to create the label
+      const response = {
+        id: options.value.length + 1,
+        name: label.name,
+        color: generateColorFromString(label.name)
+      }
+
+      options.value.push(response)
+
+      return response
+    })
+
+    selected.value = await Promise.all(promises)
+  }
+})
+
+function hashCode(str) {
+  let hash = 0
+  for (let i = 0; i < str.length; i++) {
+    hash = str.charCodeAt(i) + ((hash << 5) - hash)
+  }
+  return hash
+}
+
+function intToRGB(i) {
+  const c = (i & 0x00FFFFFF)
+    .toString(16)
+    .toUpperCase()
+
+  return '00000'.substring(0, 6 - c.length) + c
+}
+
+function generateColorFromString(str) {
+  return intToRGB(hashCode(str))
+}
+</script>
+
+<template>
+  <USelectMenu
+    v-model="labels"
+    by="id"
+    name="labels"
+    :options="options"
+    option-attribute="name"
+    clearable
+    multiple
+    searchable
+    creatable
+  >
+    <template #label>
+      <template v-if="labels.length">
+        <span class="flex items-center -space-x-1">
+          <span v-for="label of labels" :key="label.id" class="flex-shrink-0 w-2 h-2 mt-px rounded-full" :style="{ background: `#${label.color}` }" />
+        </span>
+        <span>{{ labels.length }} label{{ labels.length > 1 ? 's' : '' }}</span>
+      </template>
+      <template v-else>
+        <span class="text-gray-500 dark:text-gray-400 truncate">Select labels</span>
+      </template>
+    </template>
+
+    <template #option="{ option }">
+      <span
+        class="flex-shrink-0 w-2 h-2 mt-px rounded-full"
+        :style="{ background: `#${option.color}` }"
+      />
+      <span class="truncate">{{ option.name }}</span>
+    </template>
+
+    <template #option-create="{ option }">
+      <span class="flex-shrink-0">New label:</span>
+      <span
+        class="flex-shrink-0 w-2 h-2 mt-px rounded-full -mx-1"
+        :style="{ background: `#${generateColorFromString(option.name)}` }"
+      />
+      <span class="block truncate">{{ option.name }}</span>
+    </template>
+  </USelectMenu>
+</template>
diff --git a/docs/content/2.components/select-menu.md b/docs/content/2.components/select-menu.md
index bb28993a..859bc109 100644
--- a/docs/content/2.components/select-menu.md
+++ b/docs/content/2.components/select-menu.md
@@ -156,7 +156,18 @@ Use the `searchableLazy` prop to control the immediacy of data requests.
 ---
 component: 'select-menu-example-search-async'
 componentProps:
-  class: 'w-full lg:w-48'
+   class: 'w-full lg:w-48'
+---
+::
+
+## Clearable
+Use the `clearable` prop to enable the remove selected option.
+
+::component-example
+---
+component: 'select-menu-example-clearable'
+componentProps:
+  class: 'w-full lg:w-52'
 ---
 ::
 
diff --git a/playground/app.vue b/playground/app.vue
index 4df511af..5c8f5a2b 100644
--- a/playground/app.vue
+++ b/playground/app.vue
@@ -1,21 +1,23 @@
-<script setup lang="ts">
-const people = ['Wade Cooper', 'Arlene Mccoy', 'Devon Webb', 'Tom Cook', 'Tanya Fox', 'Hellen Schmidt', 'Caroline Schultz', 'Mason Heaney', 'Claudie Smitham', 'Emil Schaefer']
-
-const selected = ref()
-
-const handleClose = () => {
-}
-</script>
-
 <template>
-  <UContainer>
-    <USelectMenu
-      v-model="selected"
-      multiple
-      clearable
-      :options="people"
-      placeholder="Select people"
-      @clear="handleClose"
-    />
+  <UContainer class="min-h-screen flex items-center">
+    <UCard class="flex-1" :ui="{ background: 'bg-gray-50 dark:bg-gray-800/50', ring: 'ring-1 ring-gray-300 dark:ring-gray-700', divide: 'divide-y divide-gray-300 dark:divide-gray-700', header: { base: 'font-bold' } }">
+      <template #header>
+        Welcome to the playground!
+      </template>
+
+      <p class="text-gray-500 dark:text-gray-400">
+        Try your components here!
+      </p>
+    </UCard>
   </UContainer>
 </template>
+
+<script setup>
+
+</script>
+
+<style>
+body {
+  @apply antialiased font-sans text-gray-700 dark:text-gray-200 bg-white dark:bg-gray-900;
+}
+</style>
diff --git a/src/runtime/components/forms/SelectMenu.vue b/src/runtime/components/forms/SelectMenu.vue
index b8410ea4..59299503 100644
--- a/src/runtime/components/forms/SelectMenu.vue
+++ b/src/runtime/components/forms/SelectMenu.vue
@@ -39,13 +39,22 @@
             <span v-if="label" :class="uiMenu.label">{{ label }}</span>
             <span v-else :class="uiMenu.label">{{ placeholder || '&nbsp;' }}</span>
           </slot>
+          <span v-if="canClearValue" :class="clearableWrapperClass">
+            <slot name="clearable" :selected="selected" :disabled="disabled" :loading="loading" @clear="onClear">
+              <UButton
+                :icon="clearableIcon"
+                size="xs"
+                class="p-0"
+                :class="clearableButtonClass"
+                variant="ghost"
+                @click.capture.stop="onClear"
+              />
+            </slot>
+          </span>
 
           <span v-if="(isTrailing && trailingIconName) || $slots.trailing" :class="trailingWrapperIconClass">
-            <slot
-              name="trailing"
-              v-bind="trailingSlotProps()"
-            >
-              <UIcon :name="trailingIconName" :class="trailingIconClass" aria-hidden="true" @click="onClear" />
+            <slot name="trailing" :selected="selected" :disabled="disabled" :loading="loading">
+              <UIcon :name="trailingIconName" :class="trailingIconClass" aria-hidden="true" />
             </slot>
           </span>
         </button>
@@ -152,6 +161,7 @@ import { useFormGroup } from '../../composables/useFormGroup'
 import { get, mergeConfig } from '../../utils'
 import { useInjectButtonGroup } from '../../composables/useButtonGroup'
 import type { SelectSize, SelectColor, SelectVariant, PopperOptions, Strategy, DeepPartial } from '../../types/index'
+import type { Button } from '../../types/button'
 // @ts-expect-error
 import appConfig from '#build/app.config'
 import { select, selectMenu } from '#ui/ui.config'
@@ -344,11 +354,8 @@ export default defineComponent({
     clearableIcon: {
       type: String,
       default: () => config.default.clerableIcon
-    },
-    closeOnClear: {
-      type: Boolean,
-      default: () => configMenu.default.closeOnClear
     }
+
   },
   emits: ['update:modelValue', 'update:query', 'open', 'close', 'change', 'clear'],
   setup(props, { emit, slots }) {
@@ -463,10 +470,22 @@ export default defineComponent({
 
     const canClearValue = computed(() => props.clearable && (Array.isArray(selected.value) ? selected.value.length > 0 : !!selected.value))
 
+    const clearableWrapperClass = computed(() => {
+      return twJoin(
+        ui.value.icon.clearable.wrapper,
+        ui.value.icon.clearable.padding[size.value]
+      )
+    })
+
+    const clearableButtonClass = computed(() => {
+      return twJoin(
+        ui.value.icon.base,
+        color.value && appConfig.ui.colors.includes(color.value) && ui.value.icon.color.replaceAll('{color}', color.value),
+        props.loading && ui.value.icon.loading
+      )
+    })
+
     const trailingIconName = computed(() => {
-      if (canClearValue.value) {
-        return props.clearableIcon
-      }
       if (props.loading && !isLeading.value) {
         return props.loadingIcon
       }
@@ -598,11 +617,8 @@ export default defineComponent({
       query.value = event.target.value
     }
 
-    function onClear(e: Event) {
+    function onClear() {
       if (canClearValue.value) {
-        if (container.value && !props.closeOnClear) {
-          e.stopPropagation()
-        }
         emit('update:modelValue', props.multiple ? [] : null)
         emit('clear')
         emitFormChange()
@@ -658,7 +674,10 @@ export default defineComponent({
       query,
       onUpdate,
       onQueryChange,
-      trailingSlotProps
+      trailingSlotProps,
+      canClearValue,
+      clearableWrapperClass,
+      clearableButtonClass
     }
   }
 })
diff --git a/src/runtime/ui.config/forms/input.ts b/src/runtime/ui.config/forms/input.ts
index ddf2c500..c61dc6be 100644
--- a/src/runtime/ui.config/forms/input.ts
+++ b/src/runtime/ui.config/forms/input.ts
@@ -98,6 +98,18 @@ export default {
         'lg': 'px-3.5',
         'xl': 'px-3.5'
       }
+    },
+    clearable: {
+      wrapper: 'absolute inset-y-0 end-6 flex items-center',
+      pointer: 'pointer-events-auto',
+      padding: {
+        '2xs': 'px-2',
+        'xs': 'px-2.5',
+        'sm': 'px-2.5',
+        'md': 'px-3',
+        'lg': 'px-3.5',
+        'xl': 'px-3.5'
+      }
     }
   },
   default: {
diff --git a/src/runtime/ui.config/forms/selectMenu.ts b/src/runtime/ui.config/forms/selectMenu.ts
index 56e03fb7..96b56686 100644
--- a/src/runtime/ui.config/forms/selectMenu.ts
+++ b/src/runtime/ui.config/forms/selectMenu.ts
@@ -23,7 +23,6 @@ export default {
   default: {
     selectedIcon: 'i-heroicons-check-20-solid',
     clearSearchOnClose: false,
-    closeOnClear: true,
     showCreateOptionWhen: 'empty',
     searchablePlaceholder: {
       label: 'Search...'