diff --git a/packages/components/CHANGELOG.md b/packages/components/CHANGELOG.md
index 80c9884c565712..d20fb5898eb3aa 100644
--- a/packages/components/CHANGELOG.md
+++ b/packages/components/CHANGELOG.md
@@ -5,6 +5,7 @@
 ### Enhancements
 
 -   Refine `ExternalLink` to be same size as the text, to appear more as a glyph than an icon. ([#37859](https://github.com/WordPress/gutenberg/pull/37859))
+-   Updated `ToolsPanel` header icon to only show "plus" icon when all items are optional and all are currently hidden ([#38262](https://github.com/WordPress/gutenberg/pull/38262))
 
 ### Bug Fix
 
diff --git a/packages/components/src/tools-panel/stories/index.js b/packages/components/src/tools-panel/stories/index.js
index f3afeb11904ee6..a27792da448abb 100644
--- a/packages/components/src/tools-panel/stories/index.js
+++ b/packages/components/src/tools-panel/stories/index.js
@@ -2,6 +2,7 @@
  * External dependencies
  */
 import styled from '@emotion/styled';
+import { boolean } from '@storybook/addon-knobs';
 
 /**
  * WordPress dependencies
@@ -23,6 +24,9 @@ import { createSlotFill, Provider as SlotFillProvider } from '../../slot-fill';
 export default {
 	title: 'Components (Experimental)/ToolsPanel',
 	component: ToolsPanel,
+	parameters: {
+		knobs: { disable: false },
+	},
 };
 
 export const _default = () => {
@@ -138,19 +142,36 @@ export const WithNonToolsPanelItems = () => {
 export const WithOptionalItemsPlusIcon = () => {
 	const [ height, setHeight ] = useState();
 	const [ width, setWidth ] = useState();
+	const [ minWidth, setMinWidth ] = useState();
 
 	const resetAll = () => {
 		setHeight( undefined );
 		setWidth( undefined );
+		setMinWidth( undefined );
 	};
 
+	const includeDefaultControls = boolean( 'includeDefaultControls', false );
+
 	return (
 		<PanelWrapperView>
 			<Panel>
 				<ToolsPanel
 					label="Tools Panel (optional items only)"
 					resetAll={ resetAll }
+					key={ includeDefaultControls }
 				>
+					<SingleColumnItem
+						hasValue={ () => !! minWidth }
+						label="Minimum width"
+						onDeselect={ () => setMinWidth( undefined ) }
+						isShownByDefault={ includeDefaultControls }
+					>
+						<UnitControl
+							label="Minimum width"
+							value={ minWidth }
+							onChange={ ( next ) => setMinWidth( next ) }
+						/>
+					</SingleColumnItem>
 					<SingleColumnItem
 						hasValue={ () => !! width }
 						label="Width"
diff --git a/packages/components/src/tools-panel/test/index.js b/packages/components/src/tools-panel/test/index.js
index 81ec094b2453b3..d1d884d439fa43 100644
--- a/packages/components/src/tools-panel/test/index.js
+++ b/packages/components/src/tools-panel/test/index.js
@@ -942,6 +942,17 @@ describe( 'ToolsPanel', () => {
 	} );
 
 	describe( 'panel header icon toggle', () => {
+		const defaultControls = {
+			attributes: { value: false },
+			hasValue: jest.fn().mockImplementation( () => {
+				return !! defaultControls.attributes.value;
+			} ),
+			label: 'Default',
+			onDeselect: jest.fn(),
+			onSelect: jest.fn(),
+			isShownByDefault: true,
+		};
+
 		const optionalControls = {
 			attributes: { value: false },
 			hasValue: jest.fn().mockImplementation( () => {
@@ -953,7 +964,26 @@ describe( 'ToolsPanel', () => {
 			isShownByDefault: false,
 		};
 
-		it( 'should render appropriate icons for the dropdown menu', async () => {
+		it( 'should render appropriate icon for the dropdown menu where there are default controls', async () => {
+			render(
+				<ToolsPanel { ...defaultProps }>
+					<ToolsPanelItem { ...defaultControls }>
+						<div>Default control</div>
+					</ToolsPanelItem>
+					<ToolsPanelItem { ...optionalControls }>
+						<div>Optional control</div>
+					</ToolsPanelItem>
+				</ToolsPanel>
+			);
+
+			const optionsDisplayedIcon = screen.getByRole( 'button', {
+				name: 'View options',
+			} );
+
+			expect( optionsDisplayedIcon ).toBeInTheDocument();
+		} );
+
+		it( 'should render appropriate icons for the dropdown menu where there are no default controls', async () => {
 			render(
 				<ToolsPanel { ...defaultProps }>
 					<ToolsPanelItem { ...optionalControls }>
diff --git a/packages/components/src/tools-panel/tools-panel/hook.ts b/packages/components/src/tools-panel/tools-panel/hook.ts
index 851ed4ca0c5841..3ef134d00c85c4 100644
--- a/packages/components/src/tools-panel/tools-panel/hook.ts
+++ b/packages/components/src/tools-panel/tools-panel/hook.ts
@@ -48,6 +48,10 @@ const generateMenuItems = ( {
 	return menuItems;
 };
 
+const isMenuItemTypeEmpty = (
+	obj?: ToolsPanelMenuItems[ ToolsPanelMenuItemKey ]
+) => obj && Object.keys( obj ).length === 0;
+
 export function useToolsPanel(
 	props: WordPressComponentProps< ToolsPanelProps, 'div' >
 ) {
@@ -167,24 +171,24 @@ export function useToolsPanel(
 	] = useState( false );
 
 	useEffect( () => {
-		if ( menuItems.optional ) {
-			const optionalItems = Object.entries( menuItems.optional );
-			const allControlsHidden =
-				optionalItems.length > 0 &&
-				! optionalItems.some( ( [ , isSelected ] ) => isSelected );
+		if (
+			isMenuItemTypeEmpty( menuItems?.default ) &&
+			! isMenuItemTypeEmpty( menuItems?.optional )
+		) {
+			const allControlsHidden = ! Object.entries(
+				menuItems.optional
+			).some( ( [ , isSelected ] ) => isSelected );
 			setAreAllOptionalControlsHidden( allControlsHidden );
 		}
-	}, [ menuItems.optional, setAreAllOptionalControlsHidden ] );
+	}, [ menuItems, setAreAllOptionalControlsHidden ] );
 
 	const cx = useCx();
 	const classes = useMemo( () => {
-		const hasDefaultMenuItems =
-			menuItems?.default && !! Object.keys( menuItems?.default ).length;
 		const wrapperStyle =
 			hasInnerWrapper &&
 			styles.ToolsPanelWithInnerWrapper( DEFAULT_COLUMNS );
 		const emptyStyle =
-			! hasDefaultMenuItems &&
+			isMenuItemTypeEmpty( menuItems?.default ) &&
 			areAllOptionalControlsHidden &&
 			styles.ToolsPanelHiddenInnerWrapper;