diff --git a/packages/components/CHANGELOG.md b/packages/components/CHANGELOG.md
index d8426b35ac264b..2744ddd198c514 100644
--- a/packages/components/CHANGELOG.md
+++ b/packages/components/CHANGELOG.md
@@ -7,6 +7,7 @@
 -   `Tooltip`: Opt in to `__unstableShift` to ensure that the Tooltip is always within the viewport. ([#41524](https://github.com/WordPress/gutenberg/pull/41524))
 -   `FormTokenField`: Do not suggest the selected one even if `{ value: string }` is passed ([#41216](https://github.com/WordPress/gutenberg/pull/41216)).
 -   `CustomGradientBar`: Fix insertion and control point positioning to more closely follow cursor. ([#41492](https://github.com/WordPress/gutenberg/pull/41492))
+-   `FormTokenField`: Added Padding to resolve close button overlap issue ([#41556](https://github.com/WordPress/gutenberg/pull/41556)).
 
 ### Internal
 
diff --git a/packages/components/src/form-token-field/style.scss b/packages/components/src/form-token-field/style.scss
index 7d26cb5152eae4..4ba684a3d363d3 100644
--- a/packages/components/src/form-token-field/style.scss
+++ b/packages/components/src/form-token-field/style.scss
@@ -94,7 +94,7 @@
 
 	&.is-borderless {
 		position: relative;
-		padding: 0 16px 0 0;
+		padding: 0 24px 0 0;
 
 		.components-form-token-field__token-text {
 			background: transparent;
@@ -107,6 +107,7 @@
 			position: absolute;
 			top: 1px;
 			right: 0;
+			padding: 0;
 		}
 
 		&.is-success {