diff --git a/ash/capture_mode/capture_mode_session.cc b/ash/capture_mode/capture_mode_session.cc
index d826804b8de5d3..fea14c245b9b6b 100644
--- a/ash/capture_mode/capture_mode_session.cc
+++ b/ash/capture_mode/capture_mode_session.cc
@@ -1966,29 +1966,6 @@ void CaptureModeSession::OnLocatedEvent(ui::LocatedEvent* event,
   }
 
   DCHECK(is_capture_region);
-  // Allow events that are located on the capture mode bar or settings menu to
-  // pass through so we can click the buttons.
-  if (!is_event_on_capture_bar &&
-      !(capture_mode_settings_widget_ &&
-        capture_mode_settings_widget_->GetWindowBoundsInScreen().Contains(
-            screen_location))) {
-    if (capture_mode_settings_widget_ &&
-        located_press_event_on_settings_menu_) {
-      capture_mode_settings_widget_->GetNativeWindow()->delegate()->OnEvent(
-          event);
-    }
-    event->SetHandled();
-    event->StopPropagation();
-  }
-
-  // OnLocatedEventPressed() and OnLocatedEventDragged used root locations since
-  // CaptureModeController::user_capture_region() is stored in root
-  // coordinates..
-  // TODO(sammiequon): Update CaptureModeController::user_capture_region() to
-  // store screen coordinates.
-  gfx::Point location_in_root = event->location();
-  aura::Window::ConvertPointToTarget(event_target, current_root_,
-                                     &location_in_root);
 
   // Early return if the given event is targeted on the capture bar or settings
   // menu, since the switch block below is for updating the user capture region
@@ -2003,11 +1980,21 @@ void CaptureModeSession::OnLocatedEvent(ui::LocatedEvent* event,
     return;
   }
 
+  event->SetHandled();
+  event->StopPropagation();
+
+  // OnLocatedEventPressed() and OnLocatedEventDragged used root locations since
+  // CaptureModeController::user_capture_region() is stored in root
+  // coordinates..
+  // TODO(sammiequon): Update CaptureModeController::user_capture_region() to
+  // store screen coordinates.
+  gfx::Point location_in_root = event->location();
+  aura::Window::ConvertPointToTarget(event_target, current_root_,
+                                     &location_in_root);
+
   switch (event->type()) {
     case ui::ET_MOUSE_PRESSED:
     case ui::ET_TOUCH_PRESSED:
-      if (is_event_on_settings_menu)
-        located_press_event_on_settings_menu_ = true;
       old_mouse_warp_status_ = SetMouseWarpEnabled(false);
       OnLocatedEventPressed(location_in_root, is_touch);
       break;
@@ -2022,7 +2009,6 @@ void CaptureModeSession::OnLocatedEvent(ui::LocatedEvent* event,
         SetMouseWarpEnabled(*old_mouse_warp_status_);
       old_mouse_warp_status_.reset();
       OnLocatedEventReleased(location_in_root);
-      located_press_event_on_settings_menu_ = false;
       break;
     default:
       break;
diff --git a/ash/capture_mode/capture_mode_session.h b/ash/capture_mode/capture_mode_session.h
index 5c3cfab6a28b36..8916f1e0fe8645 100644
--- a/ash/capture_mode/capture_mode_session.h
+++ b/ash/capture_mode/capture_mode_session.h
@@ -538,14 +538,6 @@ class ASH_EXPORT CaptureModeSession
   // The object which handles tab focus while in a capture session.
   std::unique_ptr<CaptureModeSessionFocusCycler> focus_cycler_;
 
-  // This helps indicating whether located events should be handled by the
-  // capture mode settings menu view or the capture mode Pre-EventHandler. When
-  // it's true, settings menu view should handle the event. Set it to true when
-  // the event is a press event and is located on the settings menu view. Set it
-  // to false when the event is a release event and "event_on_settings_menu_" is
-  // true.
-  bool located_press_event_on_settings_menu_ = false;
-
   // True if a located event should be passed to camera preview to be handled.
   bool should_pass_located_event_to_camera_preview_ = false;
 
diff --git a/ash/capture_mode/capture_mode_unittests.cc b/ash/capture_mode/capture_mode_unittests.cc
index 97152609205525..3bb16787c18df2 100644
--- a/ash/capture_mode/capture_mode_unittests.cc
+++ b/ash/capture_mode/capture_mode_unittests.cc
@@ -1064,6 +1064,31 @@ TEST_F(CaptureModeTest, CaptureRegionCaptureButtonDoesNotIntersectCaptureBar) {
   EXPECT_GT(GetCaptureModeLabelWidget()->GetWindowBoundsInScreen().x(), 20);
 }
 
+// Tests that pressing on the capture bar and releasing the press outside of the
+// capture bar, the capture region could still be draggable and set. Regression
+// test for https://crbug.com/1325028.
+TEST_F(CaptureModeTest, SetCaptureRegionAfterPressOnCaptureBar) {
+  UpdateDisplay("800x600");
+
+  auto* controller =
+      StartCaptureSession(CaptureModeSource::kRegion, CaptureModeType::kVideo);
+  auto* settings_button = GetSettingsButton();
+
+  // Press on the settings button without release.
+  auto* event_generator = GetEventGenerator();
+  event_generator->MoveMouseTo(
+      settings_button->GetBoundsInScreen().CenterPoint());
+  event_generator->PressLeftButton();
+  // Move mouse to the outside of the capture bar and then release the press.
+  event_generator->MoveMouseTo({300, 300});
+  event_generator->ReleaseLeftButton();
+
+  // Set the capture region, and verify it's set successfully.
+  const gfx::Rect region_bounds(100, 100, 200, 200);
+  SelectRegion(region_bounds);
+  EXPECT_EQ(controller->user_capture_region(), region_bounds);
+}
+
 TEST_F(CaptureModeTest, WindowCapture) {
   // Create 2 windows that overlap with each other.
   const gfx::Rect bounds1(0, 0, 200, 200);