diff --git a/packages/shared/src/KeyedCoalescingWorker.test.ts b/packages/shared/src/KeyedCoalescingWorker.test.ts
index 8bfc1a340a60..8ce44069d2d5 100644
--- a/packages/shared/src/KeyedCoalescingWorker.test.ts
+++ b/packages/shared/src/KeyedCoalescingWorker.test.ts
@@ -6,6 +6,98 @@ import * as Effect from "effect/Effect";
 import { makeKeyedCoalescingWorker } from "./KeyedCoalescingWorker.ts";
 
 describe("makeKeyedCoalescingWorker", () => {
+  it.live("lets a queued key drain before a continuously updated key finishes", () =>
+    Effect.scoped(
+      Effect.gen(function* () {
+        const processed: string[] = [];
+        const busyStarted = yield* Deferred.make<void>();
+        const releaseBusy = yield* Deferred.make<void>();
+
+        const worker = yield* makeKeyedCoalescingWorker<string, number, never, never>({
+          merge: (_current, next) => next,
+          process: (key, value): Effect.Effect<void> =>
+            Effect.gen(function* () {
+              processed.push(`${key}:${value}`);
+              if (key !== "busy") return;
+
+              if (value === 1) {
+                yield* Deferred.succeed(busyStarted, undefined);
+                yield* Deferred.await(releaseBusy);
+              }
+              if (value < 4) yield* worker.enqueue(key, value + 1);
+            }),
+        });
+
+        yield* worker.enqueue("busy", 1);
+        yield* Deferred.await(busyStarted);
+        yield* worker.enqueue("quiet", 1);
+        yield* Deferred.succeed(releaseBusy, undefined);
+        yield* worker.drainKey("quiet");
+        yield* worker.drainKey("busy");
+
+        expect(processed).toEqual(["busy:1", "quiet:1", "busy:2", "busy:3", "busy:4"]);
+      }),
+    ),
+  );
+
+  it.live("merges updates while waiting behind another key and drains the merged batch", () =>
+    Effect.scoped(
+      Effect.gen(function* () {
+        const processed: string[] = [];
+        const busyStarted = yield* Deferred.make<void>();
+        const releaseBusy = yield* Deferred.make<void>();
+        const quietStarted = yield* Deferred.make<void>();
+        const releaseQuiet = yield* Deferred.make<void>();
+        const mergedStarted = yield* Deferred.make<void>();
+        const releaseMerged = yield* Deferred.make<void>();
+
+        const worker = yield* makeKeyedCoalescingWorker<string, string, never, never>({
+          merge: (current, next) => `${current}+${next}`,
+          process: (key, value) =>
+            Effect.gen(function* () {
+              processed.push(`${key}:${value}`);
+              if (value === "first") {
+                yield* Deferred.succeed(busyStarted, undefined);
+                yield* Deferred.await(releaseBusy);
+              } else if (key === "quiet") {
+                yield* Deferred.succeed(quietStarted, undefined);
+                yield* Deferred.await(releaseQuiet);
+              } else if (value === "a+b+c") {
+                yield* Deferred.succeed(mergedStarted, undefined);
+                yield* Deferred.await(releaseMerged);
+              }
+            }),
+        });
+
+        yield* worker.enqueue("busy", "first");
+        yield* Deferred.await(busyStarted);
+        yield* worker.enqueue("quiet", "quiet");
+        yield* worker.enqueue("busy", "a");
+        yield* Deferred.succeed(releaseBusy, undefined);
+        yield* Deferred.await(quietStarted);
+        expect(processed).toEqual(["busy:first", "quiet:quiet"]);
+        yield* worker.enqueue("busy", "b");
+        yield* worker.enqueue("busy", "c");
+
+        const drained = yield* Deferred.make<void>();
+        yield* Effect.forkChild(
+          worker.drainKey("busy").pipe(Effect.andThen(Deferred.succeed(drained, undefined))),
+          { startImmediately: true },
+        );
+        expect(yield* Deferred.isDone(drained)).toBe(false);
+
+        yield* Deferred.succeed(releaseQuiet, undefined);
+        yield* Deferred.await(mergedStarted);
+        expect(yield* Deferred.isDone(drained)).toBe(false);
+        yield* Deferred.succeed(releaseMerged, undefined);
+        yield* Deferred.await(drained);
+        yield* worker.drainKey("quiet");
+
+        expect(processed).toEqual(["busy:first", "quiet:quiet", "busy:a+b+c"]);
+      }),
+    ),
+  );
+
   it.live("waits for latest work enqueued during active processing before draining the key", () =>
     Effect.scoped(
       Effect.gen(function* () {
@@ -85,12 +177,13 @@ describe("makeKeyedCoalescingWorker", () => {
 
         yield* worker.enqueue("terminal-1", "first");
         yield* Deferred.await(firstStarted);
+        yield* worker.enqueue("terminal-2", "quiet");
         yield* worker.enqueue("terminal-1", "second");
         yield* Deferred.succeed(releaseFailure, undefined);
         yield* Deferred.await(secondProcessed);
         yield* worker.drainKey("terminal-1");
 
-        expect(processed).toEqual(["terminal-1:first", "terminal-1:second"]);
+        expect(processed).toEqual(["terminal-1:first", "terminal-2:quiet", "terminal-1:second"]);
       }),
     ),
   );
diff --git a/packages/shared/src/KeyedCoalescingWorker.ts b/packages/shared/src/KeyedCoalescingWorker.ts
index f4edebfafb30..ce1d89a41169 100644
--- a/packages/shared/src/KeyedCoalescingWorker.ts
+++ b/packages/shared/src/KeyedCoalescingWorker.ts
@@ -2,8 +2,9 @@
  * KeyedCoalescingWorker - A keyed worker that keeps only the latest value per key.
  *
  * Enqueues for an active or already-queued key are merged atomically instead of
- * creating duplicate queued items. `drainKey()` resolves only when that key has
- * no queued, pending, or active work left.
+ * creating duplicate queued items. Each batch yields to other queued keys before
+ * processing newer updates. `drainKey()` resolves only when that key has no
+ * queued, pending, or active work left.
  *
  * @module KeyedCoalescingWorker
  */
@@ -35,28 +36,9 @@ export const makeKeyedCoalescingWorker = <K, V, E, R>(options: {
       activeKeys: new Set(),
     });
 
-    const processKey = (key: K, value: V): Effect.Effect<void, E, R> =>
-      options.process(key, value).pipe(
-        Effect.flatMap(() =>
-          TxRef.modify(stateRef, (state) => {
-            const nextValue = state.latestByKey.get(key);
-            if (nextValue === undefined) {
-              const activeKeys = new Set(state.activeKeys);
-              activeKeys.delete(key);
-              return [null, { ...state, activeKeys }] as const;
-            }
-
-            const latestByKey = new Map(state.latestByKey);
-            latestByKey.delete(key);
-            return [nextValue, { ...state, latestByKey }] as const;
-          }).pipe(Effect.tx),
-        ),
-        Effect.flatMap((nextValue) =>
-          nextValue === null ? Effect.void : processKey(key, nextValue),
-        ),
-      );
-
-    const cleanupFailedKey = (key: K): Effect.Effect<void> =>
+    // Return dirty keys to the tail on success or failure. Keep pending values
+    // available for merging until the next batch starts.
+    const completeKey = (key: K): Effect.Effect<void> =>
       TxRef.modify(stateRef, (state) => {
         const activeKeys = new Set(state.activeKeys);
         activeKeys.delete(key);
@@ -69,10 +51,11 @@ export const makeKeyedCoalescingWorker = <K, V, E, R>(options: {
 
         return [false, { ...state, activeKeys }] as const;
       }).pipe(
-        Effect.tx,
         Effect.flatMap((shouldRequeue) =>
           shouldRequeue ? TxQueue.offer(queue, key) : Effect.void,
         ),
+        Effect.tx,
+        Effect.asVoid,
       );
 
     yield* TxQueue.take(queue).pipe(
@@ -100,9 +83,9 @@ export const makeKeyedCoalescingWorker = <K, V, E, R>(options: {
       Effect.flatMap((item) =>
         item === null
           ? Effect.void
-          : processKey(item.key, item.value).pipe(
-              Effect.catchCause(() => cleanupFailedKey(item.key)),
-            ),
+          : options
+              .process(item.key, item.value)
+              .pipe(Effect.ignoreCause, Effect.ensuring(completeKey(item.key))),
       ),
       Effect.forever,
       Effect.forkScoped,