diff --git a/projects/igniteui-angular/src/lib/services/overlay/overlay.spec.ts b/projects/igniteui-angular/src/lib/services/overlay/overlay.spec.ts
index fb9a5c92c8d..a51de2a7024 100644
--- a/projects/igniteui-angular/src/lib/services/overlay/overlay.spec.ts
+++ b/projects/igniteui-angular/src/lib/services/overlay/overlay.spec.ts
@@ -727,6 +727,42 @@ describe('igxOverlay', () => {
             expect(overlayInstance.onOpening.emit).toHaveBeenCalledTimes(2);
             expect(overlayInstance.onOpened.emit).toHaveBeenCalledTimes(1);
         }));
+
+        it('fix for #3673 - Should not close dropdown in dropdown', fakeAsync(() => {
+            const fix = TestBed.createComponent(EmptyPageComponent);
+            const button = fix.componentInstance.buttonElement;
+            const overlay = fix.componentInstance.overlay;
+            fix.detectChanges();
+
+            const overlaySettings: OverlaySettings = {
+                positionStrategy: new ConnectedPositioningStrategy(),
+                modal: false,
+                closeOnOutsideClick: true
+            };
+
+            overlaySettings.positionStrategy.settings.target = button.nativeElement;
+
+            overlay.show(SimpleDynamicComponent, overlaySettings);
+            overlaySettings.positionStrategy.settings.horizontalStartPoint = HorizontalAlignment.Right;
+            overlay.show(SimpleDynamicComponent, overlaySettings);
+            fix.detectChanges();
+            tick();
+
+            let overlayDiv: Element = document.getElementsByClassName(CLASS_OVERLAY_MAIN)[0];
+            expect(overlayDiv).toBeDefined();
+            expect(overlayDiv.children.length).toEqual(2);
+            expect(overlayDiv.children[0].localName).toEqual('div');
+            expect(overlayDiv.children[1].localName).toEqual('div');
+
+            (<any>overlay)._overlayInfos[0].elementRef.nativeElement.click();
+            fix.detectChanges();
+            tick();
+
+            overlayDiv = document.getElementsByClassName(CLASS_OVERLAY_MAIN)[0];
+            expect(overlayDiv).toBeDefined();
+            expect(overlayDiv.children.length).toEqual(1);
+            expect(overlayDiv.children[0].localName).toEqual('div');
+        }));
     });
 
     describe('Unit Tests - Scroll Strategies: ', () => {
@@ -3379,12 +3415,15 @@ export class SimpleDynamicWithDirectiveComponent {
 }
 
 @Component({
-    template: `<button #button (click)=\'click($event)\' class='button'>Show Overlay</button>`
+    template: `
+        <button #button (click)=\'click($event)\' class='button'>Show Overlay</button>
+    `
 })
 export class EmptyPageComponent {
     constructor(@Inject(IgxOverlayService) public overlay: IgxOverlayService) { }
 
     @ViewChild('button') buttonElement: ElementRef;
+    @ViewChild('div') divElement: ElementRef;
 
     click(event) {
         this.overlay.show(SimpleDynamicComponent);
diff --git a/projects/igniteui-angular/src/lib/services/overlay/overlay.ts b/projects/igniteui-angular/src/lib/services/overlay/overlay.ts
index 7198185eaf8..bed99bd5d7d 100644
--- a/projects/igniteui-angular/src/lib/services/overlay/overlay.ts
+++ b/projects/igniteui-angular/src/lib/services/overlay/overlay.ts
@@ -520,6 +520,12 @@ export class IgxOverlayService implements OnDestroy {
     }
 
     private documentClicked = (ev: Event) => {
+        //  if we get to modal overlay just return - we should not close anything under it
+        //  if we get to non-modal overlay do the next:
+        //   1. Check it has close on outside click. If not go on to next overlay;
+        //   2. If true check if click is on the element. If it is on the element we have closed
+        //  already all previous non-modal with close on outside click elements, so we return. If
+        //  not close the overlay and check next
         for (let i = this._overlayInfos.length; i--;) {
             const info = this._overlayInfos[i];
             if (info.settings.modal) {
@@ -528,7 +534,8 @@ export class IgxOverlayService implements OnDestroy {
             if (info.settings.closeOnOutsideClick) {
                 if (!info.elementRef.nativeElement.contains(ev.target)) {
                     this.hide(info.id);
-                    // TODO: should we return here too and not closing all no-modal overlays?
+                } else {
+                    return;
                 }
             }
         }
diff --git a/projects/igniteui-angular/src/lib/time-picker/time-picker.directives.ts b/projects/igniteui-angular/src/lib/time-picker/time-picker.directives.ts
index d3eb385534c..a4f6787a0c7 100644
--- a/projects/igniteui-angular/src/lib/time-picker/time-picker.directives.ts
+++ b/projects/igniteui-angular/src/lib/time-picker/time-picker.directives.ts
@@ -335,7 +335,7 @@ export class IgxAmPmItemDirective {
 }
 
 /**
- * @hidden
+ * This directive should be used to mark which ng-template will be used from IgxTimePicker when re-templating its input group.
  */
 @Directive({
     selector: '[igxTimePickerTemplate]'