diff --git a/docs/next/CHANGELOG.md b/docs/next/CHANGELOG.md
index 05f3680842..ef42736b6a 100644
--- a/docs/next/CHANGELOG.md
+++ b/docs/next/CHANGELOG.md
@@ -28,6 +28,7 @@
 - Experimental pane graphics now support bounded named layers, acknowledged full-RGBA primary-layer direct file frames on audited local terminals, owned BGRA fallback, exact pixel mouse input, and placement-only resize replay.
 
 ### Fixed
+- Live handoff now preserves mouse forwarding for running pane applications. (#3000, thanks @xkrogen)
 - Unix CLI commands now exit quietly when a downstream pipe closes instead of panicking with exit 101. (#2994)
 - The terminal theme now keeps the active Space row fill visible when the Navigate cursor lands on it, in both expanded and collapsed sidebars. (#2987)
 - Busy multi-pane sessions now avoid redundant hidden-pane wakeups and full terminal-state formatting in pane-scaled paths, preventing CPU regressions from high-rate background output, scrollbars, and enhanced keyboard modes. (#2550, #2901, #2962)
diff --git a/src/pane/terminal.rs b/src/pane/terminal.rs
index 0b06302e95..f1c6e2e5a2 100644
--- a/src/pane/terminal.rs
+++ b/src/pane/terminal.rs
@@ -1489,49 +1489,28 @@ impl GhosttyPaneTerminal {
             input_state.color_scheme_reporting,
         );
 
-        for mode in [
-            MODE_MOUSE_X10,
-            MODE_MOUSE_PRESS_RELEASE,
-            MODE_MOUSE_BUTTON_MOTION,
-            MODE_MOUSE_ANY_MOTION,
-        ] {
-            let _ = core.terminal.mode_set(mode, false);
-        }
-        let mouse_mode = match input_state.mouse_protocol_mode {
+        core.terminal
+            .write(b"\x1b[?9l\x1b[?1000l\x1b[?1002l\x1b[?1003l");
+        let mouse_mode_ansi: Option<&[u8]> = match input_state.mouse_protocol_mode {
             crate::input::MouseProtocolMode::None => None,
-            crate::input::MouseProtocolMode::Press => Some(MODE_MOUSE_X10),
-            crate::input::MouseProtocolMode::PressRelease => Some(MODE_MOUSE_PRESS_RELEASE),
-            crate::input::MouseProtocolMode::ButtonMotion => Some(MODE_MOUSE_BUTTON_MOTION),
-            crate::input::MouseProtocolMode::AnyMotion => Some(MODE_MOUSE_ANY_MOTION),
+            crate::input::MouseProtocolMode::Press => Some(b"\x1b[?9h"),
+            crate::input::MouseProtocolMode::PressRelease => Some(b"\x1b[?1000h"),
+            crate::input::MouseProtocolMode::ButtonMotion => Some(b"\x1b[?1002h"),
+            crate::input::MouseProtocolMode::AnyMotion => Some(b"\x1b[?1003h"),
         };
-        if let Some(mode) = mouse_mode {
-            let _ = core.terminal.mode_set(mode, true);
+        if let Some(ansi) = mouse_mode_ansi {
+            core.terminal.write(ansi);
         }
 
-        let _ = core
-            .terminal
-            .mode_set(crate::ghostty::MODE_MOUSE_UTF8, false);
-        let _ = core
-            .terminal
-            .mode_set(crate::ghostty::MODE_MOUSE_SGR, false);
-        let _ = core
-            .terminal
-            .mode_set(crate::ghostty::MODE_MOUSE_SGR_PIXELS, false);
-        match input_state.mouse_protocol_encoding {
-            crate::input::MouseProtocolEncoding::Default => {}
-            crate::input::MouseProtocolEncoding::Utf8 => {
-                let _ = core
-                    .terminal
-                    .mode_set(crate::ghostty::MODE_MOUSE_UTF8, true);
-            }
-            crate::input::MouseProtocolEncoding::Sgr => {
-                let _ = core.terminal.mode_set(crate::ghostty::MODE_MOUSE_SGR, true);
-            }
-            crate::input::MouseProtocolEncoding::SgrPixels => {
-                let _ = core
-                    .terminal
-                    .mode_set(crate::ghostty::MODE_MOUSE_SGR_PIXELS, true);
-            }
+        core.terminal.write(b"\x1b[?1005l\x1b[?1006l\x1b[?1016l");
+        let mouse_encoding_ansi: Option<&[u8]> = match input_state.mouse_protocol_encoding {
+            crate::input::MouseProtocolEncoding::Default => None,
+            crate::input::MouseProtocolEncoding::Utf8 => Some(b"\x1b[?1005h"),
+            crate::input::MouseProtocolEncoding::Sgr => Some(b"\x1b[?1006h"),
+            crate::input::MouseProtocolEncoding::SgrPixels => Some(b"\x1b[?1016h"),
+        };
+        if let Some(ansi) = mouse_encoding_ansi {
+            core.terminal.write(ansi);
         }
 
         if input_state.modify_other_keys {
@@ -4510,6 +4489,13 @@ mod tests {
         let key = crate::input::parse_terminal_key_sequence("\x1b[13;2u").unwrap();
         let encoded = pane.encode_terminal_key(key.clone(), crate::input::KeyboardProtocol::Legacy);
         assert_eq!(encoded, b"\x1b[27;2;13~");
+
+        let encoded = pane.encode_mouse_wheel(
+            crossterm::event::MouseEventKind::ScrollUp,
+            crate::input::mouse::Position::Cell { column: 11, row: 9 },
+            crossterm::event::KeyModifiers::empty(),
+        );
+        assert_eq!(encoded.as_deref(), Some(&b"\x1b[<64;12;10M"[..]));
     }
 
     #[test]