--- a/devtools/client/shared/test/browser.ini
+++ b/devtools/client/shared/test/browser.ini
@@ -115,16 +115,17 @@ skip-if = e10s # Bug 1221911, bug 122228
 skip-if = e10s # Bug 1221911, bug 1222289, frequent e10s timeouts
 [browser_html_tooltip-01.js]
 [browser_html_tooltip-02.js]
 [browser_html_tooltip-03.js]
 [browser_html_tooltip-04.js]
 [browser_html_tooltip-05.js]
 [browser_html_tooltip_arrow-01.js]
 [browser_html_tooltip_arrow-02.js]
+[browser_html_tooltip_variable-height.js]
 [browser_inplace-editor-01.js]
 [browser_inplace-editor-02.js]
 [browser_inplace-editor_autocomplete_01.js]
 [browser_inplace-editor_autocomplete_02.js]
 [browser_inplace-editor_maxwidth.js]
 [browser_key_shortcuts.js]
 [browser_layoutHelpers.js]
 skip-if = e10s # Layouthelpers test should not run in a content page.

--- a/devtools/client/shared/test/browser_html_tooltip_arrow-01.js
+++ b/devtools/client/shared/test/browser_html_tooltip_arrow-01.js
@@ -54,17 +54,17 @@ add_task(function* () {
   yield pushPref("devtools.toolbox.footer.height", 200);
 
   yield addTab("about:blank");
   let [,, doc] = yield createHost("bottom", TEST_URI);
 
   info("Create HTML tooltip");
   let tooltip = new HTMLTooltip({doc}, {type: "arrow"});
   let div = doc.createElementNS(HTML_NS, "div");
-  div.style.height = "100%";
+  div.style.height = "35px";
   yield tooltip.setContent(div, 200, 35);
 
   let {right: docRight} = doc.documentElement.getBoundingClientRect();
 
   let elements = [...doc.querySelectorAll(".anchor")];
   for (let el of elements) {
     info("Display the tooltip on an anchor.");
     yield showTooltip(tooltip, el);

--- a/devtools/client/shared/test/browser_html_tooltip_arrow-02.js
+++ b/devtools/client/shared/test/browser_html_tooltip_arrow-02.js
@@ -48,17 +48,17 @@ add_task(function* () {
   yield pushPref("devtools.toolbox.footer.height", 200);
 
   yield addTab("about:blank");
   let [,, doc] = yield createHost("bottom", TEST_URI);
 
   info("Create HTML tooltip");
   let tooltip = new HTMLTooltip({doc}, {type: "arrow"});
   let div = doc.createElementNS(HTML_NS, "div");
-  div.style.height = "100%";
+  div.style.height = "35px";
   yield tooltip.setContent(div, 200, 35);
 
   let {right: docRight} = doc.documentElement.getBoundingClientRect();
 
   let elements = [...doc.querySelectorAll(".anchor")];
   for (let el of elements) {
     info("Display the tooltip on an anchor.");
     yield showTooltip(tooltip, el);

new file mode 100644
--- /dev/null
+++ b/devtools/client/shared/test/browser_html_tooltip_variable-height.js
@@ -0,0 +1,74 @@
+/* Any copyright is dedicated to the Public Domain.
+   http://creativecommons.org/publicdomain/zero/1.0/ */
+/* import-globals-from helper_html_tooltip.js */
+
+"use strict";
+
+/**
+ * Test the HTMLTooltip content can have a variable height.
+ */
+
+const HTML_NS = "http://www.w3.org/1999/xhtml";
+const TEST_URI = `data:text/xml;charset=UTF-8,<?xml version="1.0"?>
+  <?xml-stylesheet href="chrome://global/skin/global.css"?>
+  <?xml-stylesheet href="chrome://devtools/skin/tooltips.css"?>
+  <window xmlns="http://www.mozilla.org/keymaster/gatekeeper/there.is.only.xul"
+   title="Tooltip test">
+    <vbox flex="1">
+      <hbox id="box1" flex="1">test1</hbox>
+      <hbox id="box2" flex="1">test2</hbox>
+      <hbox id="box3" flex="1">test3</hbox>
+      <hbox id="box4" flex="1">test4</hbox>
+    </vbox>
+  </window>`;
+
+const CONTAINER_HEIGHT = 200;
+const CONTAINER_WIDTH = 200;
+const TOOLTIP_HEIGHT = 50;
+
+const {HTMLTooltip} = require("devtools/client/shared/widgets/HTMLTooltip");
+loadHelperScript("helper_html_tooltip.js");
+
+add_task(function* () {
+  // Force the toolbox to be 400px tall => 50px for each box.
+  yield pushPref("devtools.toolbox.footer.height", 400);
+
+  yield addTab("about:blank");
+  let [,, doc] = yield createHost("bottom", TEST_URI);
+
+  let tooltip = new HTMLTooltip({doc}, {});
+  info("Set tooltip content 50px tall, but request a container 200px tall");
+  let tooltipContent = doc.createElementNS(HTML_NS, "div");
+  tooltipContent.style.cssText = "height: " + TOOLTIP_HEIGHT + "px; background: red;";
+  tooltip.setContent(tooltipContent, CONTAINER_WIDTH, CONTAINER_HEIGHT);
+
+  info("Show the tooltip and check the container and panel height.");
+  yield showTooltip(tooltip, doc.getElementById("box1"));
+
+  let containerRect = tooltip.container.getBoundingClientRect();
+  let panelRect = tooltip.panel.getBoundingClientRect();
+  is(containerRect.height, CONTAINER_HEIGHT,
+    "Tooltip container has the expected height.");
+  is(panelRect.height, TOOLTIP_HEIGHT, "Tooltip panel has the expected height.");
+
+  info("Click below the tooltip panel but in the tooltip filler element.");
+  let onHidden = once(tooltip, "hidden");
+  EventUtils.synthesizeMouse(tooltip.container, 100, 100, {}, doc.defaultView);
+  yield onHidden;
+
+  info("Show the tooltip one more time, and increase the content height");
+  yield showTooltip(tooltip, doc.getElementById("box1"));
+  tooltipContent.style.height = (2 * CONTAINER_HEIGHT) + "px";
+
+  info("Click at the same coordinates as earlier, this time it should hit the tooltip.");
+  let onPanelClick = once(tooltip.panel, "click");
+  EventUtils.synthesizeMouse(tooltip.container, 100, 100, {}, doc.defaultView);
+  yield onPanelClick;
+  is(tooltip.isVisible(), true, "Tooltip is still visible");
+
+  info("Click below the tooltip container, the tooltip should be closed.");
+  onHidden = once(tooltip, "hidden");
+  EventUtils.synthesizeMouse(tooltip.container, 100, CONTAINER_HEIGHT + 10,
+    {}, doc.defaultView);
+  yield onHidden;
+});

--- a/devtools/client/shared/widgets/HTMLTooltip.js
+++ b/devtools/client/shared/widgets/HTMLTooltip.js
@@ -106,17 +106,19 @@ HTMLTooltip.prototype = {
    * Set the tooltip content element. The preferred width/height should also be
    * specified here.
    *
    * @param {Element} content
    *        The tooltip content, should be a HTML element.
    * @param {Number} width
    *        Preferred width for the tooltip container
    * @param {Number} height
-   *        Preferred height for the tooltip container
+   *        Preferred height for the tooltip container. If the content height is
+   *        smaller than the container's height, the tooltip will automatically
+   *        shrink around the content.
    * @return {Promise} a promise that will resolve when the content has been
    *         added in the tooltip container.
    */
   setContent: function (content, width, height) {
     let themeHeight = EXTRA_HEIGHT[this.type] + 2 * EXTRA_BORDER[this.type];
     let themeWidth = 2 * EXTRA_BORDER[this.type];
 
     this.preferredWidth = width + themeWidth;
@@ -202,17 +204,18 @@ HTMLTooltip.prototype = {
     this.container.remove();
   },
 
   _createContainer: function () {
     let container = this.doc.createElementNS(XHTML_NS, "div");
     container.setAttribute("type", this.type);
     container.classList.add("tooltip-container");
 
-    let html = '<div class="tooltip-panel"></div>';
+    let html = '<div class="tooltip-filler"></div>';
+    html += '<div class="tooltip-panel"></div>';
 
     if (this.type === TYPE.ARROW) {
       html += '<div class="tooltip-arrow"></div>';
     }
     container.innerHTML = html;
     return container;
   },
 

--- a/devtools/client/themes/tooltips.css
+++ b/devtools/client/themes/tooltips.css
@@ -100,68 +100,81 @@
 }
 
 .tooltip-container {
   display: none;
   position: fixed;
   z-index: 9999;
   display: none;
   background: transparent;
+  pointer-events: none;
+  overflow: hidden;
+}
+
+.tooltip-top {
+  flex-direction: column;
+}
+
+.tooltip-bottom {
+  flex-direction: column-reverse;
 }
 
 .tooltip-panel{
   background-color: var(--theme-tooltip-background);
+  pointer-events: all;
 }
 
 .tooltip-visible {
-  display: block;
-}
-
-.tooltip-container[type="normal"] > .tooltip-panel {
-  height: 100%;
-  width: 100%;
+  display: flex;
 }
 
 /* Tooltip : arrow style */
 
 .tooltip-container[type="arrow"] {
   filter: drop-shadow(0 3px 4px var(--theme-tooltip-shadow));
 }
 
 .tooltip-container[type="arrow"] > .tooltip-panel {
-  position: absolute;
+  position: relative;
+  flex-grow: 0;
+  min-height: 10px;
   box-sizing: border-box;
-  height: calc(100% - 13px);
   width: 100%;
 
   border: 3px solid var(--theme-tooltip-border);
   border-radius: 5px;
 }
 
 .tooltip-top[type="arrow"] .tooltip-panel {
   top: 0;
 }
 
 .tooltip-bottom[type="arrow"] .tooltip-panel {
   bottom: 0;
 }
 
 .tooltip-arrow {
-  position: absolute;
+  position: relative;
   height: 16px;
   width: 32px;
   overflow: hidden;
+  pointer-events: all;
+  flex-shrink: 0;
+}
+
+.tooltip-filler {
+  flex: 1;
 }
 
 .tooltip-top .tooltip-arrow {
-  bottom: 0;
+  margin-top: -3px;
 }
 
 .tooltip-bottom .tooltip-arrow {
-  top: 0;
+  margin-bottom: -3px;
 }
 
 .tooltip-arrow:before {
   content: "";
   position: absolute;
   width: 21px;
   height: 21px;
   margin-left: 4px;