diff --git a/apps/api/plane/app/views/issue/base.py b/apps/api/plane/app/views/issue/base.py
index 3b8b05a6a2f..50727715df9 100644
--- a/apps/api/plane/app/views/issue/base.py
+++ b/apps/api/plane/app/views/issue/base.py
@@ -69,6 +69,7 @@
     issue_queryset_grouper,
 )
 from plane.utils.host import base_host
+from plane.utils.sub_issue_state_propagation import propagate_state_to_sub_issues
 from plane.utils.issue_filters import issue_filters
 from plane.utils.order_queryset import order_issue_queryset
 from plane.utils.paginator import GroupedOffsetPaginator, SubGroupedOffsetPaginator
@@ -630,6 +631,12 @@ def partial_update(self, request, slug, project_id, pk=None):
         queryset = self.apply_annotations(queryset)
 
         skip_activity = request.data.pop("skip_activity", False)
+        propagate_state_to_sub_issues_flag = request.data.pop("propagate_state_to_sub_issues", False)
+        if not isinstance(propagate_state_to_sub_issues_flag, bool):
+            return Response(
+                {"propagate_state_to_sub_issues": ["This field must be a boolean."]},
+                status=status.HTTP_400_BAD_REQUEST,
+            )
         is_description_update = request.data.get("description_html") is not None
 
         issue = (
@@ -710,6 +717,15 @@ def partial_update(self, request, slug, project_id, pk=None):
                     issue_id=str(serializer.data.get("id", None)),
                     user_id=request.user.id,
                 )
+            if propagate_state_to_sub_issues_flag and "state_id" in request.data:
+                issue = Issue.issue_objects.select_related("state").get(pk=issue.id)
+                propagate_state_to_sub_issues(
+                    parent=issue,
+                    new_state=issue.state,
+                    actor=request.user,
+                    workspace_slug=slug,
+                    origin=base_host(request=request, is_app=True),
+                )
             return Response(status=status.HTTP_204_NO_CONTENT)
         return Response(serializer.errors, status=status.HTTP_400_BAD_REQUEST)
 
diff --git a/apps/api/plane/tests/unit/utils/test_sub_issue_state_propagation.py b/apps/api/plane/tests/unit/utils/test_sub_issue_state_propagation.py
new file mode 100644
index 00000000000..bc8d0b2f171
--- /dev/null
+++ b/apps/api/plane/tests/unit/utils/test_sub_issue_state_propagation.py
@@ -0,0 +1,168 @@
+# Copyright (c) 2023-present Plane Software, Inc. and contributors
+# SPDX-License-Identifier: AGPL-3.0-only
+# See the LICENSE file for details.
+
+from unittest.mock import patch
+
+import pytest
+
+from plane.db.models import Issue, Project, ProjectMember, State, Workspace
+from plane.utils.sub_issue_state_propagation import (
+    propagate_state_to_sub_issues,
+    resolve_target_state,
+    user_can_edit_issue,
+)
+
+
+@pytest.fixture
+def project(workspace, create_user):
+    return Project.objects.create(
+        name="Test Project",
+        identifier="TP",
+        workspace=workspace,
+        created_by=create_user,
+    )
+
+
+@pytest.fixture
+def todo_state(project):
+    return State.objects.create(
+        name="Todo",
+        project=project,
+        group="unstarted",
+        color="#60646C",
+    )
+
+
+@pytest.fixture
+def done_state(project):
+    return State.objects.create(
+        name="Done",
+        project=project,
+        group="completed",
+        color="#46A758",
+    )
+
+
+@pytest.fixture
+def parent_issue(workspace, project, todo_state, create_user):
+    return Issue.objects.create(
+        name="Parent Issue",
+        workspace=workspace,
+        project=project,
+        state=todo_state,
+        created_by=create_user,
+    )
+
+
+@pytest.fixture
+def sub_issue(workspace, project, todo_state, create_user, parent_issue):
+    return Issue.objects.create(
+        name="Sub Issue",
+        workspace=workspace,
+        project=project,
+        state=todo_state,
+        parent=parent_issue,
+        created_by=create_user,
+    )
+
+
+@pytest.mark.unit
+class TestResolveTargetState:
+    @pytest.mark.django_db
+    def test_returns_same_state_for_same_project(self, project, todo_state):
+        assert resolve_target_state(todo_state, project.id) == todo_state
+
+    @pytest.mark.django_db
+    def test_resolves_state_by_group_and_name(self, workspace, create_user, todo_state):
+        other_project = Project.objects.create(
+            name="Other Project",
+            identifier="OP",
+            workspace=workspace,
+            created_by=create_user,
+        )
+        other_todo = State.objects.create(
+            name="Todo",
+            project=other_project,
+            group="unstarted",
+            color="#60646C",
+        )
+        assert resolve_target_state(todo_state, other_project.id) == other_todo
+
+    @pytest.mark.django_db
+    def test_falls_back_to_group_state(self, workspace, create_user, todo_state):
+        other_project = Project.objects.create(
+            name="Other Project",
+            identifier="OP",
+            workspace=workspace,
+            created_by=create_user,
+        )
+        fallback_state = State.objects.create(
+            name="Backlog",
+            project=other_project,
+            group="unstarted",
+            color="#60646C",
+            sequence=1000,
+        )
+        assert resolve_target_state(todo_state, other_project.id) == fallback_state
+
+
+@pytest.mark.unit
+class TestPropagateStateToSubIssues:
+    @pytest.mark.django_db
+    @patch("plane.utils.sub_issue_state_propagation.issue_activity.delay")
+    def test_propagates_state_to_direct_sub_issues(
+        self, mock_issue_activity, workspace, create_user, parent_issue, sub_issue, done_state
+    ):
+        ProjectMember.objects.create(
+            workspace=workspace,
+            project=parent_issue.project,
+            member=create_user,
+            role=20,
+        )
+
+        updated_ids = propagate_state_to_sub_issues(
+            parent=parent_issue,
+            new_state=done_state,
+            actor=create_user,
+            workspace_slug=workspace.slug,
+            origin="http://localhost",
+        )
+
+        sub_issue.refresh_from_db()
+        assert updated_ids == [str(sub_issue.id)]
+        assert sub_issue.state_id == done_state.id
+        assert sub_issue.completed_at is not None
+        mock_issue_activity.assert_called_once()
+
+    @pytest.mark.django_db
+    @patch("plane.utils.sub_issue_state_propagation.issue_activity.delay")
+    def test_skips_sub_issues_user_cannot_edit(
+        self, mock_issue_activity, workspace, create_user, parent_issue, sub_issue, done_state, user_data
+    ):
+        from plane.db.models import User
+
+        other_user = User.objects.create(
+            email="other@plane.so",
+            first_name="Other",
+            last_name="User",
+        )
+        sub_issue.created_by = other_user
+        sub_issue.save()
+
+        updated_ids = propagate_state_to_sub_issues(
+            parent=parent_issue,
+            new_state=done_state,
+            actor=create_user,
+            workspace_slug=workspace.slug,
+            origin="http://localhost",
+        )
+
+        sub_issue.refresh_from_db()
+        assert updated_ids == []
+        assert sub_issue.state_id != done_state.id
+        mock_issue_activity.assert_not_called()
+
+    @pytest.mark.django_db
+    def test_user_can_edit_issue_for_creator(self, workspace, create_user, sub_issue):
+        assert user_can_edit_issue(create_user, workspace.slug, sub_issue) is True
diff --git a/apps/api/plane/utils/sub_issue_state_propagation.py b/apps/api/plane/utils/sub_issue_state_propagation.py
new file mode 100644
index 00000000000..f66a0a2c025
--- /dev/null
+++ b/apps/api/plane/utils/sub_issue_state_propagation.py
@@ -0,0 +1,100 @@
+# Copyright (c) 2023-present Plane Software, Inc. and contributors
+# SPDX-License-Identifier: AGPL-3.0-only
+# See the LICENSE file for details.
+
+import json
+
+from django.utils import timezone
+
+from plane.app.permissions.base import ROLE
+from plane.bgtasks.issue_activities_task import issue_activity
+from plane.db.models import Issue, ProjectMember, State, WorkspaceMember
+
+
+def user_can_edit_issue(user, workspace_slug, issue):
+    """Check if the user can edit an issue, mirroring partial_update permissions."""
+    if issue.created_by_id == user.id:
+        return True
+
+    allowed_roles = [ROLE.ADMIN.value, ROLE.MEMBER.value]
+    if ProjectMember.objects.filter(
+        member=user,
+        workspace__slug=workspace_slug,
+        project_id=issue.project_id,
+        role__in=allowed_roles,
+        is_active=True,
+    ).exists():
+        return True
+
+    return (
+        ProjectMember.objects.filter(
+            member=user,
+            workspace__slug=workspace_slug,
+            project_id=issue.project_id,
+            is_active=True,
+        ).exists()
+        and WorkspaceMember.objects.filter(
+            member=user,
+            workspace__slug=workspace_slug,
+            role=ROLE.ADMIN.value,
+            is_active=True,
+        ).exists()
+    )
+
+
+def resolve_target_state(new_state, target_project_id):
+    """Resolve the equivalent state for a sub-issue's project."""
+    if str(new_state.project_id) == str(target_project_id):
+        return new_state
+
+    # Prefer a state with the same group and name in the target project
+    matching_state = State.objects.filter(
+        project_id=target_project_id,
+        group=new_state.group,
+        name=new_state.name,
+    ).first()
+    if matching_state:
+        return matching_state
+
+    # Fall back to any state in the same group
+    return State.objects.filter(project_id=target_project_id, group=new_state.group).order_by("sequence").first()
+
+
+def propagate_state_to_sub_issues(parent, new_state, actor, workspace_slug, origin):
+    """
+    Propagate a state change from a parent issue to its direct sub-issues.
+    Returns the list of updated sub-issue IDs.
+    """
+    if not new_state:
+        return []
+
+    sub_issues = Issue.issue_objects.filter(parent_id=parent.id, workspace=parent.workspace).select_related("state")
+    updated_sub_issue_ids = []
+
+    for sub_issue in sub_issues:
+        if not user_can_edit_issue(actor, workspace_slug, sub_issue):
+            continue
+
+        target_state = resolve_target_state(new_state, sub_issue.project_id)
+        if not target_state or sub_issue.state_id == target_state.id:
+            continue
+
+        current_instance = json.dumps({"state_id": str(sub_issue.state_id)})
+        sub_issue.state = target_state
+        sub_issue.updated_by = actor
+        sub_issue.save()
+
+        issue_activity.delay(
+            type="issue.activity.updated",
+            requested_data=json.dumps({"state_id": str(target_state.id)}),
+            actor_id=str(actor.id),
+            issue_id=str(sub_issue.id),
+            project_id=str(sub_issue.project_id),
+            current_instance=current_instance,
+            epoch=int(timezone.now().timestamp()),
+            notification=True,
+            origin=origin,
+        )
+        updated_sub_issue_ids.append(str(sub_issue.id))
+
+    return updated_sub_issue_ids
diff --git a/apps/web/core/components/issues/issue-detail/root.tsx b/apps/web/core/components/issues/issue-detail/root.tsx
index 72484c696ba..1c47053bb98 100644
--- a/apps/web/core/components/issues/issue-detail/root.tsx
+++ b/apps/web/core/components/issues/issue-detail/root.tsx
@@ -16,6 +16,7 @@ import { EIssuesStoreType } from "@plane/types";
 import emptyIssue from "@/app/assets/empty-state/issue.svg?url";
 // components
 import { EmptyState } from "@/components/common/empty-state";
+import { PropagateStateModalRoot } from "@/components/issues/propagate-state-modal";
 // hooks
 import { useAppTheme } from "@/hooks/store/use-app-theme";
 import { useIssueDetail } from "@/hooks/store/use-issue-detail";
@@ -266,6 +267,7 @@ export const IssueDetailRoot = observer(function IssueDetailRoot(props: TIssueDe
 
       {/* peek overview */}
       <IssuePeekOverview />
+      <PropagateStateModalRoot />
     </>
   );
 });
diff --git a/apps/web/core/components/issues/issue-detail/sidebar.tsx b/apps/web/core/components/issues/issue-detail/sidebar.tsx
index 8077c4ef947..efee1611220 100644
--- a/apps/web/core/components/issues/issue-detail/sidebar.tsx
+++ b/apps/web/core/components/issues/issue-detail/sidebar.tsx
@@ -35,6 +35,8 @@ import { useIssueDetail } from "@/hooks/store/use-issue-detail";
 import { useMember } from "@/hooks/store/use-member";
 import { useProject } from "@/hooks/store/use-project";
 import { useProjectState } from "@/hooks/store/use-project-state";
+// helpers
+import { updateIssueStateWithPropagation } from "@/helpers/issue-state-update";
 // components
 import { IssueParentSelectRoot } from "@/components/issues/parent-select-root";
 import { SidebarPropertyListItem } from "@/components/common/layout/sidebar/property-list-item";
@@ -59,6 +61,7 @@ export const IssueDetailsSidebar = observer(function IssueDetailsSidebar(props:
   const { areEstimateEnabledByProjectId } = useProjectEstimates();
   const {
     issue: { getIssueById },
+    subIssues: { fetchSubIssues },
   } = useIssueDetail();
   const { getUserDetails } = useMember();
   const { getStateById } = useProjectState();
@@ -77,6 +80,18 @@ export const IssueDetailsSidebar = observer(function IssueDetailsSidebar(props:
   const maxDate = issue.target_date ? getDate(issue.target_date) : null;
   maxDate?.setDate(maxDate.getDate());
 
+  const handleStateChange = async (stateId: string) => {
+    await updateIssueStateWithPropagation({
+      currentStateId: issue.state_id,
+      newStateId: stateId,
+      subIssuesCount: issue.sub_issues_count ?? 0,
+      onUpdate: async (data) => issueOperations.update(workspaceSlug, projectId, issueId, data),
+      afterPropagate: async () => {
+        await fetchSubIssues(workspaceSlug, projectId, issueId);
+      },
+    });
+  };
+
   return (
     <>
       <div className="flex h-full w-full flex-col items-center divide-y-2 divide-subtle-1 overflow-hidden">
@@ -86,7 +101,7 @@ export const IssueDetailsSidebar = observer(function IssueDetailsSidebar(props:
             <SidebarPropertyListItem icon={StatePropertyIcon} label={t("common.state")}>
               <StateDropdown
                 value={issue?.state_id}
-                onChange={(val) => issueOperations.update(workspaceSlug, projectId, issueId, { state_id: val })}
+                onChange={handleStateChange}
                 projectId={projectId?.toString() ?? ""}
                 disabled={!isEditable}
                 buttonVariant="transparent-with-text"
diff --git a/apps/web/core/components/issues/issue-layouts/issue-layout-HOC.tsx b/apps/web/core/components/issues/issue-layouts/issue-layout-HOC.tsx
index 2c6cd65f494..353bd51c8bb 100644
--- a/apps/web/core/components/issues/issue-layouts/issue-layout-HOC.tsx
+++ b/apps/web/core/components/issues/issue-layouts/issue-layout-HOC.tsx
@@ -9,6 +9,7 @@ import { observer } from "mobx-react";
 import { EIssueLayoutTypes } from "@plane/types";
 // components
 import { LayoutErrorBoundary } from "@/components/common/layout-error-boundary";
+import { PropagateStateModalRoot } from "@/components/issues/propagate-state-modal";
 import { CalendarLayoutLoader } from "@/components/ui/loader/layouts/calendar-layout-loader";
 import { GanttLayoutLoader } from "@/components/ui/loader/layouts/gantt-layout-loader";
 import { KanbanLayoutLoader } from "@/components/ui/loader/layouts/kanban-layout-loader";
@@ -59,5 +60,10 @@ export const IssueLayoutHOC = observer(function IssueLayoutHOC(props: Props) {
     return <IssueLayoutEmptyState storeType={storeType} />;
   }
 
-  return <LayoutErrorBoundary key={layout}>{props.children}</LayoutErrorBoundary>;
+  return (
+    <LayoutErrorBoundary key={layout}>
+      {props.children}
+      <PropagateStateModalRoot />
+    </LayoutErrorBoundary>
+  );
 });
diff --git a/apps/web/core/components/issues/issue-layouts/properties/all-properties.tsx b/apps/web/core/components/issues/issue-layouts/properties/all-properties.tsx
index cd2ffbffc57..b2ae70de844 100644
--- a/apps/web/core/components/issues/issue-layouts/properties/all-properties.tsx
+++ b/apps/web/core/components/issues/issue-layouts/properties/all-properties.tsx
@@ -16,7 +16,6 @@ import { useTranslation } from "@plane/i18n";
 import { LinkIcon, StartDatePropertyIcon, ViewsIcon, DueDatePropertyIcon } from "@plane/propel/icons";
 import { Tooltip } from "@plane/propel/tooltip";
 import type { TIssue, IIssueDisplayProperties, TIssuePriorities } from "@plane/types";
-// ui
 import {
   cn,
   getDate,
@@ -42,6 +41,8 @@ import { useProjectState } from "@/hooks/store/use-project-state";
 import { useAppRouter } from "@/hooks/use-app-router";
 import { useIssueStoreType } from "@/hooks/use-issue-layout-store";
 import { usePlatformOS } from "@/hooks/use-platform-os";
+// helpers
+import { updateIssueStateWithPropagation } from "@/helpers/issue-state-update";
 // local components
 import { IssuePropertyLabels } from "./labels";
 import { WithDisplayPropertiesHOC } from "./with-display-properties-HOC";
@@ -106,7 +107,13 @@ export const IssueProperties = observer(function IssueProperties(props: IIssuePr
   );
 
   const handleState = async (stateId: string) => {
-    if (updateIssue) await updateIssue(issue.project_id, issue.id, { state_id: stateId });
+    if (!updateIssue) return;
+    await updateIssueStateWithPropagation({
+      currentStateId: issue.state_id,
+      newStateId: stateId,
+      subIssuesCount: issue.sub_issues_count ?? 0,
+      onUpdate: async (data) => updateIssue(issue.project_id, issue.id, data),
+    });
   };
 
   const handlePriority = async (value: TIssuePriorities) => {
diff --git a/apps/web/core/components/issues/peek-overview/properties.tsx b/apps/web/core/components/issues/peek-overview/properties.tsx
index 8f35cc1645a..60e1da50a5c 100644
--- a/apps/web/core/components/issues/peek-overview/properties.tsx
+++ b/apps/web/core/components/issues/peek-overview/properties.tsx
@@ -35,6 +35,8 @@ import { useIssueDetail } from "@/hooks/store/use-issue-detail";
 import { useMember } from "@/hooks/store/use-member";
 import { useProject } from "@/hooks/store/use-project";
 import { useProjectState } from "@/hooks/store/use-project-state";
+// helpers
+import { updateIssueStateWithPropagation } from "@/helpers/issue-state-update";
 // plane web components
 import { IssueParentSelectRoot } from "@/components/issues/parent-select-root";
 import type { TIssueOperations } from "../issue-detail";
@@ -74,6 +76,15 @@ export const PeekOverviewProperties = observer(function PeekOverviewProperties(p
   const maxDate = getDate(issue.target_date);
   maxDate?.setDate(maxDate.getDate());
 
+  const handleStateChange = async (stateId: string) => {
+    await updateIssueStateWithPropagation({
+      currentStateId: issue.state_id,
+      newStateId: stateId,
+      subIssuesCount: issue.sub_issues_count ?? 0,
+      onUpdate: async (data) => issueOperations.update(workspaceSlug, projectId, issueId, data),
+    });
+  };
+
   return (
     <div>
       <h6 className="text-body-xs-medium">{t("common.properties")}</h6>
@@ -81,7 +92,7 @@ export const PeekOverviewProperties = observer(function PeekOverviewProperties(p
         <SidebarPropertyListItem icon={StatePropertyIcon} label={t("common.state")}>
           <StateDropdown
             value={issue?.state_id}
-            onChange={(val) => issueOperations.update(workspaceSlug, projectId, issueId, { state_id: val })}
+            onChange={handleStateChange}
             projectId={projectId}
             disabled={disabled}
             buttonVariant="transparent-with-text"
diff --git a/apps/web/core/components/issues/propagate-state-modal.tsx b/apps/web/core/components/issues/propagate-state-modal.tsx
new file mode 100644
index 00000000000..6fb1d28467c
--- /dev/null
+++ b/apps/web/core/components/issues/propagate-state-modal.tsx
@@ -0,0 +1,56 @@
+/**
+ * Copyright (c) 2023-present Plane Software, Inc. and contributors
+ * SPDX-License-Identifier: AGPL-3.0-only
+ * See the LICENSE file for details.
+ */
+
+import { observer } from "mobx-react";
+import { useTranslation } from "@plane/i18n";
+import { AlertModalCore, ToggleSwitch } from "@plane/ui";
+import { propagateStateStore } from "@/store/issue/propagate-state.store";
+
+export const PropagateStateModalRoot = observer(function PropagateStateModalRoot() {
+  const { t } = useTranslation();
+  const { promptData, propagateToSubIssues, isSubmitting } = propagateStateStore;
+
+  if (!promptData) return null;
+
+  const handleClose = () => {
+    propagateStateStore.cancel();
+  };
+
+  const handleSubmit = () => {
+    propagateStateStore.confirm();
+  };
+
+  return (
+    <AlertModalCore
+      isOpen
+      variant="primary"
+      title={t("sub_work_item.propagate_state.modal.title")}
+      content={
+        <div className="space-y-4">
+          <p className="text-body-sm-regular text-secondary">
+            {t("sub_work_item.propagate_state.modal.description", { count: promptData.subIssuesCount })}
+          </p>
+          <div className="flex items-center justify-between gap-3 rounded-md border border-subtle bg-layer-1 px-3 py-2.5">
+            <span className="text-body-sm-medium text-primary">{t("sub_work_item.propagate_state.modal.toggle")}</span>
+            <ToggleSwitch
+              value={propagateToSubIssues}
+              onChange={(value) => propagateStateStore.setPropagateToSubIssues(value)}
+              disabled={isSubmitting}
+            />
+          </div>
+        </div>
+      }
+      handleClose={handleClose}
+      handleSubmit={handleSubmit}
+      isSubmitting={isSubmitting}
+      primaryButtonText={{
+        loading: t("common.updating"),
+        default: t("common.update"),
+      }}
+      secondaryButtonText={t("common.cancel")}
+    />
+  );
+});
diff --git a/apps/web/core/hooks/use-group-dragndrop.ts b/apps/web/core/hooks/use-group-dragndrop.ts
index b21cdcbe10d..33d8fe029b7 100644
--- a/apps/web/core/hooks/use-group-dragndrop.ts
+++ b/apps/web/core/hooks/use-group-dragndrop.ts
@@ -9,6 +9,7 @@ import { TOAST_TYPE, setToast } from "@plane/propel/toast";
 import type { EIssuesStoreType, TIssue, TIssueGroupByOptions, TIssueOrderByOptions } from "@plane/types";
 import type { GroupDropLocation } from "@/components/issues/issue-layouts/utils";
 import { handleGroupDragDrop } from "@/components/issues/issue-layouts/utils";
+import { updateIssueStateWithPropagation } from "@/helpers/issue-state-update";
 import { ISSUE_FILTER_DEFAULT_DATA } from "@/store/issue/helpers/base-issues.store";
 import { useIssueDetail } from "./store/use-issue-detail";
 import { useIssues } from "./store/use-issues";
@@ -72,29 +73,69 @@ export const useGroupIssuesDragNDrop = (
     const isModuleChanged = Object.keys(data).includes(moduleKey);
     const isCycleChanged = Object.keys(data).includes(cycleKey);
 
-    if (isCycleChanged && workspaceSlug) {
-      if (data[cycleKey]) {
-        addCycleToIssue(workspaceSlug.toString(), projectId, data[cycleKey]?.toString() ?? "", issueId).catch(() =>
-          setToast(errorToastProps)
+    const issue = getIssueById(issueId);
+    const stateId = data.state_id;
+    const needsPropagationPrompt = Boolean(
+      stateId && issue && issue.sub_issues_count > 0 && stateId !== issue.state_id
+    );
+
+    const applyCycleAndModuleChanges = async () => {
+      if (!workspaceSlug) return;
+
+      if (isCycleChanged) {
+        if (data[cycleKey]) {
+          await addCycleToIssue(workspaceSlug.toString(), projectId, data[cycleKey]?.toString() ?? "", issueId);
+        } else {
+          await removeCycleFromIssue(workspaceSlug.toString(), projectId, issueId);
+        }
+      }
+
+      if (isModuleChanged && issueUpdates[moduleKey]) {
+        await changeModulesInIssue(
+          workspaceSlug.toString(),
+          projectId,
+          issueId,
+          issueUpdates[moduleKey].ADD,
+          issueUpdates[moduleKey].REMOVE
         );
-      } else {
-        removeCycleFromIssue(workspaceSlug.toString(), projectId, issueId).catch(() => setToast(errorToastProps));
       }
-      delete data[cycleKey];
-    }
+    };
+
+    const issueUpdateData = { ...data };
+    if (isCycleChanged) delete issueUpdateData[cycleKey];
+    if (isModuleChanged) delete issueUpdateData[moduleKey];
 
-    if (isModuleChanged && workspaceSlug && issueUpdates[moduleKey]) {
-      changeModulesInIssue(
-        workspaceSlug.toString(),
-        projectId,
-        issueId,
-        issueUpdates[moduleKey].ADD,
-        issueUpdates[moduleKey].REMOVE
-      ).catch(() => setToast(errorToastProps));
-      delete data[moduleKey];
+    const applyIssueUpdate = async (patchData: Partial<TIssue>) => {
+      if (updateIssue) {
+        await updateIssue(projectId, issueId, patchData);
+      }
+    };
+
+    if (needsPropagationPrompt && issue && stateId) {
+      try {
+        await updateIssueStateWithPropagation({
+          currentStateId: issue.state_id,
+          newStateId: stateId,
+          subIssuesCount: issue.sub_issues_count,
+          onUpdate: async (stateUpdateData) => {
+            await applyCycleAndModuleChanges();
+            await applyIssueUpdate({ ...issueUpdateData, ...stateUpdateData });
+          },
+        });
+      } catch (error) {
+        console.error("Error while updating work item during drag-and-drop propagation:", error);
+        setToast(errorToastProps);
+      }
+      return;
     }
 
-    updateIssue && updateIssue(projectId, issueId, data).catch(() => setToast(errorToastProps));
+    try {
+      await applyCycleAndModuleChanges();
+      await applyIssueUpdate(issueUpdateData);
+    } catch (error) {
+      console.error("Error while updating work item during drag-and-drop:", error);
+      setToast(errorToastProps);
+    }
   };
 
   const handleOnDrop = async (source: GroupDropLocation, destination: GroupDropLocation) => {
diff --git a/apps/web/core/store/issue/propagate-state.store.ts b/apps/web/core/store/issue/propagate-state.store.ts
new file mode 100644
index 00000000000..935df5023f7
--- /dev/null
+++ b/apps/web/core/store/issue/propagate-state.store.ts
@@ -0,0 +1,53 @@
+/**
+ * Copyright (c) 2023-present Plane Software, Inc. and contributors
+ * SPDX-License-Identifier: AGPL-3.0-only
+ * See the LICENSE file for details.
+ */
+
+import { action, makeAutoObservable } from "mobx";
+
+type TPropagateStatePrompt = {
+  subIssuesCount: number;
+  resolve: (propagate: boolean | null) => void;
+};
+
+class PropagateStateStore {
+  promptData: TPropagateStatePrompt | null = null;
+  propagateToSubIssues = false;
+  isSubmitting = false;
+
+  constructor() {
+    makeAutoObservable(this);
+  }
+
+  prompt(subIssuesCount: number): Promise<boolean | null> {
+    return new Promise((resolve) => {
+      this.promptData?.resolve(null);
+      this.propagateToSubIssues = false;
+      this.isSubmitting = false;
+      this.promptData = { subIssuesCount, resolve };
+    });
+  }
+
+  setPropagateToSubIssues = action((value: boolean) => {
+    this.propagateToSubIssues = value;
+  });
+
+  confirm = action(() => {
+    this.promptData?.resolve(this.propagateToSubIssues);
+    this.promptData = null;
+    this.isSubmitting = false;
+  });
+
+  cancel = action(() => {
+    this.promptData?.resolve(null);
+    this.promptData = null;
+    this.isSubmitting = false;
+  });
+
+  setIsSubmitting = action((value: boolean) => {
+    this.isSubmitting = value;
+  });
+}
+
+export const propagateStateStore = new PropagateStateStore();
diff --git a/apps/web/helpers/issue-state-update.ts b/apps/web/helpers/issue-state-update.ts
new file mode 100644
index 00000000000..867bbd99a20
--- /dev/null
+++ b/apps/web/helpers/issue-state-update.ts
@@ -0,0 +1,39 @@
+/**
+ * Copyright (c) 2023-present Plane Software, Inc. and contributors
+ * SPDX-License-Identifier: AGPL-3.0-only
+ * See the LICENSE file for details.
+ */
+
+import type { TIssuePatchPayload } from "@plane/types";
+import { propagateStateStore } from "@/store/issue/propagate-state.store";
+
+type TUpdateIssueStateWithPropagationParams = {
+  currentStateId: string | null | undefined;
+  newStateId: string;
+  subIssuesCount: number;
+  onUpdate: (data: TIssuePatchPayload) => Promise<void>;
+  afterPropagate?: () => Promise<void>;
+};
+
+export async function updateIssueStateWithPropagation(params: TUpdateIssueStateWithPropagationParams): Promise<void> {
+  const { currentStateId, newStateId, subIssuesCount, onUpdate, afterPropagate } = params;
+
+  if (currentStateId === newStateId) return;
+
+  if (subIssuesCount > 0) {
+    const shouldPropagate = await propagateStateStore.prompt(subIssuesCount);
+    if (shouldPropagate === null) return;
+
+    await onUpdate({
+      state_id: newStateId,
+      propagate_state_to_sub_issues: shouldPropagate,
+    });
+
+    if (shouldPropagate && afterPropagate) {
+      await afterPropagate();
+    }
+    return;
+  }
+
+  await onUpdate({ state_id: newStateId });
+}
diff --git a/packages/i18n/src/locales/cs/work-item.json b/packages/i18n/src/locales/cs/work-item.json
index 2fe97ce830d..f7f685ea5b4 100644
--- a/packages/i18n/src/locales/cs/work-item.json
+++ b/packages/i18n/src/locales/cs/work-item.json
@@ -277,6 +277,13 @@
       "success": "Podřízená pracovní položka úspěšně odebrána",
       "error": "Chyba při odebírání podřízené položky"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Nemáte podřízené pracovní položky, které odpovídají použitým filtrům.",
diff --git a/packages/i18n/src/locales/de/work-item.json b/packages/i18n/src/locales/de/work-item.json
index 9c235f60554..5df486a6665 100644
--- a/packages/i18n/src/locales/de/work-item.json
+++ b/packages/i18n/src/locales/de/work-item.json
@@ -277,6 +277,13 @@
       "success": "Untergeordnetes Arbeitselement erfolgreich entfernt",
       "error": "Fehler beim Entfernen des untergeordneten Elements"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Sie haben keine untergeordneten Arbeitselemente, die den von Ihnen angewendeten Filtern entsprechen.",
diff --git a/packages/i18n/src/locales/en/work-item.json b/packages/i18n/src/locales/en/work-item.json
index b7935a125c3..6423d0959f4 100644
--- a/packages/i18n/src/locales/en/work-item.json
+++ b/packages/i18n/src/locales/en/work-item.json
@@ -277,6 +277,13 @@
       "success": "Sub-work item removed successfully",
       "error": "Error removing sub-work item"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "You don't have sub-work items that match the filters you've applied.",
diff --git a/packages/i18n/src/locales/es/work-item.json b/packages/i18n/src/locales/es/work-item.json
index 738fff249c7..934f407175f 100644
--- a/packages/i18n/src/locales/es/work-item.json
+++ b/packages/i18n/src/locales/es/work-item.json
@@ -277,6 +277,13 @@
       "success": "Sub-elemento eliminado correctamente",
       "error": "Error al eliminar el sub-elemento"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "No tienes sub-elementos de trabajo que coincidan con los filtros que has aplicado.",
diff --git a/packages/i18n/src/locales/fr/work-item.json b/packages/i18n/src/locales/fr/work-item.json
index 04a5958092b..e3ee78a3318 100644
--- a/packages/i18n/src/locales/fr/work-item.json
+++ b/packages/i18n/src/locales/fr/work-item.json
@@ -277,6 +277,13 @@
       "success": "Sous-élément de travail supprimé avec succès",
       "error": "Erreur lors de la suppression du sous-élément de travail"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Vous n’avez pas de sous-éléments de travail qui correspondent aux filtres que vous avez appliqués.",
diff --git a/packages/i18n/src/locales/id/work-item.json b/packages/i18n/src/locales/id/work-item.json
index 917fdeb1b6a..5692dbb63a4 100644
--- a/packages/i18n/src/locales/id/work-item.json
+++ b/packages/i18n/src/locales/id/work-item.json
@@ -277,6 +277,13 @@
       "success": "Sub-item kerja berhasil dihapus",
       "error": "Kesalahan saat menghapus sub-item kerja"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Anda tidak memiliki sub-item kerja yang cocok dengan filter yang Anda terapkan.",
diff --git a/packages/i18n/src/locales/it/work-item.json b/packages/i18n/src/locales/it/work-item.json
index 7622c815bb8..8d4faf2860f 100644
--- a/packages/i18n/src/locales/it/work-item.json
+++ b/packages/i18n/src/locales/it/work-item.json
@@ -277,6 +277,13 @@
       "success": "Sotto-elemento di lavoro rimosso con successo",
       "error": "Errore nella rimozione del sotto-elemento di lavoro"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Non hai sotto-elementi di lavoro che corrispondono ai filtri che hai applicato.",
diff --git a/packages/i18n/src/locales/ja/work-item.json b/packages/i18n/src/locales/ja/work-item.json
index ca6ed7ffc96..c8e8024b0f5 100644
--- a/packages/i18n/src/locales/ja/work-item.json
+++ b/packages/i18n/src/locales/ja/work-item.json
@@ -277,6 +277,13 @@
       "success": "サブ作業項目を削除しました",
       "error": "サブ作業項目の削除中にエラーが発生しました"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "適用されたフィルターに一致するサブ作業項目がありません。",
diff --git a/packages/i18n/src/locales/ko/work-item.json b/packages/i18n/src/locales/ko/work-item.json
index 259adc2fc57..7d8d177da6b 100644
--- a/packages/i18n/src/locales/ko/work-item.json
+++ b/packages/i18n/src/locales/ko/work-item.json
@@ -277,6 +277,13 @@
       "success": "하위 작업 항목이 성공적으로 제거되었습니다",
       "error": "하위 작업 항목 제거 중 오류 발생"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "적용된 필터에 일치하는 하위 작업 항목이 없습니다.",
diff --git a/packages/i18n/src/locales/pl/work-item.json b/packages/i18n/src/locales/pl/work-item.json
index f9c6a284957..a91b4c4554b 100644
--- a/packages/i18n/src/locales/pl/work-item.json
+++ b/packages/i18n/src/locales/pl/work-item.json
@@ -277,6 +277,13 @@
       "success": "Podrzędny element pracy usunięto pomyślnie",
       "error": "Błąd podczas usuwania elementu podrzędnego"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Nie masz elementów podrzędnych, które pasują do filtrów, które zastosowałeś.",
diff --git a/packages/i18n/src/locales/pt-BR/work-item.json b/packages/i18n/src/locales/pt-BR/work-item.json
index 614a34a21d8..e9e283f2899 100644
--- a/packages/i18n/src/locales/pt-BR/work-item.json
+++ b/packages/i18n/src/locales/pt-BR/work-item.json
@@ -277,6 +277,13 @@
       "success": "Sub-item de trabalho removido com sucesso",
       "error": "Erro ao remover sub-item de trabalho"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Você não tem sub-itens de trabalho que correspondem aos filtros que você aplicou.",
diff --git a/packages/i18n/src/locales/ro/work-item.json b/packages/i18n/src/locales/ro/work-item.json
index a989e537093..993d3f1a0ac 100644
--- a/packages/i18n/src/locales/ro/work-item.json
+++ b/packages/i18n/src/locales/ro/work-item.json
@@ -277,6 +277,13 @@
       "success": "Sub-activitatea a fost eliminată cu succes",
       "error": "Eroare la eliminarea sub-activității"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Nu ai sub-elemente de lucru care corespund filtrelor pe care le-ai aplicat.",
diff --git a/packages/i18n/src/locales/ru/work-item.json b/packages/i18n/src/locales/ru/work-item.json
index df676a95bd1..edd6afb04c2 100644
--- a/packages/i18n/src/locales/ru/work-item.json
+++ b/packages/i18n/src/locales/ru/work-item.json
@@ -277,6 +277,13 @@
       "success": "Подэлемент успешно удален",
       "error": "Ошибка удаления подэлемента"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "У вас нет подэлементов, которые соответствуют примененным фильтрам.",
diff --git a/packages/i18n/src/locales/sk/work-item.json b/packages/i18n/src/locales/sk/work-item.json
index f015c780f38..31363fda1eb 100644
--- a/packages/i18n/src/locales/sk/work-item.json
+++ b/packages/i18n/src/locales/sk/work-item.json
@@ -277,6 +277,13 @@
       "success": "Podriadená pracovná položka bola úspešne odstránená",
       "error": "Chyba pri odstraňovaní podriadenej položky"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Nemáte podriadené pracovné položky, ktoré zodpovedajú použitým filtrom.",
diff --git a/packages/i18n/src/locales/tr-TR/work-item.json b/packages/i18n/src/locales/tr-TR/work-item.json
index 0cf70387523..1b8a9780169 100644
--- a/packages/i18n/src/locales/tr-TR/work-item.json
+++ b/packages/i18n/src/locales/tr-TR/work-item.json
@@ -277,6 +277,13 @@
       "success": "Alt iş öğesi başarıyla kaldırıldı",
       "error": "Alt iş öğesi kaldırılırken hata oluştu"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Alt iş öğelerinizin filtreleriyle eşleşmiyor.",
diff --git a/packages/i18n/src/locales/ua/work-item.json b/packages/i18n/src/locales/ua/work-item.json
index 158f41610b0..d23ce57a342 100644
--- a/packages/i18n/src/locales/ua/work-item.json
+++ b/packages/i18n/src/locales/ua/work-item.json
@@ -277,6 +277,13 @@
       "success": "Похідну робочу одиницю успішно вилучено",
       "error": "Помилка під час вилучення похідної одиниці"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Ви не маєте похідних робочих одиниць, які відповідають застосованим фільтрам.",
diff --git a/packages/i18n/src/locales/vi-VN/work-item.json b/packages/i18n/src/locales/vi-VN/work-item.json
index 848fd48ae34..ea07880c501 100644
--- a/packages/i18n/src/locales/vi-VN/work-item.json
+++ b/packages/i18n/src/locales/vi-VN/work-item.json
@@ -277,6 +277,13 @@
       "success": "Đã xóa mục công việc con thành công",
       "error": "Đã xảy ra lỗi khi xóa mục công việc con"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "Bạn không có mục công việc con nào phù hợp với các bộ lọc mà bạn đã áp dụng.",
diff --git a/packages/i18n/src/locales/zh-CN/work-item.json b/packages/i18n/src/locales/zh-CN/work-item.json
index 0617955699e..7771fba472e 100644
--- a/packages/i18n/src/locales/zh-CN/work-item.json
+++ b/packages/i18n/src/locales/zh-CN/work-item.json
@@ -277,6 +277,13 @@
       "success": "子工作项移除成功",
       "error": "移除子工作项时出错"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "您没有符合您应用的过滤器的子工作项。",
diff --git a/packages/i18n/src/locales/zh-TW/work-item.json b/packages/i18n/src/locales/zh-TW/work-item.json
index 450b65a1131..fb6a1e5b372 100644
--- a/packages/i18n/src/locales/zh-TW/work-item.json
+++ b/packages/i18n/src/locales/zh-TW/work-item.json
@@ -277,6 +277,13 @@
       "success": "子工作事項移除成功",
       "error": "移除子工作事項時發生錯誤"
     },
+    "propagate_state": {
+      "modal": {
+        "title": "Update sub-work items?",
+        "description": "This work item has {count, plural, one {# sub-work item} other {# sub-work items}}. You can apply the same state change to them.",
+        "toggle": "Apply state to sub-work items"
+      }
+    },
     "empty_state": {
       "sub_list_filters": {
         "title": "您沒有符合您應用過的過濾器的子工作事項。",
diff --git a/packages/types/src/issues/issue.ts b/packages/types/src/issues/issue.ts
index 8054b4c44c3..2306afcdafe 100644
--- a/packages/types/src/issues/issue.ts
+++ b/packages/types/src/issues/issue.ts
@@ -103,6 +103,10 @@ export type TIssue = TBaseIssue & {
   state__group?: TStateGroups | null;
 };
 
+export type TIssuePatchPayload = Partial<TIssue> & {
+  propagate_state_to_sub_issues?: boolean;
+};
+
 export type TIssueMap = {
   [issue_id: string]: TIssue;
 };