diff --git a/src/managers/AllDayManager.ts b/src/managers/AllDayManager.ts
index 348ead1..24047c1 100644
--- a/src/managers/AllDayManager.ts
+++ b/src/managers/AllDayManager.ts
@@ -128,7 +128,17 @@ export class AllDayManager {
         
         console.log('🔄 AllDayManager: All-day → timed conversion', { eventId });
 
+        // Mark for removal (sets data-removing attribute)
         this.fadeOutAndRemove(dragEndPayload.originalElement);
+        
+        // Recalculate layout WITHOUT the removed event to compress gaps
+        const remainingEvents = this.currentAllDayEvents.filter(e => e.id !== eventId);
+        const newLayouts = this.calculateAllDayEventsLayout(remainingEvents, this.currentWeekDates);
+        
+        // Re-render all-day events with compressed layout
+        this.allDayEventRenderer.renderAllDayEventsForPeriod(newLayouts);
+        
+        // NOW animate height with compressed layout
         this.checkAndAnimateAllDayHeight();
       }
     });