diff --git a/changelog/8234-policy-match-values-chips.yaml b/changelog/8234-policy-match-values-chips.yaml
new file mode 100644
index 00000000000..86b80151985
--- /dev/null
+++ b/changelog/8234-policy-match-values-chips.yaml
@@ -0,0 +1,4 @@
+type: Changed
+description: Improved UI/UX for selecting many taxonomy values in a policy match block
+pr: 8234
+labels: []
diff --git a/clients/admin-ui/src/features/access-policies/AccessPolicyEditor.tsx b/clients/admin-ui/src/features/access-policies/AccessPolicyEditor.tsx
index 625755b1970..d4e08451c9e 100644
--- a/clients/admin-ui/src/features/access-policies/AccessPolicyEditor.tsx
+++ b/clients/admin-ui/src/features/access-policies/AccessPolicyEditor.tsx
@@ -623,11 +623,20 @@ const PolicyCanvasPanel = (props: PolicyCanvasPanelProps) => {
   const nodeSizes = useMemo(() => {
     const sizes: Record<string, { width: number; height: number }> = {};
     nodes.forEach((n) => {
-      if (n.type === "conditionNode") {
-        sizes[n.id] = { width: 320, height: 310 };
-      } else if (n.type === "constraintNode") {
-        sizes[n.id] = { width: 320, height: 380 };
+      if (n.type !== "conditionNode" && n.type !== "constraintNode") {
+        return;
       }
+      // Once React Flow has measured the node, use the real DOM height so
+      // condition nodes that grow vertically (e.g. a chip list of many
+      // selected values) don't overlap the next match node below. The
+      // fallback covers the first paint before measurement is available.
+      const measuredHeight = (n as Node & { measured?: { height?: number } })
+        .measured?.height;
+      const fallbackHeight = n.type === "conditionNode" ? 310 : 380;
+      sizes[n.id] = {
+        width: 320,
+        height: measuredHeight ?? fallbackHeight,
+      };
     });
     return sizes;
   }, [nodes]);
diff --git a/clients/admin-ui/src/features/access-policies/ConditionValuesField.tsx b/clients/admin-ui/src/features/access-policies/ConditionValuesField.tsx
new file mode 100644
index 00000000000..a3a517f15dd
--- /dev/null
+++ b/clients/admin-ui/src/features/access-policies/ConditionValuesField.tsx
@@ -0,0 +1,194 @@
+import { Flex, Select, SelectProps, Tag, Text } from "fidesui";
+import { ReactNode, useState } from "react";
+
+import { useAppSelector } from "~/app/hooks";
+import DataCategorySelect from "~/features/common/dropdown/DataCategorySelect";
+import DataSubjectSelect from "~/features/common/dropdown/DataSubjectSelect";
+import DataUseSelect from "~/features/common/dropdown/DataUseSelect";
+import SystemGroupSelect from "~/features/common/dropdown/SystemGroupSelect";
+import useTaxonomies from "~/features/common/hooks/useTaxonomies";
+import {
+  selectSystemGroupsAsTaxonomyEntities,
+  useGetAllSystemGroupsQuery,
+} from "~/features/system/system-groups.slice";
+import CustomTaxonomySelect from "~/features/taxonomy/components/CustomTaxonomySelect";
+import { useGetTaxonomyQuery } from "~/features/taxonomy/taxonomy.slice";
+
+import { BUILT_IN_TAXONOMY_KEYS, ConditionProperty } from "./types";
+
+interface ConditionValuesFieldProps {
+  property: string | undefined;
+  values: string[] | undefined;
+  onChange: (values: string[]) => void;
+}
+
+const ConditionValuesField = ({
+  property,
+  values,
+  onChange,
+}: ConditionValuesFieldProps) => {
+  const [isEditing, setIsEditing] = useState(false);
+  const {
+    getDataUseDisplayName,
+    getDataCategoryDisplayName,
+    getDataSubjectDisplayName,
+  } = useTaxonomies();
+
+  useGetAllSystemGroupsQuery();
+  const systemGroups = useAppSelector(selectSystemGroupsAsTaxonomyEntities);
+
+  const isCustomTaxonomy =
+    !!property &&
+    !BUILT_IN_TAXONOMY_KEYS.includes(property as ConditionProperty);
+  const { data: customTaxonomyItems = [] } = useGetTaxonomyQuery(
+    property ?? "",
+    { skip: !isCustomTaxonomy },
+  );
+
+  if (!property) {
+    return (
+      <Select
+        disabled
+        placeholder="Select a taxonomy first"
+        className="w-full"
+        aria-label="Select values"
+        data-testid="condition-values-disabled"
+      />
+    );
+  }
+
+  const safeValues = values ?? [];
+
+  const getDisplayName = (value: string): ReactNode => {
+    switch (property) {
+      case ConditionProperty.DATA_USE:
+        return getDataUseDisplayName(value);
+      case ConditionProperty.DATA_CATEGORIES:
+        return getDataCategoryDisplayName(value);
+      case ConditionProperty.DATA_SUBJECTS:
+        return getDataSubjectDisplayName(value);
+      case ConditionProperty.SYSTEM_GROUP: {
+        const group = systemGroups.find((g) => g.fides_key === value);
+        return group?.name ?? value;
+      }
+      default: {
+        const item = customTaxonomyItems.find((t) => t.fides_key === value);
+        return item?.name ?? value;
+      }
+    }
+  };
+
+  if (isEditing) {
+    const renderSelectedTag: SelectProps["tagRender"] = ({
+      value,
+      closable,
+      onClose,
+    }) => (
+      <Tag
+        color="white"
+        closable={closable}
+        onClose={onClose}
+        onMouseDown={(e) => {
+          e.preventDefault();
+          e.stopPropagation();
+        }}
+        style={{
+          marginInlineEnd: "var(--fidesui-padding-xs)",
+          marginBottom: "var(--fidesui-padding-xs)",
+        }}
+      >
+        <Text
+          ellipsis={{ tooltip: true }}
+          style={{ color: "inherit", maxWidth: 200 }}
+        >
+          {getDisplayName(value as string)}
+        </Text>
+      </Tag>
+    );
+
+    const commonProps = {
+      selectedTaxonomies: safeValues,
+      value: safeValues,
+      onChange: (v: unknown) => onChange(v as string[]),
+      mode: "multiple" as const,
+      autoFocus: true,
+      open: true,
+      onBlur: () => setIsEditing(false),
+      tagRender: renderSelectedTag,
+    };
+
+    switch (property) {
+      case ConditionProperty.DATA_USE:
+        return (
+          <DataUseSelect
+            {...commonProps}
+            placeholder="Select data uses"
+            data-testid="condition-values-data-use"
+          />
+        );
+      case ConditionProperty.DATA_CATEGORIES:
+        return (
+          <DataCategorySelect
+            {...commonProps}
+            placeholder="Select data categories"
+            data-testid="condition-values-data-category"
+          />
+        );
+      case ConditionProperty.DATA_SUBJECTS:
+        return (
+          <DataSubjectSelect
+            {...commonProps}
+            placeholder="Select data subjects"
+            data-testid="condition-values-data-subject"
+          />
+        );
+      case ConditionProperty.SYSTEM_GROUP:
+        return (
+          <SystemGroupSelect
+            {...commonProps}
+            placeholder="Select system groups"
+            data-testid="condition-values-system-group"
+          />
+        );
+      default:
+        return (
+          <CustomTaxonomySelect
+            {...commonProps}
+            taxonomyKey={property}
+            placeholder="Select values"
+            data-testid="condition-values-custom"
+          />
+        );
+    }
+  }
+
+  return (
+    <Flex wrap gap="small" align="center" data-testid="condition-values-chips">
+      {safeValues.map((value) => (
+        <Tag
+          key={value}
+          color="white"
+          closable
+          onClose={() => onChange(safeValues.filter((v) => v !== value))}
+          closeButtonLabel="Remove value"
+          data-testid={`condition-value-${value}`}
+        >
+          <Text
+            ellipsis={{ tooltip: true }}
+            style={{ color: "inherit", maxWidth: 200 }}
+          >
+            {getDisplayName(value)}
+          </Text>
+        </Tag>
+      ))}
+      <Tag
+        addable
+        onClick={() => setIsEditing(true)}
+        aria-label="Add value"
+        data-testid="condition-values-add-btn"
+      />
+    </Flex>
+  );
+};
+
+export default ConditionValuesField;
diff --git a/clients/admin-ui/src/features/access-policies/MatchNode.tsx b/clients/admin-ui/src/features/access-policies/MatchNode.tsx
index 1cc20cea0a6..cc67f663952 100644
--- a/clients/admin-ui/src/features/access-policies/MatchNode.tsx
+++ b/clients/admin-ui/src/features/access-policies/MatchNode.tsx
@@ -10,17 +10,12 @@ import {
   Text,
 } from "fidesui";
 
-import DataCategorySelect from "~/features/common/dropdown/DataCategorySelect";
-import DataSubjectSelect from "~/features/common/dropdown/DataSubjectSelect";
-import DataUseSelect from "~/features/common/dropdown/DataUseSelect";
-import SystemGroupSelect from "~/features/common/dropdown/SystemGroupSelect";
-import CustomTaxonomySelect from "~/features/taxonomy/components/CustomTaxonomySelect";
-
+import ConditionValuesField from "./ConditionValuesField";
 import { CONDITION_OPERATOR_OPTIONS } from "./constants";
 import { usePolicyTaxonomyOptions } from "./hooks/usePolicyTaxonomyOptions";
 import styles from "./MatchNode.module.scss";
 import NodeActions from "./NodeActions";
-import { ConditionOperator, ConditionProperty } from "./types";
+import { ConditionOperator } from "./types";
 
 export interface ConditionNodeData extends Record<string, unknown> {
   property?: string;
@@ -42,76 +37,6 @@ export interface ConditionNodeData extends Record<string, unknown> {
 
 export type ConditionNodeType = Node<ConditionNodeData, "conditionNode">;
 
-const renderValuesSelect = (
-  property: string | undefined,
-  values: string[] | undefined,
-  onChange: (values: string[]) => void,
-) => {
-  if (!property) {
-    return (
-      <Select
-        disabled
-        placeholder="Select a taxonomy first"
-        className="w-full"
-        aria-label="Select values"
-        data-testid="condition-values-disabled"
-      />
-    );
-  }
-
-  const commonProps = {
-    selectedTaxonomies: values,
-    value: values,
-    onChange: (v: unknown) => onChange(v as string[]),
-    mode: "multiple" as const,
-    maxTagCount: 1 as const,
-  };
-
-  switch (property) {
-    case ConditionProperty.DATA_USE:
-      return (
-        <DataUseSelect
-          {...commonProps}
-          placeholder="Select data uses"
-          data-testid="condition-values-data-use"
-        />
-      );
-    case ConditionProperty.DATA_CATEGORIES:
-      return (
-        <DataCategorySelect
-          {...commonProps}
-          placeholder="Select data categories"
-          data-testid="condition-values-data-category"
-        />
-      );
-    case ConditionProperty.DATA_SUBJECTS:
-      return (
-        <DataSubjectSelect
-          {...commonProps}
-          placeholder="Select data subjects"
-          data-testid="condition-values-data-subject"
-        />
-      );
-    case ConditionProperty.SYSTEM_GROUP:
-      return (
-        <SystemGroupSelect
-          {...commonProps}
-          placeholder="Select system groups"
-          data-testid="condition-values-system-group"
-        />
-      );
-    default:
-      return (
-        <CustomTaxonomySelect
-          {...commonProps}
-          taxonomyKey={property}
-          placeholder="Select values"
-          data-testid="condition-values-custom"
-        />
-      );
-  }
-};
-
 const ConditionNode = ({ data }: NodeProps<ConditionNodeType>) => {
   const { options, labelByKey } = usePolicyTaxonomyOptions();
 
@@ -200,9 +125,11 @@ const ConditionNode = ({ data }: NodeProps<ConditionNodeType>) => {
             />
           </Form.Item>
           <Form.Item label={valuesLabel} className="mb-0">
-            {renderValuesSelect(data.property, data.values, (values) =>
-              data.onValuesChange?.(values),
-            )}
+            <ConditionValuesField
+              property={data.property}
+              values={data.values}
+              onChange={(values) => data.onValuesChange?.(values)}
+            />
           </Form.Item>
         </Form>
       </div>