diff --git a/apps/web/src/app/auth/settings/account/change-avatar-dialog.component.ts b/apps/web/src/app/auth/settings/account/change-avatar-dialog.component.ts
index d41a2367e01..f4a2116eced 100644
--- a/apps/web/src/app/auth/settings/account/change-avatar-dialog.component.ts
+++ b/apps/web/src/app/auth/settings/account/change-avatar-dialog.component.ts
@@ -17,6 +17,7 @@ import { I18nService } from "@bitwarden/common/platform/abstractions/i18n.servic
 import { PlatformUtilsService } from "@bitwarden/common/platform/abstractions/platform-utils.service";
 import { Utils } from "@bitwarden/common/platform/misc/utils";
 import {
+  AvatarDefaultColors,
   DIALOG_DATA,
   DialogConfig,
   DialogRef,
@@ -48,18 +49,13 @@ export class ChangeAvatarDialogComponent implements OnInit, OnDestroy {
 
   loading = false;
 
-  // change palette to new colors
-  defaultColorPalette: NamedAvatarColor[] = [
-    { name: "brightBlue", color: "#16cbfc" },
-    { name: "green", color: "#94cc4b" },
-    { name: "orange", color: "#ffb520" },
-    { name: "lavender", color: "#e5beed" },
-    { name: "yellow", color: "#fcff41" },
-    { name: "indigo", color: "#acbdf7" },
-    { name: "teal", color: "#8ecdc5" },
-    { name: "salmon", color: "#ffa3a3" },
-    { name: "pink", color: "#ffa2d4" },
-  ];
+  defaultColorPalette: NamedAvatarColor[] = AvatarDefaultColors.map((color) => {
+    return {
+      color,
+      name: this.i18nService.t(color === "brand" ? "blue" : color),
+    };
+  });
+
   customColorSelected = false;
   currentSelection: string;
 
@@ -79,9 +75,6 @@ export class ChangeAvatarDialogComponent implements OnInit, OnDestroy {
   }
 
   async ngOnInit() {
-    //localize the default colors
-    this.defaultColorPalette.forEach((c) => (c.name = this.i18nService.t(c.name)));
-
     this.customColor$
       .pipe(debounceTime(200), takeUntil(this.destroy$))
       .subscribe((color: string | null) => {
@@ -104,13 +97,12 @@ export class ChangeAvatarDialogComponent implements OnInit, OnDestroy {
     this.setSelection(this.customColor$.value);
   }
 
-  // does this get used anywhere?
-  async generateAvatarColor() {
-    Utils.stringToColor(this.profile.name.toString());
-  }
-
   submit = async () => {
-    if (Utils.validateHexColor(this.currentSelection) || this.currentSelection == null) {
+    const defaultColorSelected = AvatarDefaultColors.includes(this.currentSelection);
+    const isValidHex = Utils.validateHexColor(this.currentSelection);
+    const isValidSelection = this.currentSelection == null || defaultColorSelected || isValidHex;
+
+    if (isValidSelection) {
       await this.avatarService.setAvatarColor(this.currentSelection);
       this.dialogRef.close();
       this.toastService.showToast({
diff --git a/apps/web/src/locales/en/messages.json b/apps/web/src/locales/en/messages.json
index fc2f463d9e6..1582ef34377 100644
--- a/apps/web/src/locales/en/messages.json
+++ b/apps/web/src/locales/en/messages.json
@@ -8221,6 +8221,15 @@
   "pink": {
     "message": "Pink"
   },
+  "coral": {
+    "message": "Coral"
+  },
+  "purple": {
+    "message": "Purple"
+  },
+  "blue": {
+    "message": "Blue"
+  },
   "customColor": {
     "message": "Custom Color"
   },
diff --git a/bitwarden_license/bit-web/src/app/admin-console/providers/settings/account.component.html b/bitwarden_license/bit-web/src/app/admin-console/providers/settings/account.component.html
index d5cab5c57e4..cc6993a0895 100644
--- a/bitwarden_license/bit-web/src/app/admin-console/providers/settings/account.component.html
+++ b/bitwarden_license/bit-web/src/app/admin-console/providers/settings/account.component.html
@@ -26,7 +26,7 @@
         </bit-form-field>
       </div>
       <div class="tw-col-span-6">
-        <bit-avatar [text]="provider.name" [id]="provider.id" size="2xlarge"></bit-avatar> // aaa
+        <bit-avatar [text]="provider.name" [id]="provider.id" size="2xlarge"></bit-avatar>
       </div>
     </div>
     <button type="submit" bitFormButton bitButton buttonType="primary">
diff --git a/libs/components/src/avatar/avatar.component.html b/libs/components/src/avatar/avatar.component.html
index 2bcb4c3956c..da11458a194 100644
--- a/libs/components/src/avatar/avatar.component.html
+++ b/libs/components/src/avatar/avatar.component.html
@@ -12,7 +12,7 @@
       x="50%"
       dy="0.35em"
       pointer-events="auto"
-      [attr.fill]="textColor()"
+      [class]="textColor()"
       [style.fontWeight]="svgFontWeight"
       [style.fontSize.px]="svgFontSize"
       [style.lineHeight.px]="16"
diff --git a/libs/components/src/avatar/avatar.component.ts b/libs/components/src/avatar/avatar.component.ts
index 090f7165014..b3512c8b462 100644
--- a/libs/components/src/avatar/avatar.component.ts
+++ b/libs/components/src/avatar/avatar.component.ts
@@ -1,4 +1,3 @@
-import { NgClass } from "@angular/common";
 import {
   ChangeDetectionStrategy,
   Component,
@@ -6,13 +5,18 @@ import {
   ElementRef,
   inject,
   input,
+  signal,
 } from "@angular/core";
 
 import { Utils } from "@bitwarden/common/platform/misc/utils";
 
+import { AriaDisableDirective } from "../a11y";
+import { ariaDisableElement } from "../utils";
+
 export type AvatarSizes = "2xlarge" | "xlarge" | "large" | "base" | "small";
 
-export type AvatarColors = "teal" | "coral" | "brand" | "green" | "purple";
+export const AvatarDefaultColors = ["teal", "coral", "brand", "green", "purple"];
+export type AvatarColors = (typeof AvatarDefaultColors)[number];
 
 const SizeClasses: Record<AvatarSizes, string[]> = {
   "2xlarge": ["tw-h-16", "tw-w-16", "tw-min-w-16"],
@@ -42,15 +46,16 @@ export const DefaultAvatarColors: Record<AvatarColors, string> = {
  * dark mode.
  */
 const DefaultAvatarHoverColors: Record<AvatarColors, string> = {
-  teal: "group-hover/avatar:tw-bg-bg-avatar-teal-hover",
-  coral: "group-hover/avatar:tw-bg-bg-avatar-coral-hover",
-  brand: "group-hover/avatar:tw-bg-bg-avatar-brand-hover",
-  green: "group-hover/avatar:tw-bg-bg-avatar-green-hover",
-  purple: "group-hover/avatar:tw-bg-bg-avatar-purple-hover",
+  teal: "tw-bg-bg-avatar-teal-hover",
+  coral: "tw-bg-bg-avatar-coral-hover",
+  brand: "tw-bg-bg-avatar-brand-hover",
+  green: "tw-bg-bg-avatar-green-hover",
+  purple: "tw-bg-bg-avatar-purple-hover",
 };
 
 /**
- * Avatars display a background color that helps a user visually recognize their logged in account.
+ * The avatar component is a visual representation of a user profile. Color variations help users
+ * quickly identify the active account and differentiate between multiple accounts in a list.
  *
  * Color options include a pre-defined set of palette-approved colors, or users can select a
  * custom color. A variance in color across the avatar component is important as it is used in
@@ -60,17 +65,19 @@ const DefaultAvatarHoverColors: Record<AvatarColors, string> = {
  * Avatars can be static or interactive.
  */
 @Component({
-  selector: "bit-avatar, button[bit-avatar], a[bit-avatar]",
+  selector: "bit-avatar, button[bit-avatar]",
   templateUrl: "avatar.component.html",
-  imports: [NgClass],
   changeDetection: ChangeDetectionStrategy.OnPush,
   host: {
-    class: "tw-group/avatar",
+    "(mouseenter)": "isHovering.set(true)",
+    "(mouseleave)": "isHovering.set(false)",
+    "[class]": "avatarClass()",
   },
-  // host directive for aria disabled states? check figma for disabled styles
+  hostDirectives: [AriaDisableDirective],
 })
 export class AvatarComponent {
   private el = inject(ElementRef);
+
   /**
    * Background color for the avatar. Provide one of the AvatarColors, or a custom hex code.
    *
@@ -100,21 +107,60 @@ export class AvatarComponent {
    */
   readonly size = input<AvatarSizes>("base");
 
+  /**
+   * For button element avatars, whether the button is disabled. No effect for non-button avatars
+   */
+  readonly disabled = input<boolean>(false);
+
+  constructor() {
+    ariaDisableElement(this.el.nativeElement, this.disabled);
+  }
+
+  readonly showDisabledStyles = computed(() => {
+    return this.isInteractive() && this.disabled();
+  });
+
   protected readonly svgCharCount = 2;
   protected readonly svgFontSize = 12;
   protected readonly svgFontWeight = 400;
   protected readonly svgSize = 32;
 
-  protected readonly svgClass = computed(() => {
-    return ["tw-rounded-full", "tw-border-solid", this.backgroundColorClass()]
-      .concat(SizeClasses[this.size()] ?? [])
-      .concat(this.hasHoverEffects() ? this.interactiveSvgClasses() : []);
+  protected readonly isInteractive = computed(() => {
+    return this.el.nativeElement.nodeName === "BUTTON";
   });
 
-  protected readonly hasHoverEffects = computed(() => {
-    return this.el.nativeElement.nodeName === "BUTTON" || this.el.nativeElement.nodeName === "A";
+  protected readonly avatarClass = computed(() => {
+    const classes = [
+      "tw-leading-[0px]",
+      "focus-visible:tw-outline-none",
+      "tw-rounded-full",
+      "focus-visible:tw-ring-2",
+      "focus-visible:tw-ring-offset-1",
+      "focus-visible:tw-ring-border-focus",
+      "!focus-visible:tw-border-[transparent]",
+      "focus-visible:tw-z-10",
+    ].concat(this.showDisabledStyles() ? ["tw-cursor-not-allowed"] : []);
+    return classes;
   });
 
+  protected readonly svgClass = computed(() => {
+    return ["tw-rounded-full"]
+      .concat(SizeClasses[this.size()] ?? [])
+      .concat(this.showDisabledStyles() ? ["tw-bg-bg-disabled"] : this.avatarBackgroundColor());
+  });
+
+  /**
+   * Manually track the hover state.
+   *
+   * We're doing this instead of using tailwind's hover helper selectors because we need to be able
+   * to apply a darker color on hover for custom background colors, and we can't use tailwind for
+   * the dynamic custom background colors due to limitations with how it generates styles at build
+   * time
+   */
+  protected readonly isHovering = signal(false);
+
+  protected readonly showHoverColor = computed(() => this.isInteractive() && this.isHovering());
+
   protected readonly usingCustomColor = computed(() => {
     if (Utils.isNullOrWhitespace(this.color())) {
       return false;
@@ -124,41 +170,70 @@ export class AvatarComponent {
     return !defaultColorKeys.includes(this.color() as AvatarColors);
   });
 
-  protected readonly customBackgroundColor = computed(() => {
+  /**
+   * Background color tailwind class
+   *
+   * Returns the appropriate class if using default avatar colors
+   * Returns an empty string (a "blank" tailwind class) if using custom color
+   */
+  protected readonly avatarBackgroundColor = computed(() => {
+    // If using custom color instead of default avatar color, early exit
     if (this.usingCustomColor()) {
-      return this.color()!;
+      return "";
     }
 
-    return undefined;
-  });
-
-  protected readonly backgroundColorClass = computed(() => {
-    if (!this.usingCustomColor()) {
-      return DefaultAvatarColors[(this.color() as AvatarColors) ?? this.avatarDefaultColorKey()];
-    }
-
-    return "";
-  });
-
-  protected readonly interactiveSvgClasses = computed(() => {
-    if (!this.usingCustomColor()) {
-      return [
-        DefaultAvatarHoverColors[(this.color() as AvatarColors) ?? this.avatarDefaultColorKey()],
+    if (this.showHoverColor()) {
+      return DefaultAvatarHoverColors[
+        (this.color() as AvatarColors) ?? this.avatarDefaultColorKey()
       ];
     }
 
-    // awaiting design choice for custom color hover state
-    return "";
+    return DefaultAvatarColors[(this.color() as AvatarColors) ?? this.avatarDefaultColorKey()];
   });
 
+  /**
+   * Background color hex code
+   *
+   * Returns the custom color if using a custom background color
+   * Returns `undefined` if using a default avatar color
+   *
+   * Custom hexes need to be applied as a style property, because dynamic values can't be used in
+   * tailwind arbitrary values due to limitations with how it generates tailwind styles at build
+   * time
+   */
+  protected readonly customBackgroundColor = computed(() => {
+    /**
+     * If using a default avatar color instead of custom color, early exit.
+     * If button is disabled, we want to use a tailwind class instead, so also early exit
+     */
+    if (!this.usingCustomColor() || this.showDisabledStyles()) {
+      return undefined;
+    }
+
+    if (this.showHoverColor()) {
+      // Drop the color's saturation and lightness by 10% when hovering
+      return `hsl(from ${this.color()} h calc(s - 10) calc(l - 10))`;
+    }
+
+    return this.color();
+  });
+
+  /**
+   * Text color class that satisfies accessible contrast requirements
+   */
   protected readonly textColor = computed(() => {
+    if (this.showDisabledStyles()) {
+      return "tw-fill-fg-disabled";
+    }
+
     const customBg = this.customBackgroundColor();
+    let textColor = "white";
 
     if (customBg) {
-      return Utils.pickTextColorBasedOnBgColor(customBg, 135, true);
-    } else {
-      return "white";
+      textColor = Utils.pickTextColorBasedOnBgColor(customBg, 135, true);
     }
+
+    return textColor === "white" ? "tw-fill-fg-white" : "tw-fill-fg-black";
   });
 
   protected readonly displayChars = computed(() => {
@@ -195,6 +270,12 @@ export class AvatarComponent {
     return characters != null ? characters.slice(0, count).join("") : "";
   }
 
+  /**
+   * Deterministically chosen default avatar color
+   *
+   * Based on the id first and the text second, choose a color from AvatarColors. This ensures that
+   * the user sees the same color for the same avatar input every time.
+   */
   readonly avatarDefaultColorKey = computed(() => {
     let magicString = "";
     const id = this.id();
diff --git a/libs/components/src/avatar/avatar.mdx b/libs/components/src/avatar/avatar.mdx
index 3807cce0cfe..b0d4ada9014 100644
--- a/libs/components/src/avatar/avatar.mdx
+++ b/libs/components/src/avatar/avatar.mdx
@@ -14,52 +14,61 @@ import { AvatarModule } from "@bitwarden/components";
 <Primary />
 <Controls />
 
-## Size
+## Static
 
-### 2XLarge
+By default, the avatar component is non-interactive. Use the avatar component as an atom in a larger
+molecule like a list item, table, or card to help users differentiate between multiple accounts in a
+list.
 
-<Canvas of={stories.XXLarge} />
+If the avatar is not a clickable element, there are no hover or focus states.
 
-### XLarge
+## Interactive
 
-<Canvas of={stories.XLarge} />
+The Avatar can be used as a button. Use the avatar component as a button to open a secondary menu
+like an account switcher or dropdown.
 
-### Large
+When the avatar is used as a button, there are hover and focus states for accessibility. Although it
+is rare for an avatar button to be inactive, this state is supported as well.
 
-<Canvas of={stories.Large} />
+<Canvas of={stories.Interactive} />
 
-### Base
+### Inactive
 
-<Canvas of={stories.Default} />
+<Canvas of={stories.Inactive} />
 
-### Small
+## Sizes
 
-<Canvas of={stories.Small} />
+There are multiple sizes available for the Avatar:
+`"2xlarge" | "xlarge" | "large" | "base" | "small"`
 
-## Background color
+<Canvas of={stories.Sizes} />
 
-The Background color can be set 3 ways. The color is generated using the following order of
-priority:
+## Color
 
-- Color
-- ID
-- Text, usually set to the user's Name field
+The avatar color can be set 3 ways. The color is generated using the following order of priority:
+
+| Method         | Input   | Accepted inputs                                                                     |
+| -------------- | ------- | ----------------------------------------------------------------------------------- |
+| Default colors | `color` | `"teal" \| "coral" \| "brand" \| "green" \| "purple"`                               |
+| Custom color   | `color` | Css colors like a hex code                                                          |
+| ID             | `id`    | Unique string identifier                                                            |
+| Text           | `text`  | String whose first letters are displayed inside the avatar, usually the user's name |
+
+### Default colors
+
+<Canvas of={stories.DefaultColors} />
+
+### Custom color
+
+<Canvas of={stories.CustomColor} />
+
+### Color by ID
 
-<Canvas of={stories.ColorByText} />
-Use the user 'ID' field if `Name` is not defined.
 <Canvas of={stories.ColorByID} />
 
-## Avatar as a button
+### Color by Text
 
-The Avatar can be used as a button.
-
-Typically this is only in the navigation on client apps where account switching is used and in the
-web app for the account menu indicator.
-
-When the avatar is used as a button, the following states should be used:
-
-`TODO:` [Jira add stories](https://bitwarden.atlassian.net/browse/CL-101) for button avatars.
-[See Figma](https://www.figma.com/file/Zt3YSeb6E6lebAffrNLa0h/Tailwind-Component-Library?type=design&node-id=9730-31746&mode=design&t=IjDIHDb6FZl6bUQW-4)
+<Canvas of={stories.ColorByText} />
 
 ## Accessibility
 
diff --git a/libs/components/src/avatar/avatar.stories.ts b/libs/components/src/avatar/avatar.stories.ts
index f23a28e17f7..5c6770c76c1 100644
--- a/libs/components/src/avatar/avatar.stories.ts
+++ b/libs/components/src/avatar/avatar.stories.ts
@@ -36,56 +36,7 @@ export const Default: Story = {
   },
 };
 
-export const XXLarge: Story = {
-  ...Default,
-  args: {
-    size: "2xlarge",
-  },
-};
-
-export const XLarge: Story = {
-  ...Default,
-  args: {
-    size: "xlarge",
-  },
-};
-
-export const Large: Story = {
-  ...Default,
-  args: {
-    size: "large",
-  },
-};
-
-export const Small: Story = {
-  ...Default,
-  args: {
-    size: "small",
-  },
-};
-
-export const ColorByID: Story = {
-  ...Default,
-  args: {
-    id: "236478",
-  },
-};
-
-export const ColorByText: Story = {
-  ...Default,
-  args: {
-    text: "Jason Doe",
-  },
-};
-
-export const CustomColor: Story = {
-  ...Default,
-  args: {
-    color: "#fbd9ff",
-  },
-};
-
-export const Button: Story = {
+export const Interactive: Story = {
   render: (args) => {
     return {
       props: args,
@@ -99,9 +50,129 @@ export const Button: Story = {
   },
 };
 
-// color by text or id button story?
+export const Sizes: Story = {
+  render: (args) => {
+    return {
+      props: args,
+      template: `
+        <span class="tw-font-bold">Static</span>
+        <div class="tw-flex tw-gap-4 tw-mb-10">
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> small </span>
+            <bit-avatar [color]="'brand'" [text]="'Walt Walterson'" [size]="'small'"></bit-avatar>
+          </div>
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> base </span>
+            <bit-avatar [color]="'brand'" [text]="'Walt Walterson'"></bit-avatar>
+          </div>
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> large </span>
+            <bit-avatar [color]="'brand'" [text]="'Walt Walterson'" [size]="'large'"></bit-avatar>
+          </div>
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> xlarge </span>
+            <bit-avatar [color]="'brand'" [text]="'Walt Walterson'" [size]="'xlarge'"></bit-avatar>
+          </div>
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> 2xlarge </span>
+            <bit-avatar [color]="'brand'" [text]="'Walt Walterson'" [size]="'2xlarge'"></bit-avatar>
+          </div>
+        </div>
 
-export const CustomColorButton: Story = {
+        <span class="tw-font-bold">Interactive</span>
+        <div class="tw-flex tw-gap-4 tw-mb-10">
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> small </span>
+            <button bit-avatar [color]="'brand'" [text]="'Walt Walterson'" [size]="'small'"></button>
+          </div>
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> base </span>
+            <button bit-avatar [color]="'brand'" [text]="'Walt Walterson'"></button>
+          </div>
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> large </span>
+            <button bit-avatar [color]="'brand'" [text]="'Walt Walterson'" [size]="'large'"></button>
+          </div>
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> xlarge </span>
+            <button bit-avatar [color]="'brand'" [text]="'Walt Walterson'" [size]="'xlarge'"></button>
+          </div>
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span> 2xlarge </span>
+            <button bit-avatar [color]="'brand'" [text]="'Walt Walterson'" [size]="'2xlarge'"></button>
+          </div>
+        </div>
+      `,
+    };
+  },
+};
+
+export const DefaultColors: Story = {
+  render: (args) => {
+    return {
+      props: args,
+      template: `
+        <span class="tw-font-bold">Static</span>
+        <div class="tw-flex tw-gap-2 tw-mb-10">
+          <bit-avatar [color]="'brand'" [text]="'Walt Walterson'"></bit-avatar>
+          <bit-avatar [color]="'teal'" [text]="'Walt Walterson'"></bit-avatar>
+          <bit-avatar [color]="'coral'" [text]="'Walt Walterson'"></bit-avatar>
+          <bit-avatar [color]="'green'" [text]="'Walt Walterson'"></bit-avatar>
+          <bit-avatar [color]="'purple'" [text]="'Walt Walterson'"></bit-avatar>
+        </div>
+
+        <span class="tw-font-bold">Interactive</span>
+        <div class="tw-flex tw-gap-2">
+          <button bit-avatar [color]="'brand'" [text]="'Walt Walterson'"></button>
+          <button bit-avatar [color]="'teal'" [text]="'Walt Walterson'"></button>
+          <button bit-avatar [color]="'coral'" [text]="'Walt Walterson'"></button>
+          <button bit-avatar [color]="'green'" [text]="'Walt Walterson'"></button>
+          <button bit-avatar [color]="'purple'" [text]="'Walt Walterson'"></button>
+        </div>
+      `,
+    };
+  },
+};
+
+export const ColorByID: Story = {
+  render: (args) => {
+    return {
+      props: args,
+      template: `
+        <div class="tw-flex tw-gap-4">
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span class="tw-font-bold"> Static </span>
+            <bit-avatar ${formatArgsForCodeSnippet<AvatarComponent>(args)}></bit-avatar>
+          </div>
+
+          <div class="tw-flex tw-flex-col tw-gap-2 tw-items-center">
+            <span class="tw-font-bold"> Interactive </span>
+            <button bit-avatar ${formatArgsForCodeSnippet<AvatarComponent>(args)}></button>
+          </div>
+        </div>
+      `,
+    };
+  },
+  args: {
+    id: "236478",
+  },
+};
+
+export const ColorByText: Story = {
+  ...ColorByID,
+  args: {
+    text: "Jason Doe",
+  },
+};
+
+export const CustomColor: Story = {
+  ...ColorByID,
+  args: {
+    color: "#fbd9fe",
+  },
+};
+
+export const Inactive: Story = {
   render: (args) => {
     return {
       props: args,
@@ -111,6 +182,6 @@ export const CustomColorButton: Story = {
     };
   },
   args: {
-    color: "#fbd9ff",
+    disabled: true,
   },
 };